Merkel needs a miracle

Never in the post war period has a German chancellor so openly interfered in the affairs of a neighbouring country. Angela Merkel has announced that she is openly supporting Nicolas Sarkozy in the French presidential election. She will give a joint interview with Sarkozy tonight to both French and German television and has, thus far, refused multiple invitations to meet Sarkozy’s socialist challenger – and leader in the polls – François Hollande.

It’s such a foolhardy idea, I find it difficult to know where to begin.

There is a very good reason why politicians don’t involve themselves in the elections of other countries: there’s not much chance of it ending well.  Setting aside the fact that electorates don’t particularly appreciate being told how to vote by a foreign power*, Merkel seems to be backing a losing horse. Sarkozy is openly talking of losing the election and leaving politics. If that were to happen, her actions would mean Merkel would not only lose an ally – but also gain an enemy.

Admittedly, even without this intervention a Hollande presidency would have been a substantial setback to Merkel – he is no great supporter of austerity. Merkel needs to stay the course if the euro and, by extension, her chancellorship is to survive. But surely it would have been a better idea to sit tight, wait and hope for either a political miracle and another Sarkozy term – or for Hollande to change his tune once in office, once the bluster of the campaign subsides.

Merkel’s desperation could mean all she can hope for is a miracle.

*I know nothing about French politics, but apparently the French electorate are already fed up with comparisons to Germany. At least according to the German press...

Germany’s disappointment, Britain’s lesson.

Germany is not immune to the pain and German GDP ‘likely to have shrunk’ in Q4, the British media breathlessly reports. Oddly enough, Germans themselves aren’t that bothered. Spiegel Online (a publication which is by no means kind to the government) calls it ‘Boom boom Deutschland’ and quotes a representative of business leaders characterising the mood as ‘clearly positive’.

What is with the lack of pessimism and crisis? After all, Germans aren’t exactly known for their sunny view on life. Time for me to play armchair economist/sociologist/psychologist:

Germany is a nation of savers, whereas Britain has a debt problem. Britain’s government and people have overstretched themselves - having subscribed to the ‘buy now pay later’ mentality for years. Here are some figures* – levels of personal debt (as a ratio of disposable income in 2010) in Germany were 60% of what Britain had to contend with.

It’s certainly clear that Germany has had a much better time of the global financial crisis. Since 2009 – when the recession really started to bite and GDP declined by 5.1% – unemployment never went above 2007 levels and, unlike Britain, has been on a downward trend since. Unemployment is certainly the biggest driver of fear in the economy, so that could explain some of the optimism. But despite some pretty dismal indicators going forward, the Germans still believe they will come through this crisis as well as the last one. The lack of fear will certainly keep the consumer side of the economy going – and take the edge off the negative effects – so they might well be right to be confident.

While the economy is a complex tapestry, a nation of people who don’t fear the next credit card bill is better suited to weather this economic storm. This is an area in which the British could learn a lot.

At least it would make the news less depressing to watch...

 *Cherry-picked to ‘prove’ my point.