New Year Holds Promise of Upswing for Germany

For at least five years -- some would say 10 -- Germany's manufacturers, its service and retail sector and its fortunes in general seemed to have been on the down.

But the country faces 2006 with a new leader, and with perhaps a better shot at turning its fortunes around than at any time in the last decade. All eyes will undoubtedly be on Chancellor Angela Merkel, who's heard mostly accolades for her much-publicized role as mediator at the contentious budget talks of the European Union in mid-December.

"I think people outside of Germany are realizing more and more that she is a powerful woman," said Gerd Langguth, author of a Merkel biography. "On the other hand, the political honeymoon will be over very soon, and she will be caught up by the daily routine."

Political scientist Ulrich Von Alemann of the University of Düsseldorf agreed that Angela Merkel got off to a good start with her new colleagues in the European Union, but said the really tough work will be at home in Germany where the economy has shown signs of picking up steam, despite being weighed down by near record unemployment.

Sustaining the momentum

But to keep the momentum going, he said, Merkel must learn to govern with her former political opponents after her conservative Christian Democrats were forced into a grand coalition with the Social Democrats by German voters in the fall.

"They had a bitter fight and they have to learn to cooperate now," Alemann said. "And it sometimes seems there is only cooperation on the surface."

According to Alemann, the grand coalition will likely be judged first on its ability to reduce unemployment, and then on the manner with which it deals with the red ink of Germany's budget deficit which is set to exceed the EU's limits again in 2006.

As for Germany's role in Europe, analysts such as Annette Heuser, the director of the Brussels-based Bertelsmann Foundation, see Chancellor Merkel rearranging her country's priorities in 2006.

Strong position in the EU

"The Merkel approach to integrate Britain and France and make sure Paris is not the one and only partner of Berlin will open new options for Merkel when it comes to EU appeals," Heuser said. "Right now, she is seen as a power broker, an honest negotiator and political leader in Europe and I think she will be taken more seriously by countries in central and eastern Europe than Gerhard Schröder had been taken before."

Pushing forward an EU constitution will be a central goal of the European Union under Austrian, then Finnish leadership in 2006. In 2007, Germany takes over the rotating presidency for the first six months, and there is concern that member states may wait until the so-called Engine of Europe and Merkel are at the controls, before they choose to take major strides forward.

"This will be proof of her ability to be an important chancellor," Alemann said.

Before that time comes though, Chancellor Merkel's decisions and persuasive abilities on the domestic front may very well determine whether Germany really is back on the up.