Now that Angela Merkel’s tenure as German chancellor is coming to an end, it is worth exploring how she was able to hold on to power for 16 years – a period during which she has come close to transforming a parliamentary democracy into a presidential democracy, and herself into something like the unofficial president of the European Union.
Here, in this short essay, I will only briefly touch on the personal and political developments that underlay her rise to power in the 1990s and early 2000s. Instead, my main focus will be on some of the structural conditions that have enabled Merkel to hold on to the chancellorship for so long, and potentially surpass even the time in power enjoyed by her erstwhile patron, the so-called Chancellor of Unity (Kanzler der Einheit), Helmut Kohl.
Angela Merkel grew up in the German Democratic Republic, the Communist half of postwar Germany. She was 35 years old when the Berlin Wall fell, and her politics were shaped by the huge changes that followed. First, she experienced the collapse of Soviet Communism in 1989-90. And then she witnessed the internationalisation of national economies, and their prospective integration in global markets, under the leadership of the United States.
The signal moment of this new era was the Gulf War of 1991. It was undertaken by the US, with a mandate from the United Nations Security Council – which was then firmly controlled by the West. Merkel was deeply impressed by the US’s aspiration to global hegemony – an aspiration expressed most famously by US president George Bush in 1991, when he announced the invasion of Iraq by calling for a ‘new world order’.
So, in 2002, it was Merkel who, as leader of the Christian Democratic Union (CDU), pressured the Social Democratic Party (SPD) government of Gerhard Schröder to form a public alliance with George W Bush’s US, and join the invasion of Iraq. Indeed, if there is a constant in Merkel’s politics, then it is this: her deep admiration for the US, and her determination that Germany and Europe be part of a Western world ruled out of Washington, DC.
In the 1990s, the politics of the CDU, like centre-right politics in Europe more broadly, was the product of a historical compromise between conservatism – patriarchal ‘family values’ and paternalistic Catholic social doctrine – and capitalism, which continued to revolutionise not only the economy but life in general, too. The two elements had by and large been compatible well into the 1980s, provided that politicians played their cards well. Which is what CDU leader and German chancellor Kohl had done, by successfully presenting himself, in opposition to Reagan and Thatcher, as the godfather of the ‘German model’ of Rhineland capitalism. This was an ideology which accepted the reality of the free market, but mitigated its effects through a welfare state, and social policies promoting ‘fairness’.
In the 1990s, however, under the pressures of intensified globalisation – indeed hyper globalisation – the classic postwar formula of European centre-right politics began to fail. International competition demanded a deep restructuring of national economies, labour-market regimes, social policy, education systems, and even family life. In Germany this resulted in a growing tension between traditional ways of life (and the politics protecting them), and the new wave of capitalist progress. This conflict increasingly dominated public discussion during the 1990s, with talkshow after talkshow debating whether Germany could remain a prosperous country if it didn’t become more competitive, entrepreneurial and economically liberal – and less socialist.
It is against this background that Kohl’s demise must be seen. After unification in 1990, he had tried to keep the old world alive – continuing to seek deals between capital and labour, and build bridges between the animal spirits of business and the distributional instincts of union leaders. In 1995 Kohl once again tried to assemble an alliance with unions and employers, a tripartite Bündnis für Arbeit, to fight unemployment, especially in the former GDR. But this was thwarted by Wolfgang Schäuble, the rising leader of a neoliberal reform wing of the CDU, and the liberal Free Democratic Party, Kohl’s coalition partner.
Ahead of the federal elections in 1998, Kohl prevented CDU colleague Schäuble from running for president, by unilaterally announcing that he would run again instead. Kohl then promptly lost to the SPD’s Gerhard Schröder, who won 40.9 per cent of the vote, with the CDU only able to muster 35.1 per cent. It appeared that the electorate considered Schröder more ‘modern’ than the old backroom-dealing Kohl. Voters wanted to try something new in order to preserve the old. They wanted modernisation for the sake of conservation.
Seven years later, in 2005, Merkel became chancellor in a so-called Grand Coalition government with the SPD. The CDU won a snap federal election, defeating Schröder, who had to cut short his second term when he lost the support of his party. Merkel then was widely seen as a placeholder for some old-guard CDU heavyweight. But she would go on, of course, to head four successive federal governments.
