GERMAN ECONOMY: ANGELA MERKEL’S HERITAGE

Abstract

The article analyses the main stages of development of the German economy during the 16-year reign of Chancellor Angela Merkel (2005–2021). During this period, Germany was reasonably successful in dealing with the impacts of the world financial and economic crisis it faced in 2008–2009. The 10 subsequent years witnessed economic growth, however, today the country is once again trying to find a way out of a crisis this time caused by the COVID-19 pandemic. In 2020, the GDP fell by almost 5%, while the industrial production declined by 10.4%. The return to the growth trajectory is being linked to improving the epidemiological situation and increasing foreign orders, primarily from China and the United States. The German economy is expected to reach pre-crisis levels in late 2022. Projections for further development assume that, due to a number of internal constraints and external risks, the GDP growth will not exceed 1% in 2023–2025. Angela Merkel is not leaving the country in the best of shapes. It is not her fault. Germany’s economy has more than once demonstrated its resilience to external shocks. Even today, Germany’s position looks preferable to that of most European countries. Its main advantage is a diversified and competitive industry, but the sentiments in the German business community vary greatly. Much depends on the sector and region. Small and medium-sized enterprises (SMEs), especially in the service sector, have been particularly hard hit. Many of them have run out of reserves, and their capacity to pay now depends largely on the financial support of the State. How long can the government “pump up” the economy with budget money without fear of a surge in inflation? Nor will the European Central Bank (ECB) indefinitely maintain interest rates at historically low levels. For many SMEs, the increase in the cost of credit, combined with the inevitable reduction in government support, will be a blow that not all will be able to withstand. People are tired of everything related to the pandemic and the years of familiar politicians. Everyone is waiting for the end of the epidemic and for new faces in politics. Whether the new politicians will be better than the old ones is a big question. Under all circumstances, in Germany’s recent history, Angela Merkel will remain a major political figure whose scale is yet to be truly appreciated.