Merkel's popularity withers as German economy thrives

Her coalition government is at breaking point after just nine months in power, her personal ratings are at an all-time low, her CDU conservative party has lost six key regional leaders in the past few months and the only game in Berlin now is guessing when she will go.

Hamburg Mayor Ole von Beust's weekend resignation made him the sixth state leader from her party to fall. He quit after voters rejected an education reform he made a central plank of his policy, but the fact is that he, like the others, have become disillusioned with the chancellor.

Her travails pile up at a time when Germany itself is coming out of the recession at speed. Its economy staged a strong recovery in the second quarter of 2010 and is widely expected to exceed the official growth forecast of 1.4 per cent for the year, with many forecasters seeing growth of 2 per cent or higher.

With a series of state votes next year, Mrs Merkel is now left trying to scramble candidates who can hold on to heartland constituencies as a series of political misfortunes bear down on her and her government partner, the Liberal Free Democrats.

She dithered on bailing out Greece and saw the euro almost hammered into extinction because of it. She then made Germany's contribution to saving it more than any other country's, thus earning her the scorn of voters asked to put up with an €80 billion austerity package that will see pensions fall, kindergartens closed and a raft of social projects shelved.

Now several of her own ministers are turning against the savings package and referring to her as the "Trummerfrau" - a reference to the German women after the Second World War who cleared away the rubble of smashed cities, conjuring up the image of Mrs Merkel presiding over a ruined government.

Punished by the voters in a key regional poll in May, when Mrs Merkel's party was turfed out of power in the all-important industrial state of North Rhine-Westphalia (NRW), everything seems to have been downhill ever since.

Should her government collapse it will trigger new financial instability at the time when the rest of the continent looks to its biggest economy for calm.

The loss of NRW meant that her party also lost its majority in the upper legislative house in Berlin, meaning she cannot now pass laws without pandering to the socialist and green opposition.

"Angela Merkel's popularity is plummeting," said Hudson Institute political commentator Peter Martino. "Putting the interests of the European Union before those of her own nation entails the loss of the people's support. That is the hard lesson which Merkel has been learning in the past three months."

Business confidence surge

Germany's business confidence is continuing its unexpected upward trend in July, showing the biggest increase since the country's reunification in 1990, according to a closely watched business climate index released yesterday.

The Ifo index rose to 106.2 points from 101.8 points in June, posting its fifth consecutive increase. Business expectations for the coming half year across all sectors surveyed are also more optimistic than in June, Ifo President Hans-Werner Sinn said in a statement. The index reflecting six-month expectations increased sharply from 102.5 to 105.5.

"Germany's economy is again in party mood," the Munich-based institute said. Sinn called the July increase the biggest since Germany's reunification.

Analysts had been expecting a slight decline in the index, just as in June when the index also rose.

The results are another sign that Germany , continues to emerge from the European economic downturn, as a healthier global economy helps boost the country's exports.

"The industry is recovering impressively," UniCredit analyst Alexander Koch said, adding that Germany's business model remains in full swing at the beginning of the second half of the year as "the tail wind still remains very strong".