germany

How Germany Went From EU Laggard To Leader

In the early 2000’s Germany was sometimes referred to as  the “sick man of Europe”. Today it has the world’s  4th largest economy and enjoys enormous political and economic influence. What changed? 

In just a few short years, Germany transformed itself into a global powerhouse, confounding critics who once worried that it was in a downward spiral. Today Germany has diplomatic clout and economic powers that include:

  • Serious diplomatic muscle, gained from earning a reputation as an honest broker on a wide range of EU and global political issues
  • A content population that enjoys one of the lowest unemployment rates in the EU, the highest EU per-capita income, a high savings rate and high satisfaction with their healthcare and judicial systems

To be sure, everything in Germany is not perfect. In 2016 Germans identified the country’s struggle to integrate refugees as the number one problem in their country.  But Germany’s recent successes are in contrast to the less vigorous advancements in the rest of the European Union. For instance:

  • The Italian economy has extremely low growth at about 0.2%. Overall the Italian economy is almost 10% smaller than it was in 2008
  • The Greek economy remains hobbled by the impact of excessive government spending.

germanyGoing From Sick To Healthy

So how did Germany go from EU laggard to EU leader? The answer, it turns out, has a few components:

  • Recently the German economy has benefited enormously from low oil prices and a cheap euro, which have boosted exports
  • Germany’s labor and management work together in an unusual and symbiotic structure that enables them to reform and modernize

Germans have very high personal savings rates that enable them to fund the rescues of profligate countries in the EU. Their rescue money, provided to countries like Greece, enables the German government to influence – if not dictate – austerity terms.

The country has already gone through the pains of austerity and has cut government spending to reduce social welfare costs

Germany has had good leadership under Chancellor Angela Merkel, who has held together diverse governing coalitions and has been credited with good diplomatic skills.

Merkel, who once brought an immigrant child to tears while explaining why the child would be deported, later turned face and welcomed over 1 million refugees.

Leadership Can Be Lonely

In some ways, Germany’s new, oversized leadership position in the EU may be putting it at odds with the original concept of the the European Union, which was formed as a partnership among equals.

Despite a lack of leadership from other EU countries, some critics believe Germany is polarizing Europe, while others refer to the EU as “A Teutonic Union”, referring to Germany’s oversized influence. Still others say that Germany has already reached the limits of its influence and will have increasing difficulty in helping to stabilize the EU.

Germany’s strength today shows how even the most economically troubled countries can move forward with the right reforms, good leadership and a bit of luck.

Updated

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