New German Government Has Nation in Buoyant Mood

They're not exactly dancing in the streets, but indications are that Germans might be seeing the glass as half full these days instead of half empty. Consumer confidence is up, business sentiment higher than it has been in nearly 15 years, and surveys show Germans are less worried about their personal economic health and slightly more optimistic about their country's economic future than they have been in years.

According to experts, much of that has to do with satisfaction with the government made up of left-leaning Social Democrats (SPD) and the conservative Christian Democratic Union (CDU) and Christian Social Union (CSU) bloc, which will complete 100 days in power on Wednesday. This grand coalition, which was cobbled together after elections last September resulted in only a razor-thin victory for the conservatives, was met with widespread misgivings when it officially took shape last November.

But public opinion shows that much of that doubt has since turned to approval, particularly when it comes to Angela Merkel, Germany's first female chancellor. On the German public broadcaster ZDF's political barometer, which rates politicians' popularity on a scale from -5 to +5, Merkel scores an average rating of 2.2. That is remarkable for a sitting chancellor, most of whom never get above the 0.5 mark.

"You'd have to be a real grouch to say that the government has had a bad start," Paul Nolte, author of the books "Hazardous Modernity" and "The Reform Generation" and professor of modern history at Berlin's Free University, said. "The change in the [country's] mood is part of the government's success story."

The nation's upbeat outlook is reflected in the media, which for years has depicted the country as standing at the edge of the abyss. Now headlines enjoy focusing on the positive, proclaiming "Springtime for Merkel" or praising a "A Can-Do Culture" -- sentiments that would have been considered laughable and delusional by editors just months ago.

From the right-of-center Frankfurter Allgemeine Zeitung to the decidedly left-wing taz newspaper, the adjectives used to describe the government and the country's direction have been, if not glowing, at least overwhelmingly positive.

Economic upswing

German businesses, particularly those who export, have been enjoying strong profits and executives are more optimistic than they have been in years. A widely watched index of German business sentiment put out by the Munich-based ifo institute reported its index rose to 103.3 in February, its highest level since October 1991.

But it's not just publishers and industry executives who are reveling in the upturn. Even ordinary Germans are tending to find reasons to smile after years of dour faces. German consumer confidence is set to improve for a fifth month in a row in March, according to the GfK research group which issued its consumer climate report last week.

"The overall mood among German consumers is more positive than it has been for many years," the GfK said in a statement.

A higher percentage of Germans believe that there is a good chance of economic recovery, according to the institute. The Soccer World Cup, to be held in Germany this summer, is also likely to play a strong role in the sunny outlook. Economic experts say the event will contribute up to 0.5 percent to GDP growth in the country.

Why the happy face?

The exact reasons behind the new buoyancy have many analysts scratching their heads. While German business has taken an overall turn for the better, there are still many serious problems facing the country. Unemployment numbers have again surpassed the five million mark; automaker Volkswagen recently announced it is cutting 20,000 jobs.

Even Merkel's government has had to announce some unpopular measures such as the cutting of subsidies, raising the retirement age to 67 and increasing the value-added tax by two percentage points in 2007.

"It is really a gap between the communicated state of affairs and reality," said Gero Neugebauer, who teaches political sociology at Berlin's Otto Suhr Institute for Political Science. "The public mood is much better than one would think it would be in the current situation."

Indeed, while consumers are showing more confidence, and companies like Volkswagen are reporting double-digit growth over last year, people are still not parting with their money like they might be, perhaps fearful that the party mood won't last long. Five years ago, Germans saved 9.2 percent of their incomes; today that number has risen to 10.6 percent. That takes some 20 billion euros out of the domestic economy.

Government's role

Although the exact reasons are unclear, the current popularity of Merkel's government does appear to be playing a role in the better attitudes across the country, never mind that substantial successes by the new government are still hard to find.

The chancellor herself could be benefiting from simply overcoming low expectations, according to Neugebauer. "They're happy that she is not as bad as it was thought she could be," he said.

Her style and that of her government appear to be a breath of fresh air to the populace: more businesslike and modest, less glitzy and gilded than the Schröder administration.

"The government has not come on board with such high emotional expectations like Schröder did," said Nolte. "It's a more pragmatic, modest beginning, which has made the thing easier."

Merkel has also cut a good figure on the international stage. While most chancellors attempt to tackle messy domestic issues first, Merkel chose to make her debut in cities like Paris, Washington, Moscow and Jerusalem. She proved her leadership and diplomatic credentials, which had been doubted by many, right away, thus earning herself some much-needed leverage on the domestic front.

However, when tangled domestic issues such as labor market regulations, health care reform, education and integration do eventually catch up, they could signal the end of the honeymoon for this government.

"The important decisions haven't been made yet," said Nolte. "You get the impression that there's not much really moving and ask yourself whether the optimism is really justified."