President Putin at the St. Petersburg International Economic Forum

-Analysis-

MOSCOW — Aug. 9 came and went in Russia without an official celebration. And yet, the date is significant. It marks the moment Vladimir Putin first came to power — 18 years ago.

Everyone, from his closest advisors at the Kremlin to independent political scientists, expects the Russian president to continue to heed his well-worn playbook. In recent weeks, we've been exposed to images of a bare-chested Putin fishing on holiday, apparently to counter rumors that he's sick and tired. And on Aug. 8, he went to Abkhazia, wedged between Russia and Georgia and bordering the Black Sea, to celebrate the ninth anniversary of victory against Georgia in 2008. The visit was meant to stress that aspect of Putin that makes him so popular among Russians: his image as the "Gatherer of Russian Lands."

He is seen as a leader who can stand up to the Americans, and who doesn't hesitate to reclaim territory from countries that formerly belonged to the Soviet Union (Ukraine, Moldova, Georgia). It's no coincidence that the date of Russia's 2018 presidential election was recently moved so that it falls on the fourth anniversary of the annexation of Crimea.

Putin hasn't officially declared his candidacy for the election as yet. But there's no doubt he wants to be president until 2024. He will then be 72 years old, a little younger than Stalin, who was 73 when he died at the helm.

putin_russia_siberia_hollidays

The holidays of President Putin in Siberia Photo: Alexei Nikolsky/ZUMA

"Putin will be in better physical shape, which means he'll be able to rule the country for another 30 or 35 years," far right columnist Piotr Akopov writes in the online newspaper Vzgliad. "Does that mean the country will stagnate terribly? Of course not. The stronger and more experienced he will be, the easier it will be to accelerate the country's development."

Akopov then asks: "Will Putin change in the future? No, he will simply be more and more confident in what he does. And it doesn't matter what his title will be after 2024, when he ceases to be president, ... Putin will clearly remain the real head of state." Under Russia's constitution, a president cannot serve more than two consecutive terms.

The presidential election, scheduled for March 18, 2018, "should give Putin his place in history," says political scientist Konstantin Kalachev, who is close to the Kremlin. "After the Russian president's efforts on foreign policy, after Crimea's annexation, the result of this election must not only be convincing; he must equal the vote he obtained in 2012 (63.6% in the first round). It must strengthen Putin in the role of the popular leader with indisputable authority, whose popularity is the basis of the political system."

A few lines of Putin's future mandate leaked to the Russian media at the beginning of the summer. Putin talks about a justice reform, building a "digital economy" and a "development program for big cities." Political scientist Alexander Morozov sees the judicial reform as "probably the only reform we can expect from Putin." But he remains skeptical given that over the past decade, he observed a "complete merging of the security forces and judicial authorities."

putin_russia_powe_politics

Russian President Vladimir Putin and Russian Defense Minister Sergei Shoigu at the annual Victory Day military parade — Photo: Kremlin Pool/ZUMA

The digital economy program would appeal to young voters, though restrictions and censorship on the internet risk limiting this project to "fulfill the needs of the military-industrial complex and support geopolitical ambitions," laments Morozov. At the same time, the Putin administration has been working discreetly for months on a "model for the future." Russian television, in the meantime, continues to deify Putin.

"It's impossible to find a model for the future," says economist Vladislav Inozemtsev. "The ideological effort of the past few years is a negation of any model for the future. It's oriented towards the popularization of the concepts of stability and conservatism."

Political analyst Aleksandr Golts is just as critical. For him, Putin's literal flaunting of muscle — already tested out in 2007 and 2009 — is "a sign of the refusal to look for something new. We can deduce from this that the administration's feverish search for a "model for the future" is completed. An immortal Putin is our future," he says, with irony.

In terms of foreign policy, "There's no turning back — Putin cannot give Crimea back," notes Andrei Kolesnikov, a senior fellow and chair of the Russian Domestic Politics and Political Institutions Program at the Carnegie Moscow Center. "The relations with the West will always be more or less tense. They can be better than they're now, but they'll never return to what they were between 2012 and 2014."

Support Worldcrunch
We are grateful for reader support to continue our unique mission of delivering in English the best international journalism, regardless of language or geography. Click here to contribute whatever you can. Merci!
Economy

Merkel's Legacy: The Rise And Stall Of The German Economy

How have 16 years of Chancellor Angela Merkel changed Germany? The Chancellor accompanied the country's rise to near economic superpower status — and then progress stalled. On technology and beyond, Germany needs real reforms under Merkel's successor.

Chancellor Angela Merkel looks at the presentation of the current 2 Euro commemorative coin ''Brandenburg''

Daniel Eckert

BERLIN — Germans are doing better than ever. By many standards, the economy broke records during the reign of outgoing Chancellor Angela Merkel: private households' financial assets have climbed to a peak; the number of jobs recorded a historic high before the pandemic hit at the beginning of 2020; the GDP — the sum of all goods and services produced in a period — also reached an all-time high.

