Merkel Steps Down: Now What?

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In late 2005, Germany saw to its first ever female chancellor as Merkel, the leader of the centre-right CDU, claimed a landslide victory. But now, with falling polls, an ever growing opposition, and most recently, a poor performance in Hesse, Angela Merkel, the most powerful woman in the world, has announced last Monday that she is stepping down as her term ends in 2021.

Throughout her thirteen years, Merkel has emerged as a dominant force in the western world. She has led Germany through numerous hardships, such as the euro and Ukraine crisis. Perhaps one of most notable, her vastly controversial decision to open up Germany’s borders received the praises of many globally, but at the same time large backlash domestically, much of which came from her own party. This decision led to the influx of more than a million refugees, fueling support for Germany’s left. Many speculated it to be a turning point in her political career, stealing more than a million votes from the CDU during the 2017 Bundestag elections.  

So, as the global political weather takes a shaky hit, what exactly will her stepping down mean for the global economy?

At least in the short term, things aren’t looking so good. Mere minutes after her official announcement, the euro took a plunge, reaching a two month low, forcing European investors into a state of uncertainty, and remaining largely volatile throughout the week. But then again, most political shifts usually cause pandemonium in the Forex markets within the first couple hours.

With Merkel gone, investors may fear that populist parties are to gain even more seats across Europe’s parliaments. Depending on the who succeeds Merkel, this could lead to further challenges for the European Union and weaken the authority of the European Commission. That could end up damaging assets such as the euro in the long run, especially in Q4. Many of Merkel’s policies, such as her reliance on product exports for economic growth, may be changed as Germany slides to the left.

In recent years, many have called Merkel a “lame duck” for her rather conservative decisions and way of dealing with issues. Though Merkel received lots of criticism in southern Europe, her steady and cautious approach made her popular at home. A change in leader could mean the introduction of a more radically decisive Germany.

Nonetheless, as europe’s primary powerhouse, the change in German power should certainly mean the change in economic policies and relations both foreign and domestically. Merkel’s transatlantic allies, such the US, willing be “watching closely” to see who might take the reins of Europe’s biggest economy. But for now, Merkel remains to be “ the queen of Europe”.