Angela Merkel's bland, say-nothing campaign worked with stunning success. Her overwhelming election victory on Sunday confirmed her third term as German Chancellor and makes her one of the most popular politicians on the planet.
The victory gives her the political heft and credibility unrivalled in Europe, perhaps among the Western democracies. But what will the woman in charge of Europe's largest economy do with all this power?
You'd be wrong if you think her euro zone strategy is set for a sea change. Her plodding approach is likely to endure, virtually ensuring that the quartet of bailed-out countries – Greece, Ireland, Portugal and Cyprus – will stay in the euro zone while austerity grinds away at their economies. "If she wanted to be more hard line, she could have done so before," Peter Schaffrik, head of European rates strategy for RBC Capital Markets, said in an interview after exit polls came out.
By early evening, German time, Ms. Merkel's Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), were in a celebratory mood. Ms. Merkel cheered what she called a "super result," one that must have been all the more satisfying given the recent polls. They had suggested that the lead of her conservative party had narrowed considerably and that the opposition Social Democratic Party (SPD) was coming on strong, even if there was no chance that its leader, Peer Steinbruck would replace her as chancellor.
The exit polls gave the CDU/CSU 42.4 per cent of the vote, an impressive gain from the 33.8 per cent the conservatives scored in the 2009 election, when Ms. Merkel was forced into a coalition with the small, pro-business liberal party, the Free Democratic Party (FDP). The FDP got wiped out on Sunday, meaning her CDU/CSU could rule with an absolute majority or, failing that, within a coalition with the Social Democrats.
The latter scenario – a coalition of centre-right and centre-left parties – would not be as awkward as it looks on paper. The two parties are not light years apart on economic policies; they formed a previous coalition government, from 2005 to 2009, when Mr. Steinbruck was Ms. Merkel's finance minister.
In theory, Mr. Merkel's soaring popularity would give her the political clout to treat the bailed-out euro countries – and the ones that may be unable to escape a future bailout of some sort, Spain and Italy – any way she pleases. Germany is the euro zone's paymaster. It funds the biggest single share of the bailouts (Greece has soaked up €250-billion – $349-billion – in international rescue funds so far) and exerts enormous influence over the European Commission and the European Central Bank. No change in bailout strategy is possible without her approval.
Ms. Merkel could change course. She could, for instance, ease up on austerity, which the Greeks consider punitive, and embrace euro bonds, which would pool some of the debt obligations of the 17 euro zone nations to bring down the funding costs of the struggling countries. Equally, she could harden her austerity and reform demands to the point that Greece and the other bailout victims would have no choice but to ditch the euro and reprint their old currencies.
She will probably not resort to either of these extremes for the very good reason that German voters aren't demanding it. Sunday's vote said that Ms. Merkel's careful, no-surprise strategy to keep euro zone (barely) intact at the minimum possible cost to German taxpayers is the right course, even if it lacks pluck and daring.
She can get away with her grind-on approach to the crisis because, so far, the distraction and expense of the crisis has barely dented the German economy. Exports are strong and unemployment, at 5.3 per cent, is at a 20-year low. Germany is growing again. Even better, the opposition SPD has always voted in favour of Ms. Merkel's European policies. The SPD seems more concerned about domestic policies, such as taxation (it wants higher tax rates, something Ms. Merkel opposes). "We don't see a change at all on European politics," Mr. Schaffrik said. "The German parliament tends to be very pragmatic when it comes to these things.
Ms. Merkel's euro zone strategy, however, is not entirely certain. That's because the make-up of her government was still an open question Sunday night, in spite of her victory. If she nails an absolute majority, it is bound to be a mere one– or two-seat majority, meaning it could be unstable. If she is forced into a coalition with the SPD, the SPD might demand a change in bailout strategy as a condition of its support.
But don't count on it. The crisis, though diminished, will probably drag on under the same policies, give or take a tweak here and there. Coalition or not, Ms. Merkel's unadventurous economic decisions have won over the German electorate.
Eric Reguly