When I think of historical analogies to Angela Merkel, the first name I come up with is Robert Walpole: two savvy political operators with the ability to find the country’s ideological sweet spot, but lacking the vision and force to prevail in a crisis. Of course, Walpole’s job was easier, because he only had the UK to worry about; Merkel has to run both Germany and the EU, and the jobs often lead her in different directions.
With the German election approaching, Merkel has a quandary: she can’t support any more bailouts without alienating her electorate, but she can’t afford to let the EU split apart, either. As a result, I suspect the EU will drift over the next several months; there will be no attempts to impose Teutonic standards of financial rectitude on Italy or France for fear of creating a backlash, but there will be no stimulus packages, either. The individual components of the EU will thus enjoy more freedom to act independently, which, in light of the circumstances, is probably a good thing.