Merkel Wins as Need for Austerity in Europe Fades

One of the early observations about her victory was that Merkel’s hard attitude that austerity was the best path to bring down deficits in the European Union’s (EU’s) weakest economies had pleased the electorate. Poll after poll since the crisis began showed that Germans did not want their hard-earned tax dollars sent abroad. They and their government had not overspent. Irresponsible nations, particularly Spain and Greece had. Merkel refused to break with her earliest stance on austerity, despite pleas from French leaders, the leaders of the nations that needed help and even occasionally the International Monetary Fund.

While Merkel’s approach to the economies, deficits and debts of other sovereigns helped her cause at home, her reelection comes at a time when her approach to austerity may no longer be important. Stimulus packages, which seemed so essential a year ago, are not as important now. Recent PMI data from Markit show a recovery in the EU. It is uneven, but at least it is present. Gross domestic product (GDP) figures for the region have supported the trend. Only employment has lagged significantly. If the United States is a model, this pattern may not be unusual.

Merkel presides over an economy that has been as robust as that of any large nation, as measured by GDP, except China. She could trumpet that, particularly since the EU is Germany’s largest trade partner, which should have pulled down its economy. That may be known as the “Germany miracle” for years to come. Trade with nations outside the EU helped Germany’s financial status. That, married with modest consumer spending, and Germany could sit on an island all its own in Europe as the region suffered its worst downturn since World War II.

Europe can consider itself lucky. Merkel will remain opposed to aid to the nation’s neighbors. However, her stance on the matter has become increasingly less important.