Angela Merkel, the current chancellor of Germany, has been reigning over the country for 8 years. Her approval rating of 71% seems expected when you consider the 2014 estimated GDP growth in Germany. Compared to the Eurozone average of 0.25% Germany’s domestic demand and increase in construction have been great assets to the country’s economy. Despite her success as chancellor, some believe that she is not taking actions that will positively impact the long-term economy.
The previous chancellor, Gerhard Schröder, ruled a succession of reforms which enabler workers to be fired more easily. The package of reforms also reduced long-term unemployment benefits enjoyed by these fired workers, and was meant to lessen the then 12% unemployment rate. These unpopular reforms cost Schröder his position in 2005, but German economists believed that they worked so well that Merkel was able to benefit from them.
Stefan Heidbreder, the managing director at a German foundation for family-owned businesses, “a long-term perspective is missing from government policy.” Although Merkel’s approval is quite high, some of her recent policies may prevent Germany from economic stability in the long-run. During her first term she raised the legal retirement age to 67. With the formation of her coalition, money was also taken out of German pension reserves, as opposed to finding money to take out of the budget. This action was taken in order to award retroactive pension benefits to parents for the time they spent at home with children, but proved to be quite costly.
In response, Social Democrats created a temporary provision which would grant retirements at 63 rather than the age of 67 previously decided upon. Adding even more fuel to the fire, the coalition created a new minimum wage, which had never been done in Germany, and also placed price controls on rent. In a report done by the German Council of Economic Experts, the conclusion was that “the present economic situation and Germany’s healthy position compared to the euro area’s crisis countries seems to have obstructed many politician’s view of major future challenges”.
According to Fratzscher, an economist for the think tank DIW Berlin, productivity per worker in Germany has remained constant in this decade despite the increased competitiveness and inexpensiveness of producing goods. Future productivity seems to be an issue for Germany’s workers. In order to improve this, a labor laws can be loosed, better education can be implemented, and additionally capital investments in infrastructure can boost productivity. Overall, in order to make economic progress Angela Merkel will have to focus less upon appearances and more upon what will make Germany the most successful it can be on a long-term scale.