What made this possible? To answer this, it is important to understand that Merkel inherited several favourable political legacies, which she was willing and able to exploit: Germany was already immersed in the European Monetary Union (EMU), which had been established in the 1990s; Schröder’s Agenda 2010 – a set of liberalising social- and labour-market policy reforms, including swingeing cuts to social security – were already underway; and Germany’s decades-old system of industrial relations, the so-called Sozialpartnerschaft (social partnership), in which unions and employers worked together, were to prove a political asset, especially in the neoliberal world of the 2000s.
Of course, what was to benefit Merkel and the CDU did not benefit everyone. The EMU hurt the EU’s Mediterranean member states, for whom Germany’s hard currency proved a good deal too hard. And Agenda 2010, which some in the SPD saw as a betrayal of its social-democratic principles, cost Schröder the support of his party. But for Merkel, both were an unqualified blessing. The Agenda 2010 reforms, implemented before her time, spared her the confrontation with the unions that Schröder had to endure. And the EMU turned out to be a wellspring of seemingly everlasting prosperity for the ever more export-dependent German economy.
Merkel’s SPD coalition partners helped her, too. They agreed in the 2005-09 legislative period to a steep if gradual increase in the pension age (thereby further helping contain government spending), in return for minor amendments to the Agenda 2010 legislation. Moreover, with the SPD in control of the Department of Labour, it, rather than Merkel and the CDU, had to take responsibility for the growth, continuing to this day, of a sizable sector of precarious and low-wage employment. And the SPD did so without an effective public policy for upskilling workers and upgrading jobs for higher productivity.
Most important of all, however, was the favourable exchange rate of the euro, with the balanced external account of the eurozone as a whole hiding and neutralising a huge and growing German trade surplus. In subsequent years, the EMU became a veritable bonanza for Germany and its manufacturing industries. The rising tax receipts that came with high profits and increasing employment enabled the government to limit public deficits and, over time, even bring down public debt. This provided other member states with an example of ‘good’ behaviour – that is, behaviour which suited the interests of the eurozone and its leading members.
Merkel and the CDU weathered the financial crisis of 2008 better than the SPD. At the 2009 federal election, the SPD’s vote fell from 34.2 per cent to 23 per cent, while Merkel’s CDU vote fell by just 1.4 per cent (from 35.2 per cent to 33.8 per cent). The result made it possible for Merkel to drop the SPD and switch to the FDP, which had won a sensational 14.6 per cent – mostly on the back of promising vast tax cuts.
Then Merkel, together with French president Nicolas Sarkozy, presided over the rescue of the euro. This only increased her popularity with German voters, who seemed to grasp that Germany’s fundamental national interest was best pursued as a ‘European project’, and defined as a hard currency union.
In the 2013 federal election, the CDU scored 41.5 per cent (an increase on its 2009 vote share of 33.8 per cent by 7.7 per cent), while the FDP, stonewalled by Merkel and her finance minister Schäuble, paid for its mésalliance with its parliamentary existence, ending up below the five per cent threshold. So Merkel formed a Grand Coalition again with the SPD, which had slightly improved its vote share to 25.7 per cent.
Two years later, as a favour to US president Barack Obama, Merkel opened the German borders to about one million Syrian and other asylum seekers. German voters punished her severely for this at the polls in 2017, when she won 32.9 per cent of the vote, down 8.6 percentage points on 2013. The SPD’s vote shrunk even more, however, to a meagre 20.5 per cent – an electoral disaster from which it has never recovered. And a new right-wing party, Alternative für Deutschland (AfD), scored 10.7 per cent.
After much to and fro this gave rise to another so-called Grand Coalition, between the CDU and the SPD in Merkel’s fourth term. This happened after the reborn FDP refused at the last minute to join a prior coalition with the CDU and the Greens. The FDP feared being squeezed against the wall by Merkel, this time assisted by her new Green friends. Which opened the door once again to the SPD.
That Merkel was always able to return to a Grand Coalition with the Social Democrats points to what may be regarded as her greatest political achievement: the formation of a dominant social bloc, comprising the centre-right and the centre-left, business and unions, capital and labour. And it is a social bloc of which the shrinking SPD feels it has to be a part, lest it lose its reason to exist.
This brings us to the third political legacy that Merkel was fortunate enough to inherit: the institutions and traditions of ‘social partnership’ – a system of cooperation between business and labour, employers and unions – left over from the sunken political economy of West Germany. It did not take very long for Merkel to understand the immense political value of this inheritance. As a consequence, she mounted a long and successful attempt to take possession of the system of social partnership from the disintegrating SPD.
She was not always so keen on strong labour movements working in concert with employers. In her first election programme, in 2005, Merkel had still promised what would amount to a fully fledged assault on trade unions, collective bargaining and workforce representation on company boards. She styled herself as a German Thatcher who would finally do what Kohl had not dared to do. In the final weeks of the campaign, however, Schröder rapidly caught up, painting Merkel as a neoliberal ideologue. And on election day, Merkel’s CDU ended up with just 35.2 per cent, only marginally ahead of the SPD on 34.2 per cent. Merkel’s vote share was less than both Kohl in 1998 (38.1 per cent) and Edmund Stoiber (38.5 per cent) of the Christian Social Union of Bavaria (the CDU’s regional partner).
But, having won over a deeply divided SPD, and installed it in coalition government, Merkel performed an about turn and became a convert to Germany’s version of social partnership. Not only did she realise that neoliberal anti-unionism did not fly with the German electorate, she also realised that times had changed. Thatcherism, after almost three decades, was no longer relevant to Germany. After all, the dirty work of Thatcherism had already been done. First, the Maastricht Treaty had imposed strict fiscal constraints on member states, including: binding limits on deficit spending; international obligations to privatise public services; and free movement not just of goods but also of services, capital and labour. And second, thanks to the social-security and labour-market reforms of Schröder, Germany’s much changed welfare state allowed Germany to stay within the Maastricht fiscal limits.
Others in the CDU did not understand all of this. They were too ideologically tied to the dream of a union-free, liberal market society. But Merkel had no ideological prejudices whatsoever. She had no need of, and no instinct for, ideology – no sense of what it might be, or might once have been, good for.
Instead, what she saw more clearly than others was that international competition, and the opportunities offered by an undervalued hard currency, had done for her what institutional destruction had done for Thatcher. And that the German system of social partnership could now be used in defence of German export industries, through wage moderation (an agreement to keep wages low in return for more jobs) underpinned by technological superiority. Merkel effectively used and cultivated the social partnership, between workers’ representatives and business, as a political resource.
I have seen this first hand. In early 2010, Berthold Huber, then president of IG Metall, a powerful trade union that organises the core manufacturing sectors of the German economy, turned 60. Merkel hosted a formal dinner for him in the cabinet room of the Chancellery, something she very rarely does. Huber was allowed to bring several friends to the occasion, and since I had sometimes done him and the union a favour, I was one of those invited. There were about 30 people there: the chancellor and a small number of close aides; a few but not very many trade unionists; some of the top brass of corporations like Volkswagen, Mercedes, Porsche, Bosch and others; and officials of the business and employers’ associations of the metal industry.
They exchanged gifts, and Huber made a speech recalling the destruction of the union movement by the Nazis, the unions’ contribution to the rebuilding of democracy after 1945, and the need for a liberal democracy to have a strong and independent trade-union movement. As he was speaking it seemed that this was something he and Merkel had talked about previously, with Merkel nodding in agreement several times.
Later, during her dinner speech, Merkel dwelled at length on the benefits of free collective bargaining, German-style. In this context, she mentioned a telephone call she had received a few days ago from Christine Lagarde, then the French finance minister. In the conversation, which had been reported extensively in the press, Lagarde had told Merkel to ensure that in the next round of wage settlements, purchasing power in Germany would rise faster than in the past to make for higher imports – and to please forget for once the German obsession with inflation. Merkel quoted this, waited a few seconds, and then said she had told Lagarde how happy she was that, unlike the French government, the German government had no role to play in setting wages. In Germany, Merkel continued, this was for the ‘social partners’ alone. She said she had no intention of changing this. Cue roaring applause around the table, from all sides.
As the evening went on, one of the guests from the automobile industry brought up the mooted change from combustion engines to electric. He said this would be very difficult to accomplish without domestic battery production, sufficient loading stations, an increased and safe supply of electricity, cash premiums for buyers of electrical cars, and so on. Merkel responded that this would be a case where she could use ‘industrial policy’, a concept that was and still is anathema to the free-market faction of her party and to mainstream economists. Again, Merkel’s response drew heartfelt applause from everyone present.
Sitting next to a ranking civil servant from the chancellor‘s office, I looked at him and whispered ‘Really?’. He responded that there were no preparations to this effect under way and that the economics ministry had had no role in the writing of the dinner speech whatsoever.