Angela Merkel’s Return to Europe

BERLIN – It is not entirely clear who – Franklin Delano Roosevelt or Peter Parker (Spiderman) – first said that “with great power comes great responsibility.” But it is an adage that applies perfectly to German Chancellor Angela Merkel.

Merkel’s resounding victory in Germany’s recent general election gives her a mandate that few of her fellow world leaders enjoy nowadays. In a country obsessed by the costs that the euro crisis may inflict upon domestic savers, the anti-euro party Alternative for Germany received less than 5% of the popular vote, which gives Merkel exceptional political strength. Even the fact that her center-right Christian Democratic Union fell short of an absolute parliamentary majority is a blessing in disguise. The grand coalition with the center-left Social Democratic Party that she is likely to form will command a super-majority of 503 seats in the 630-seat Bundestag.

For several months (at least), the rest of Europe has been awaiting the result of this election. The biggest question now is where Merkel will invest her enormous political capital. Her choice may well shape the future of the continent.

Europe is in better shape than it was a year ago, but it still faces an uncertain future. Economic recovery is undeniable, external imbalances have receded, and real-exchange-rate misalignments have diminished. But aggregate per capita GDP remains below 2007 levels. In Greece, per capita income hovers around its level in 2000; in Italy, it remains around its level in 1997.