• Executives voicing concern German chancellor may be forced out
  • Dutch finance minister warns against upper limit for refugees

A world where Angela Merkel no longer occupies the German chancellery is one more risk factor that global executives are finding hard to calculate.

In closed-door meetings taking place during the World Economic Forum in Davos, Switzerland, this week, the prospect that Merkel could be forced from office over her open-door policy on refugees from the Middle East has cropped up again and again. While the political tide at home hasn’t yet turned decisively against her, executives are beginning to fret about the end of the decade-long Merkel era.

“There’s nobody to replace her,” Ian Bremmer, president of the Eurasia Group thinktank, said in an interview with Bloomberg Television on Friday. “That’s the big risk surprise” of this year, he said.

Merkel’s woes come as investors struggle to understand the forces that are disrupting politics around the world. Davos delegates spent most of the week obsessing about whether the rise of Donald Trump should be taken seriously or not. And in Europe, the refugee crisis is fanning the success of populist parties from Poland to France.

Greater Threat

Multiple executives at global banks meeting in Davos said that the crisis posed by the influx of more than a million refugees to Europe and the risk it represents to Merkel is a greater threat to the stability of the continent than the U.K.’s vote on whether to stay in the European Union.

With her EU counterparts saying there are only a few weeks left to find a common policy on re-settling migrants and policing borders, it’s conceivable that Merkel would be forced out this year, two of the executives said. They asked not to be named as the discussions were private.

Under pressure from conservatives in her own coalition and with public understanding dissipating after sex-attacks reportedly committed by asylum seekers, Merkel is running out of time to stem the influx to Germany. She refuses to bow to calls to put an upper limit on refugee numbers, saying she’ll give diplomacy one more month, until the next EU summit, to achieve a reduction in the flow. “After that we can make a preliminary assessment and see where we stand,” Merkel said this week.

EU Isolation

A year ago, in the immediate aftermath of the Charlie Hebdo attacks in Paris, Merkel used her appearance in Davos to emphasize that global terrorism doesn’t stop at Europe’s borders, and argued for the application of joint European action to address it. This week, after another atrocity in Paris that further inflamed the debate about immigration, Merkel’s stance on refugees has left her increasingly isolated both at home and across the EU.

The German deputy chancellor, Sigmar Gabriel, arrived in Davos on Wednesday with an appeal for the kind of joint action that could rescue Merkel’s political fortunes. He appeared on the same day that Austria’s government announced a plan to limit the influx of refugees through its borders, an act he described as “a cry for help to make it clear that Austria, Sweden and Germany can’t master the refugee crisis alone.”

Across Europe, it seems few are listening. With countries like Hungary throwing up fences and others in the EU’s east refusing to share the burden of asylum seekers, Dutch Finance Minister Jeroen Dijsselbloemused his appearance in Davos to urge against imposing an upper limit on refugee arrivals and argue for a joint approach to border control.

“What happens now is that one member after the other individually are taking measures, starting to close the borders and that is the way I don’t want to go,” he said in an interview on Bloomberg Television.

The risk that Europe fails to deal with the refugee crisis is one factor contributing to a loss of confidence in global markets at a time when China’s slowdown, the slump in oil prices and the prospect of a more protectionist U.S. is stoking uncertainty.

Leadership

That political risk may not be as bad as getting to grips with the sudden departure of a leader valued by many of the 2,500 business chiefs gathered in Davos. According to Bill Browder, chief executive officer of Hermitage Capital LLP, Merkel has the bonus of being a political leader who can corral those around her unwilling to take unpopular decisions.

She’ll need it: a survey for N24-Emnid published on Friday suggested that only 15 percent of Germans back the current unrestricted migration policy.

“Leadership is when someone does something right but not popular,” Browder said in Davos. “Germans may not like the Syrians coming in but it’s historic and humanitarian. Merkel is one of the few leaders.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE