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POLITICS

Merkel warns of hard economic times ahead

German chancellor Angela Merkel warned of tough times ahead for the world's third largest economy due to the global financial crisis, and called for a comprehensive overhaul and more oversight of the financial system.

Merkel warns of hard economic times ahead
Merkel at a Mercedes factory in Beijing. Photo: DPA

“We know that we can influence events in Germany,” Merkel said at the conclusion of the Asia-Europe summit in Beijing. “Which is why the government will take measures where we can help specific sectors” that are troubled, she added without going into detail.

“We can see that trust in the financial markets has yet to be fully restored,” Merkel said, following another week in stomach-churning losses in world stock markets, during which major indices in Europe, Asia and the United States fluctuated wildly.

She also called for a reform of the battered financial system — including substantially more oversight — as the only way to prevent future crises of this nature.

The DAX in Frankfurt dropped at times by nearly 10 percent on Friday before recovering, ultimately closing down close to five percent as news about falling corporate profits and rising jobless claims dogged investors.

Germany’s finance minister meanwhile grimly predicted that the financial crisis will last at least until late 2009, and it will take years for Germany to gauge the ultimate costs of its rescue plan.

“The risk of collapse is far from over. It would be wrong to lift the

alarm,” Finance Minister Peer Steinbrück told the weekly Bild am Sonntag newspaper.

The €480-billion ($610-billion) rescue package for banks approved a week ago is to last through next year, “and we will certainly need it for that duration,” he predicted.

“We won’t know whether the rescue plan will entail real costs until between 2010 and 2013,” he added.

German banks have so far been reluctant to ask for state aid under the rescue plan, with one analyst suggesting they are wary of losing autonomy and of being stigmatised by their peers.

But state bank BayernLB this week asked for a capital injection of 6.4 billion euros, including 5.4 billion euros from the federal government, the first bank to have applied for help under the government scheme.

POLITICS

Can German Chancellor Scholz create a Merkel-like buzz at the G7 in Bavaria?

The last time Germany hosted a G7 summit, then-chancellor Angela Merkel produced a series of viral images with Barack Obama, clinking giant mugs in a traditional Bavarian beer garden and communing against a verdant Alpine backdrop.

Can German Chancellor Scholz create a Merkel-like buzz at the G7 in Bavaria?

Her successor Olaf Scholz, hobbled in domestic opinion polls and of modest global stature, may struggle to match that convivial atmosphere when leaders gather again from Sunday.

The centrist Scholz, 64, assumed the presidency of the Group of Seven rich countries in January, just a month after taking office in Berlin.

Since then his handling of the Russian invasion of Ukraine, soaring inflation and energy supply complications have put his government to the test while sending his approval ratings plunging.

READ ALSO: Opinion – Scholz is already out of step at Germany – it’s time for a change of course

Scholz told parliament on Wednesday he was ready to seize the three days of talks at the Elmau Castle mountain resort – the same remote, picturesque venue Merkel chose in 2015 – to burnish Germany’s global image and the standing of the West.

“In Europe’s biggest security crisis for decades, Germany as the economically strongest and most populous country in the EU is assuming special responsibility – and not just for its own security but also for the security of its allies,” he said.

A series of summits in the coming days must show “that G7, EU and NATO are as united as ever” and that the “democracies of the world are standing together in the fight against (Russian President Vladimir) Putin’s imperialism,” Scholz said.

READ ALSO: Germany tightens border controls ahead of G7 summit

German Chancellor Olaf Scholz arrives at the EU summit in Brussels on June 23rd.

German Chancellor Olaf Scholz arrives at the EU summit in Brussels on June 23rd 2022. Photo: picture alliance/dpa/AP | Olivier Matthys

‘Merkel tradition’

Joachim Trebbe, a professor of political communication at Berlin’s Free University, said Scholz had a “huge opportunity” with the G7 to dispel any doubts about his leadership skills or resolve against the Russian president.

“At the start of his term and even when the war began, Scholz was quite reserved – perhaps a little bit in the tradition of Ms Merkel,” a
still-popular conservative the Social Democratic chancellor has sought to emulate, Trebbe said.

She also “tended to manage crises and didn’t pay much attention to informing the media at every step”.

Former US President Barack Obama and ex-German Chancellor Angela Merkel sit during a concert visit in Elmau (Bavaria) in June 2015 as part of the G7 summit.

Former US President Barack Obama and ex-German Chancellor Angela Merkel at a concert visit in Elmau (Bavaria) in June 2015 during the G7 summit. Photo: picture alliance / dpa | Karl-Josef Hildenbrand

After accusations of foot-dragging, Scholz’s attempts at a reset were on display during a long-delayed visit to Kyiv last week, joined by the leaders of France, Italy and Romania.

A journalist from the daily Süddeutsche Zeitung travelling with the chancellor noted that he had a tendency to make gaffes under pressure – like “an old tap that either releases ice-cold or boiling water”.

‘Symbols’

His trouble finding the middle ground had led him to exercise too much caution when it came to sending weapons to Ukraine, or too little, as when on a visit to Lithuania this month he significantly overstated German arms deliveries.   

The chancellor, whose sometimes robotic style has earned him the nickname Scholzomat, has also found himself outflanked in his own unwieldy ruling coalition of his Social Democrats (SPD), ecologist Greens and liberal Free Democrats.

A poll this week showed that the Greens – with popular Foreign Minister Annalena Baerbock and Economy Minister Robert Habeck, both credited with clearer messaging on Ukraine — were leading the SPD in voter intentions for the first time since July 2021.

Both parties, however, are currently trailing the conservative opposition, which has relentlessly criticised Scholz’s Ukraine and energy policies as too timid.

READ ALSO: Why has Germany been so slow to deliver weapons to Ukraine?

Trebbe said that initiatives at the G7 bearing Scholz’s imprint on issues including future political and economic support for Ukraine, climate
protection and strengthening democracies worldwide were crucial if he hoped to gain political tailwinds from the summit.

But he said the gathering was nearly as much about generating images, such as the instant meme of Merkel, arms outstretched, explaining her world view to a nonchalant Obama, draped in repose on a wooden bench.

“That’s where symbols of unity, common strategy and strong leadership are created,” Trebbe said.

“I’m pretty sure Scholz has a team of professionals ready to take full advantage of that aspect of the summit.”

By Deborah COLE

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