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Global Economics

Merkel Faulted for Baby Steps on Economy

Foreign observers say the Chancellor's cautious response to the financial collapse is robbing Germany of its leadership role

For years, German Chancellor Angela Merkel has been a popular leader, active on the world scene and widely regarded as a success at home. But as the global finance crisis deepens, cracks are developing in Merkel's polished image.

The biggest issue has been the perception in foreign capitals that Merkel—and Germany—are stumbling over their response to the collapse of financial markets worldwide. Merkel's cautious, small-steps approach to the crisis has robbed Germany of a leadership role, while France's President Nichalos Sarkozy and British Prime Minister Gordon Brown have stepped up to organize EU-wide recovery plans.

Indeed, after an all-smiles recent meeting with French President Nicholas Sarkozy, Merkel was barely on the plane home before Sarkozy attacked her in the press. "France is working on a solution, while Germany is thinking about one," Sarkozy said.

The situation at home isn't much better. Economists are predicting the

German economy may have its worst year since the end of World War II in 2009. The jobless rate may climb over 700,000, and mainstays of the German economy like steel, automotive and chemical factories are planning to lay off workers and shut down plants.

Critics at home say she's not doing enough to help Germany pull out of its financial troubles. The German economy shrank 2.1 percent in the last quarter. Meanwhile, Merkel's rescue plan for German banks doesn't seem to be working, her economic recovery plan has fallen far short, and she hasn't given a major speech on the economy since the crisis began.

Now there is even grumbling from with her own conservative Christian Democrats (CDU). As the party's membership meets Monday in Stuttgart, rumbles of complaint about Merkel are growing. Many of the party's members want to see immediate tax cuts as a way to spur spending and an economic recovery. Merkel has signalled that any tax relief will have to wait until after elections next year.

Almost 20 years after the fall of the Berlin Wall, one target of conservative ire is the so-called "Soli," or "solidarity tax," a charge levied on all Germans designed to help the former East rebuild its economy. "I hope the CDU decides to raise the buying power of Germans immediately," Federation of German Wholesale and Foreign Trade President Anton Börner told the Handelsblatt newspaper. "There's a simple way to do that: eliminate the Soli."

Prominent members of Merkel's own party have criticized her apparent passivity in the face of the financial challenge. Over the weekend, the governors of Saarland and Baden-Württemburg both broke ranks with CDU party leadership and called for tax breaks—and soon. "I think our citizens expect lower taxes in this legislative period," Saarland's Peter Müller told SPIEGEL.

Criticism of the 54-year-old chancellor's leadership comes at a crucial moment. Today and tomorrow, about 1,000 CDU members will meet to elect new leaders. The last time the party met, in Dresden in 2006, Merkel got over 93 percent of the votes, a resounding affirmation. This time around, internal party support for her could be decidedly weaker—not a good sign just a year before national elections.

Provided by Spiegel Online—Read the latest from Europe's largest newsmagazine

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