By Gideon Rachman
Published: September 21 2009 21:55
Angela Merkel, the German chancellor, might have been excused had she decided to skip the Group of 20 meeting in Pittsburgh later this week. The German general election takes place on Sunday – just 48 hours after the summit. Ms Merkel’s decision to go to Pittsburgh is both cool and calculated. It sends a signal to the German electorate that she is relaxed, above the fray, an international leader more concerned with representing her country to the world than with mud-wrestling domestic opponents in the last days of a campaign.
It is a shrewd approach. The polls suggest that Ms Merkel is very popular. Barring a huge upset, the elections will see her returned as chancellor, at the head of yet another coalition government.
So no change in Germany, then? It would be a mistake to believe that. The tenor of the election campaign suggests that the country is changing – in ways that its partners around the table in Pittsburgh may not find very comfortable.
The global financial crisis has shifted Germany left – and turned it inwards. The protective, interventionist state is back in fashion. Deeper international commitments – whether in Afghanistan or the European Union – are out of favour. The mood of the country, says Jan Techau of the German Council on Foreign Relations, is “profoundly parochial”.
In the decade before the financial crash, Germany had gradually moved towards some of the ideas associated with US-style capitalism – shareholder value, welfare reform, an encouragement of services as well as manufacturing. But the economic crisis has persuaded Germans across the political spectrum to scurry back to their old ways. Ms Merkel has campaigned as a champion of the traditional “social market economy” – whose virtues, she argues, should now be exported to the whole world.
Der Spiegel, the German news magazine, commented recently that in Germany the financial crisis has “not just consumed billions, it has also destroyed faith in the power of the market”. Ralf Fücks, the president of the Heinrich Böll Stiftung, a think-tank linked to the Green party, says that there is now a “very deep consensus” in Germany that the “Anglo-Saxon model” is deeply flawed. He argues that in Germany “state capitalism is back and big government is back”.
Why should this be of any concern to Germany’s partners? Because, in a globalised economy, it is hard to have “state capitalism” in one country – particularly when that country is as central to the world economy as Germany, Europe’s largest economy and the world’s second biggest exporter.
Ms Merkel’s successful effort last week to broker a rescue deal for the Opel car manufacturer, part of General Motors, is a case in point. The bail-out has been cheered in Germany – but greeted with horror in Belgium, Britain and Spain – all of which fear that it means that the axe will fall on car plants in their countries. In theory, EU rules on state aid are meant to prevent beggar-thy-neighbour subsidies. Germany used to pride itself on being scrupulous about obeying Union rules and respecting the sensibilities of smaller EU countries. But, in a deep recession, old instincts about the importance of industrial policy and the car industry have trumped worries about Germany’s international obligations.
This German instinct to fall back on the old verities could trouble its international partners in other ways, too. Germany, like China, is shrugging off talk about the need to tackle “global economic imbalances”. Ms Merkel has bluntly insisted that Germany intends to remain an export superpower. She has also made a nod in the direction of encouraging domestic consumption, by promising tax cuts as part of her campaign. But she has combined this with an emphasis on the need to balance the federal budget.
Germany’s strategic position is also becoming a bit more self-centred. Some 65 per cent of the electorate want to see a swift German withdrawal from Afghanistan and politicians have begun to respond. Frank-Walter Steinmeier, Germany’s foreign minister and the leader of the Social Democrats (SPD), wants to prepare a plan for withdrawal over the next four years. Ms Merkel wants an international conference, establishing benchmarks that would allow the Germans to gauge when the mission is complete. This is not “cut and run” – but it is also certainly not the expanded German commitment that the Americans and the British once hoped for.
The direction of German public policy after the election could still be complicated by the demands of building a coalition. The popular names for the options available sound like something out of a paint catalogue – Jamaica, Traffic Light, Grand. Ms Merkel’s favoured option is a black-yellow coalition with the Free Democrats (FDP), the lone champions of liberal economics in the German colour spectrum. That might slow Germany’s drift back towards “state capitalism”, but perhaps not very much. The FDP would be junior partners in the coalition – and FDP politicians already in regional governments did not oppose the Opel bail-out.
In many respects, Germany has weathered the global economic crisis admirably. The economy has shrunk by more than 5 per cent without triggering anything close to a national nervous breakdown. Ms Merkel deserves congratulations for making it to Pittsburgh. But just do not look to Germany for fresh ideas or global leadership.
Copyright The Financial Times Limited 2009
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