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Twenty per cent of its population has foreign roots but Germany has never seen itself as a multicultural country. That is why the arrival of more than one million refugees in 2015 has caused such intense debate over the future of the country and helped fragment the political landscape. This large and sudden influx, coupled with the slow-burning euro crisis, has fuelled the rise of the far-right Alternative for Germany party (AFD), which holds seats in half of the country’s 16 state parliaments. But the AFD’s growth should be put in perspective: parties that backed Angela Merkel’s refugee stance, including her coalition partners the SPD and the Greens, won far more votes in March’s regional elections than the populist upstart.

Merkel, though, is undoubtedly in a weaker position than she was a year ago. Federal elections are due in 2017 and her party is openly searching for a successor while, with France, the US, the UK and Poland occupied with their own issues, she is fighting to hold the EU together. At least the economy is in good shape. Domestic demand is making up for troubled export markets such as China, while public coffers won’t be overly stretched by the refugee intake and well-being is above OECD average; all in all, the country is well placed to absorb the new arrivals. But you’d never guess that from the tone of public discourse.

Leader’s performance

Is Angela Merkel showing extraordinary leadership or a near-autocratic disregard for the people’s will? The answer depends on where you stand on the issue of refugees. The fact is that many Germans don’t recognise their dependable chancellor anymore. “For the first time in her political career she’s doing what she was always criticised for not doing before: she has taken a very clear stance,” says Merlind Theile, political correspondent at Die Zeit. Yet her personal approval ratings have bounced back and even CDU losses in recent state elections can’t be read as an outright rebuke. Perhaps voters are getting used to this new Merkel, even if her own party isn’t. She appears to have maintained her famed calm and resilience and that might still pay off.

Foreign policy

Germany’s international stance was transformed by Frank-Walter Steinmeier’s appointment as foreign minister in 2013. “In the future it will not be sufficient simply to repeat familiar mantras,” he said, signalling Berlin’s readiness to take on more responsibility in global affairs. Its resolve was tested with the 2014 Ukraine crisis, which Merkel made a priority, aligning her European partners behind her as she did in the eurozone crisis. Yet Germany’s most “familiar mantra” has always been to never go it alone; now that Berlin has alienated its allies over the refugee issue, the government looks far less comfortable in a leading role. “For a long time, Germany didn’t lead and now that we do we’re being criticised,” says Jana Puglierin of the German Council on Foreign Relations think-tank. Some say this awakening is too little, too late but she believes Germany’s embrace of its new role is a fragile one. “The refugee crisis will end up reducing German engagement.”

State of the economy

The German economy may not be booming but it is in rude health. The 1.6 per cent growth forecast for 2016 is above the eurozone average and its 4.9 per cent unemployment rate is the lowest in Europe. Experts agree that neither the smouldering euro crisis nor the influx of refugees present insurmountable problems. Sluggish productivity growth is a different matter, though opinions vary on whether laxer labour laws or public investment is the solution. Economics professor Peter Bofinger, a member of the government’s expert advisory council, sees Germany shifting from export-led growth to a domestic-market focus as wage rises help demand. But he warns that “Germany isn’t using favourable interest rates to push investment on a large scale”.

View from the inside

Joachim Fritz-Vannahme, Bertelsmann Foundation
“We can demand and expect the German government to reunite Europe. Of course, Germany can’t do this alone but if European politics and integration go wrong no country will pay a higher price than Germany.”

Merlind Theile, political correspondent, Die Zeit
“What is happening in Germany is a break with the past. We’re taking in so many foreign people in such a short time and that is causing friction, fear and insecurity. It’s something we will have to process politically and as a society.”

Nicola Jentzsch, German Institute for Economic Research (DIW Berlin)
“Germany has a huge problem with investment. We need much more of it, especially in the education of IT specialists. We don’t have anywhere near enough of them and, since many will found companies, public and private investment go hand in hand.”

Energy policy

In 2010 Germany vowed that 60 per cent of its total energy consumption would be from renewable sources by 2050. In 2014, it promised to reach that goal by 2035. But heavy investment in renewables and price guarantees for private producers had the effect of raising prices while making coal more attractive. New legislation promises more efficient investment and a phasing out of older coal plants but in a wider context Germany’s energy policies are a test of how far a national government can regulate a globalised market.

Soft-power credentials

Language
German is becoming hip, a trend that surprises nobody more than Germans. The number of learners is up by 4 per cent in five years and Americans are sharing articles praising the exactness of German words such as Backpfeifengesicht (to describe Ted Cruz’s face).

Football
The World Cup-winning national team is the perfect representation of the modern German nation: multiracial, not just blond and blue-eyed; well organised but creative too.

Oktoberfest
Oktoberfest is the most-exported folk festival in the world. Imitations from Australia to Palestine and the US mean a sliver of Bavarian culture is enjoyed worldwide by millions every year.

Automobile industry

German car-makers were feeling the heat even before the Volkswagen emissions scandal rattled the sector. Domestic sales are up but export growth has slowed as US drivers – encouraged by the low oil price – opt for SUVs, which most German manufacturers don’t produce. Meanwhile, many Chinese are less keen on being seen with foreign luxury cars thanks to a government crackdown on corruption. German market share in the US is down 0.8 per cent since 2012, while China sales fell 1 per cent from 2014 to 2015. With competition in the offing from Google, Apple, Tesla and self-driving cars, Germany’s biggest employers might need some new ideas.

What needs fixing

Right-wing violence
Hate crime was up 30 per cent in 2015 compared with 2014. Many culprits aren’t linked to neo-Nazi groups so a ban on the rightist NPD won’t reverse the trend.

Early-childhood education
Three times as many children of graduates go to university as those from non-graduate households; making education available at a younger age would help.

Digital economy
Start-ups here attracted more investment in 2015 than anywhere else in Europe but Germans are suspicious of data usage; privacy-protecting technologies are needed.

Integration policy
Banning German cultural rituals to comfort newcomers doesn’t help residents nor refugees.

In figures:
Annual defence spending
€34.3bn (2015/16)
International aid budget
€12.48bn (ODA 2014)
Tourism
33 million in 2014

The scorecard

Germany has challenges ahead but most nations would happily swap their problems for Berlin’s. Under Angela Merkel’s leadership, the country has gradually grown accustomed to its new role as Europe’s de facto top dog. A strong Germany (who’d have thought?) is now good for all us.
Grade: B+

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