Even with a caretaker government, Germany's outlook for 2018 is more positive than other parts of the EU, the Eurasia Group has said. Brexit and Italian elections will pose political and economic challenges for the bloc.
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New York City-based political risk consultancy Eurasia Group on Tuesday published its annual risk prognosis, saying that Germany and the rest of the EU are poised to remain stable despite increasingly threatening risks across the globe.
"Germany must regain its footing after a tumultuous electoral season, Italy will face a contentious election and President Emmanuel Macron's war on vested interests won't become any easier in France," said Eurasia Group in its report.
Since September's federal elections, German Chancellor Angela Merkel's Christian Democrats have yet to form a government after talks collapsed with the Greens and the pro-business Free Democratic Party (FDP). Despite signs pointing towards a grand coalition with the Social Democrats, the process has dragged on at a sluggish pace.
"The German polity will pull together and recover from its recent jitters – at least for the next few years ... European politics will continue to keep us busy in 2018, but the eurozone should have yet another modestly encouraging year," the group said.
Angela Merkel: Conquerer of political rivals
Angela Merkel has long shown a knack for neutralizing or sidelining politicians who got in her way. This applies as much to members of her own party as to rivals in other parties.
Image: picture-alliance/dpa/ANP/R. De Waal
'Kohl's girl' leaves moniker behind
Longtime Chancellor Helmut Kohl gave Merkel her first cabinet post and facilitated her rise. After losing the chancellorship in 1998, his onetime acolyte turned her back and that of their Christian Democratic Union (CDU) on him. Merkel, then CDU secretary general, said Kohl, who had accepted a cash donation from sources he refused to reveal, had hurt the party. The CDU moved on without him.
Image: picture-alliance/dpa/A. Altwein
Gerhard Schröder - end of a political career
Merkel was Chancellor Gerhard Schröder's undoing in the 2005 election, though his own vanity was also to blame. His Social Democrats (SPD) finished one point behind her conservative CDU/CSU alliance. On TV with Merkel and other party heads, Schröder insisted Germans had made clear they wanted him to stay. The others rebuffed his apparently absurd claim. She became chancellor. He quit politics.
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Frank-Walter Steinmeier - ever the partner
Frank-Walter Steinmeier had been Germany's foreign minister, serving under Merkel, for nearly four years when the Social Democrat challenged her in the 2009 election. Many people said the SPD's heavy defeat was because of his lack of a popular touch. But he bounced back and in 2013 returned as the country's top diplomat, again with Merkel as the boss. He became Germany's president in March 2017.
Image: picture-alliance/dpa/S. Kembowski
Günther Oettinger - out of the way
Eliminating competitors doesn't always mean forcing them off the political scene. Merkel dispatched her party colleague and potential rival Günther Oettinger, premier of the state of Baden-Württemberg, to a top job in the European Commission in 2010. Oettinger had no track record in EU politics and even then was known for sticking his foot in his mouth. He is on his third position as commissioner.
Image: picture-alliance/dpa/P. Seeger
Roland Koch - left out in the cold
Roland Koch was known in some parts for his friendship with the Dalai Lama, in others for collecting millions of signatures to catapult the government's plans for dual citizenship. The state premier of Hesse was part of a clique of CDU men who never anticipated Merkel's rise, and then were sure they'd outlast her. Koch waited in vain to be offered a job in Berlin. In the end, she outlasted him.
Image: picture-alliance/dpa
Christian Wulff - an unfortunate president
Christian Wulff wasn't Merkel's first pick for president, but left in a pinch when Horst Köhler resigned in 2010, party leaders wouldn't agree to Ursula von der Leyen, now defense minister. The choice of Wulff, the CDU state premier of Lower Saxony who had been rumored to be unhappy in his position, came as a surprise to him, too. He resigned over corruption charges and was later acquitted.
Image: picture-alliance/dpa
Peer Steinbrück - right man, wrong time
Merkel had reached the peak of her career by the time the SPD decided Peer Steinbrück should run against her in the 2013 election. She was unchallenged in her party and had come to dominate managing the euro and debt crisis in Brussels. Steinbrück, a finance minister under Merkel and ex-state premier of North Rhine-Westphalia, had the expertise to be chancellor, but he had little chance.
Image: picture-alliance/dpa
Friedrich Merz — back again
Friedrich Merz was ousted by Merkel as the head of the CDU/CSU parliamentary party in 2002. He ended up leaving the Bundestag in 2009 and later became the chair of the world's biggest wealth manager, BlackRock. When Merkel announced her decision to step down as the head of the CDU, Merz made a surprising return to the German political scene and threw his hat in the ring to replace her.
Image: Reuters/H. Hanschke
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The Brexit challenge
However, the group's outlook on the UK's formal process to leave the EU was dim. While EU leaders announced their decision to advance talks on the bloc's post-Brexit relationship with the UK in December, questions remain on how that might look.
The forecast also suggested that domestic politics may continue to undermine Prime Minister Theresa May's Conservative government, including on Northern Ireland, where a fringe party remains key to her political survival.
Ian Bremmer on how #Brexit talks will impact the coming year
"Italy risks coming out of its election season with a weak coalition government or even an outright radical eurosceptic one, but in neither case will the country's economy fall apart. Nor will the Italians opt to leave the eurozone or the EU."
For the risk consultancy, the major risks lie beyond Europe's borders, and as such, are unlikely to have as profound of an impact on the bloc. However, the outlook was significantly dim for international relations and geopolitics.
"If we had to pick one year for a big unexpected crisis – the geopolitical equivalent of the 2008 financial meltdown – it feels like 2018. Sorry."