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German election heralds no change for EU

Update: September, 27/2013 - 10:03

by Mai Hien

Over the past few weeks, much attention has been paid to the elec-tion in Germany, which is not only the European Union's largest economy but also one that will play a decisive role in addressing debt turmoil in the eurozone.

Many hope that a new government in Germany could push the country towards adopting a more constructive role for Europe. However, most analysts rule out a change in policy.

In Sunday's election, Angela Merkel's conservative Christian Democratic Union won a resounding victory with 41.5 per cent, the best in 23 years.

Her victory is significant, as she is the only European leader to maintain her position in this time of economic crisis. Merkel's austerity measures have drawn many protesters from crisis-stricken countries, but now she returns with consolidated power.

Merkel was rewarded for navigating the country through the eurozone debt crisis largely unscathed, with triple A ratings and low unemployment.

The fact that Germany enjoys steady economic growth while other countries are stricken by debt is believed to be the main reason why voters handed Merkel a landslide victory.

The country's economy expanded 0.7 per cent in the second quarter of this year after being stagnant in the first quarter and employment is below 7 per cent – its lowest level in two decades.

German's economy is forecast to regain strength next year with predicted growth of 1.7 per cent, compared with 0.4 per cent this year.

Merkel's popularity results from her determination to stick to principles in dealing with the eurozone debt crisis, including pressing indebted eurozone members to carry out austerity measures and reforms.

After the election, Merkel started talks with potential partners to find a governing alliance for the country, but analysts believe that any coalition –either between CDU and the Social Democratic Party or between CDU and the Greens –will herald no major policy changes with regards to Europe.

Analysts said any government would be prudent and rigid in its policy towards the eurozone.

In contrast to Merkel's austerity-driven response to the eurozone, SPD called for a bit more generosity and patience with nations as they pay back their debts.

The election results showed that voters endorse her strategy of demanding biting reforms in exchange for funding bailouts.

"Germany remains firmly rooted in a European identity, with the two main parties agreeing on this vision even while they disagree on some technicalities," read an International Institute for Strategic Studies' report.

"Our course on European policy will not change," Merkel told AFP when asked whether Germany would now be more flexible in its demands for structural reforms and balanced budgets from European partners.

While Germany had been considered "the sick man of Europe" around a decade ago, Merkel said proudly that it was now "an anchor of stability" in the EU. "The others can also achieve that," she said.

During her campaign, Merkel demanded reform to aid recipient countries in the eurozone, saying that was the only way to increase European competitiveness. She took German employment as an example. The German unemployment rate declined from 12.1 per cent from 2005 to the current 6.8 per cent thanks to labour reforms.

Merkel has also worked to prevent Greece from leaving the eurozone and a split of euro currency. Germany has contributed US$73 billion in aid for Cyprus and explicitly or implicitly supported billions of euros in debt restructuring and the European Central Bank's economic stimulation efforts.

The debt crisis in Europe has eased and a modest economic recovery now seems under way across Europe thanks to measures initiated by Germany, ECB and the International Monetary Fund. The eurozone economy grew by 0.3 per cent in the second quarter this year, according to Eurostat.

This might be a good reason for Merkel to continue what she has been doing in the past.

Although Merkel continues to demand binding European control over national budgets and parliamentary accountability for eurozone funds, she has softened her stance toward EU partners. She has called on the European Union to increase investment in addressing unemployment among youths in countries like Spain and Greece, where nearly half of youth aged 16-25 have no jobs. With Germany's agreement, the European Union has given a number of eurozone countries more time to reduce their budget deficit to the targeted 3 per cent of GDP.

After the new government in Berlin is formed, Germany can help its partners in Europe create a better future. — VNS

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