Merkel Victory Will Mask Germany’s Long-Term Economic Problems

Angela Merkel was reelected chancellor of Germany for a third term. The world’s fourth largest economy, and Europe’s largest, leads in tackling the eurozone crisis. But writing for the Telegraph, Ambrose Evans-Pritchard warns that Germany’s economic strength is deceptive, “an illusion of the business cycle and a China-driven global boom in machinery and capital goods that is running out of steam.” Critics warn against complacency: Some urge investment in aging infrastructure and education; others suggest that investment in renewable energies is too much too soon. Rigid labor regulations discourage layoffs, tech startups, as well as rising productivity. “Economists fret that Germany is coasting as deep structural problems build up, repeating the mistakes of Italy and Spain at the outset of monetary union” notes Evans-Pritchard. Germans are impatient for Europe’s economic recovery, which may be underway; if not, populism could spread among Germans. With Asian demand in decline, Germany and other nations must act quickly and get their economies in order. – YaleGlobal