Germany: reinstating leadership in Europe

Whether it’s from the enduring threat of Grexit or the mass inflows of asylum seekers, the EU’s political and social-economic chaos is becoming commonplace.

During the especially tough past three months, the Eurogroup and EU citizens both watched in disbelief at the drama being played out in Greece by the ambitious but inexperienced leftist government, with the fate of its 11 million population at stake. While debt relief was being agreed, the costs to EU citizens were increased and unrest between member states grew. It was a modern tragedy performed to no applause.

With no laurels presented to Germany for its leadership in this affair, but with the conviction of having done everything right, Chancellor Angela Merkel continues to exercise influence nationally and abroad without provoking political rivalry, all the while making it clear that Germany intends to lead and lead with action.

Notwithstanding some criticism for the way Germany’s finance minister Wolfgang Schäuble steered negotiations between Greece and the Eurogroup, the German people were together relieved to see this insufferable episode brought to a close. To put it simply, dishonouring a publicly agreed obligation or signed contract in Germany would mean a massive and expensive court rebuttal with a sure chance of losing hard-earned reputation and goodwill. Germany’s sympathetic but surprised population, the vast majority of whom are hard-working, law-abiding and tax-paying citizens, regardless of their political affiliations, were on the whole satisfied to see Schäuble, Germany’s long-serving and highly respected master of political strategies, display leadership based on German values and reasoning during this critical European episode.

Economically, Germany is a strong performer. The weakening demand from Chinese consumers has not dampened Germany’s sales performance. There was little impact from the Shanghai stock market crash on German stock values because large, medium and small businesses alike have not wasted any time in seeking new markets to compensate for the fall in exports to China and Russia. And in the aftermath of the Greek affair, businesses are benefitting from Schäuble’s handling of the negotiations, which has served to reverse the dwindling investor confidence in the euro as a currency. The recent growth in the trading of long-term credit instruments confirms this trend. Merkel’s government has also managed to keep unemployment and inflation low, making the investment environment an attractive and fertile ground for new business ventures. As a result, start-ups in technology, B2B ventures, electro mobility and medicinal services are booming across Germany.

Germany’s relief, however, has been short-lived. The mass movement of refugees waved in from neighbouring Hungary and Austria are putting pressure on Germany’s resources and capacities. Around 800,000 refugees are estimated to arrive by the end of the year, and the daily intake of asylum-seekers is thought to be at least 1,000. Merkel’s government is confident of having the necessary monetary resources, an estimated €6bn until 2017, to handle the situation. While ministers and industrialists agree that a sudden population growth of 1 million presents an opportunity for Germany to fix its labour market gaps, they also point out that the enormous challenge of ensuring that the new arrivals receive a speedy and complete integration into the community.