Politeía Digest

Quis custodiet ipsos custodes?

Index Tracks What Ails Merkel

with 2 comments

By Matthew Dalton

We recently asked political economists what they had to say about the euro-zone’s most important domestic political problem: Angela Merkel’s troubled relationship with German voters. That relationship has been and will be a key determinant of Ms. Merkel’s willingness to put the German economy on the hook for bailing out the weaker euro-zone countries.

The puzzle for Ms. Merkel is why voters aren’t giving her more credit for running one of the EU’s strongest economies. Are they angry at her for bailing out Greece and Ireland? What political economists would tell her is that the German economy hasn’t delivered the goods for the average German in the form of strongly growing disposable income, adjusted for inflation, which is the most important economic determinant of domestic political popularity.

The University of Braunschweig is now publishing a quarterly “Government Performance Index,” based on the research of the political economists Gernot Sieg and Irem Batool. The index says how many percentage points of the vote Germany’s economic performance would add or subtract from the governing coalition’s vote total if an election were held today.

So, how’s the economy treating Ms. Merkel’s coalition now? Not particularly well, though things have improved from a low point in the fourth quarter of 2009.

“Starting from an all-time low caused the economic and financial crisis, the GPI has further increased in the 3rd quarter 2010 but still remains at a very low level of -2.45,” Braunschweig’s economics department said in a statement.

It seems that voters aren’t being particularly fair to Ms. Merkel. The financial crisis isn’t her fault, right? But voters aren’t particularly good at handing out reward and blame for economic performance. They just want results, and if the current government isn’t delivering, for whatever reason, they’re more than happy to vote for the other guy.

Interestingly, the indicator has been strongly negative for most of the previous decade, despite the fact that the German economy expanded its position as one of the world’s leading exporters, with a rapidly growing trade surplus.

But here voters may be right to blame the government: Labor market reforms started by Chancellor Gerhard Schroeder that have kept wages from rising are the main cause of Germany’s world-beating competitiveness. And stagnant wages translate into low growth rates of real disposable income, a sure recipe for domestic political misery, as any political economist will tell you.

Braunschweig will update its index after Germany publishes its fourth-quarter real disposable income data, expected in February.

Source: The Wall Street Journal


Written by Theophyle

December 31, 2010 at 8:27 pm

2 Responses

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  1. Index Tracks What Ails Merkel « Politeía Digest…

    Here at World Spinner we are debating the same thing……

    World Spinner

    January 1, 2011 at 12:04 am

  2. […] pe Politeia Digest- De ce nu este populara Merkel in Germania; […]

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