And still, while the economic balance sheet of Merkel's 16 years is outstanding if taken at face value, on closer inspection one thing catches the eye: against the backdrop of globalization, Europe's largest economy no longer has the clout it had at the beginning of the century. Germany has fallen behind in key sectors that will shape the future of the world, and even the competitiveness of its manufacturing industries shows unmistakable signs of fatigue.

In 2004, a year before Merkel was first elected Chancellor, the British magazine The Economist branded Germany the "sick man of Europe." Ironically, the previous government, a coalition of center-left and green parties, had already laid the foundations for recovery with some reforms. Facing the threat of high unemployment, unions had held back on wage demands.

"Up until the Covid-19 crisis, Germany had achieved strong economic growth with both high and low unemployment," says Michael Holstein, chief economist at DZ Bank. However, it never made important decisions for its future.

Another economist, Jens Südekum of Heinrich Heine University in Düsseldorf, offers a different perspective: "Angela Merkel profited greatly from the preparatory work of her predecessor. This is particularly true regarding the extreme wage restraint practiced in Germany in the early 2000s."

Above all, Germany was helped in the first half of the Merkel era by global economic upheaval. Between the turn of the millennium and the 2011-2012 debt crisis, emerging countries, led by China, experienced unprecedented growth. With many German companies specializing in manufacturing industrial machines and systems, the rise of rapidly industrializing countries was a boon for the country's economy.

Germany dismissed Google as an over-hyped tech company.

Digital competitiveness, on the other hand, was not a big problem in 2005 when Merkel became chancellor. Google went public the year before, but was dismissed as an over-hyped tech company in Germany. Apple's iPhone was not due to hit the market until 2007, then quickly achieved cult status and ushered in a new phase of the global economy.

Germany struggled with the digital economy, partly because of the slow expansion of internet infrastructure in the country. Regulation, lengthy start-up processes and in some cases high taxation contributed to how the former economic wonderland became marginalized in some of the most innovative sectors of the 21st century.

Volkswagen's press plant in Zwickau, Germany — Photo: Jan Woitas/dpa/ZUMA

"When it comes to digitization today, Germany has a lot of catching up to do with the relevant infrastructure, such as the expansion of fiber optics, but also with digital administration," says Stefan Kooths, Director of the Economic and Growth Research Center at the Kiel Institute for the World Economy (IfW Kiel).

For a long time now, the country has made no adjustments to its pension system to ward off the imminent demographic problems caused by an increasingly aging population. "The social security system is not future-proof," says Kooths. The most recent changes have come at the expense of future generations and taxpayers, the economist says.

Low euro exchange rates favored German exports

Nevertheless, things seemed to go well for the German economy at the start of the Merkel era. In part, this can be explained by the economic downturn caused by the euro debt crisis of 2011-2012. Unlike in the previous decade, the low euro exchange rate favored German exports and made money flow into German coffers. And since then-European Central Bank president Mario Draghi's decision to save the euro "whatever it takes" in 2012, this money has become cheaper and cheaper.

In the long run, these factors inflated the prices of real estate and other sectors but failed to contribute to the future viability of the country. "With the financial crisis and the national debt crisis that followed, economic policy got into crisis mode, and it never emerged from it again," says DZ chief economist Holstein. Policy, he explains, was geared towards countering crises and maintaining the status quo. "The goal of remaining competitive fell to the background, as did issues concerning the future."

In the traditional field of manufacturing, the situation deteriorated significantly. The Institut der Deutschen Wirtschaft (IW), which regularly measures and compares the competitiveness of industries in different countries, recently concluded that German companies have lost many of the advantages they had gained. The high level of productivity, which used to be one of the country's strengths, faltered in the years before the pandemic.

Kooths, of IfW Kiel, points out that private investment in the German economy has declined in recent years, while the "government quota" in the economy, which describes the amount of government expenditure against the GDP, grew significantly during Merkel's tenure, from 43.5% in 2005 to 46.5% in 2019. Kooths concludes that: "Overall, the state's influence on economic activity has increased significantly."

Another very crucial aspect of competitiveness, at least from the point of view of skilled workers and companies, has been neglected by German politics for years: taxes and social contributions. The country has among the highest taxes on income in Europe, and corporate taxes are also hardly as high as in Germany anywhere in the industrialized world. "In the long run, high tax rates always come at the expense of economic dynamism and can even prevent new companies from being set up," warns Kooths.

Startups can renew an economy and lay the foundation for future prosperity. Between the year 2000 and the Covid-19 crisis, fewer and fewer new companies were created every year. Economists from left to right are unanimous: Angela Merkel is leaving behind a country with considerable need for reform.

Support Worldcrunch
We are grateful for reader support to continue our unique mission of delivering in English the best international journalism, regardless of language or geography. Click here to contribute whatever you can. Merci!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