IN1804

Case Study

Angela Merkel’s Long Journey (B):

Her Final Act

01/2022­6556
This case study was written by José Luis Alvarez, Senior Affiliate Professor of Organisational Behaviour
at INSEAD, and José M. de Areilza, Professor at ESADE. It is intended to be used as a basis for class
discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
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The Troubled Waters of Succession
As she was preparing for the 2018 Christmas festivities, Angela Merkel wondered if she had made
the right move, announcing that she would be stepping down in 2021 and organizing her
succession while remaining chancellor for three more years. Her decision, only nine months into
her fourth coalition government, had been triggered by the CDU/CSU’s poor showing in the
regional elections in former strongholds Bavaria and Hesse the previous fall, to which she had
responded, “Things cannot go on as they are.” The announcement that she would not run in the
next federal elections was tantamount to a political earthquake.

At the party conference in December 2018, she had backed her ‘disciple’, Annegret Kramp­
Karrenbauer (“AKK”) to become the new leader of the Christian Democratic Union and candidate
for chancellor. AKK had narrowly defeated Friedrich Merz, Merkel’s rival since 2002. He was a
Euro­sceptic, critical of Merkel’s immigration policy, and represented a new strand of German
conservatism. In 2009 he had left Parliament to join BlackRock.

Fourteen months later, another surprise rocked German politics: AKK announced that she was
stepping down as party chair and would not run in the next elections. She would, however, remain
Minister of Defence, a job inherited from Ursula von der Leyen, who had been appointed president
of the European Commission on July 2019 – the second Merkel disciple to be promoted to a key
leadership position.

Clearly, AKK had not been able to establish herself as a credible party leader. The last straw had
been losing the fight with the CDU’s Thuringia branch, where its local representatives decided to
ignore the official party ban on voting with the far right and had joined forces with the nationalist
AfD to elect a candidate from the pro­business Free Democratic Party as state premier. Chancellor
Merkel, who was on an official trip to South Africa, had condemned its betrayal of the basic party
principle of not cooperating with the far right.

The deeper problem was that the CDU had not done well in other recent elections under AKK’s
leadership (both the European elections and state elections in Brandenburg and Saxony). AKK
was an experienced politician with strong roots in her home state of Saarland. A traditional
Catholic, she came across as more conservative than Merkel and was prone to gaffes. The
chancellor had chosen her as the number two in the party, of which she was secretary general,
and then as her successor. Merkel admired her capacity to win elections in Saarland, her pro­
European stance, and her way of connecting with grassroots voters. But “mini­Merkel”, as she
was dubbed by the media, had not been able to distinguish herself from her mentor and continue
her work.

It was no easy task. German politics had become more complicated and unpredictable since the
migration crisis in 2015. Populism was on the rise in Western countries, with a growing demand
for strong leaders who typically offered simple solutions to complex situations and blamed external
enemies for every problem.

In the 2017 national elections, the CDU had held onto power but had lost 65 seats. The extreme
right had become the third strongest party, with 94 seats. It had taken five months of political
deadlock and the mediation of Federal President Frank­Walter Steinmeier to put together the
fourth coalition government led by Merkel, with the Social Democratic Party as the junior partner.

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The two traditional parties shared power in the federal government, while the AfD and the Greens
dominated the opposition. Within the CDU/CSU group, Merkel had become a contested figure.
The more conservative wing could never forgive her for the “welcome refugees” policy during the
2015 crisis.

AKK had been Merkel’s way of preserving her centrist and pro­European legacy. But with AKK
gone, Merkel decided not to rush the election of a new party leader and stayed true to her practice
of caution and postponing difficult decisions. She did not want to make things easy for Friedrich
Merz, her arch­enemy who was still hoping to lead the CDU one day and would put the coalition
government with the Social Democrats in jeopardy. Markus Soeder, leader of Bavaria’s CSU, also
had ambitions to become chancellor.

The Turn to EU Affairs

In EU affairs, Merkel found a perfect pretext to delay. The EU was trying to pass its six­year
budget, always a delicate bargain, and needed to conclude the long and difficult Brexit
negotiations. Moreover, from July 2020 Germany would hold the rotating presidency of the EU
Council for the next six months. Merkel ‘decided not to decide’ and the party conference was
moved to the end of the year.

When the coronavirus outbreak hit Europe in mid­March 2020, early reactions from national
governments lacked coordination, as was typical in the EU at times of crisis. Health policy was in
the hands of the respective Member States – each government issued its own rules to deal with
the situation, each bought its own medical supplies and regulated the export of its supplies. Merkel
was quick to realize that the EU had an essential role to play in fighting the financial and economic
consequences of the pandemic that affected all Europeans.

In the next months, she led the European Council (the institution where the respective prime
ministers meet) to adopt a radical plan: the creation of a gigantic EU fund to help national
economies that would combine direct subsidies with long­term loans financed by European bonds
and administered by the European Commission. Many analysts understood this as a step towards
a European Treasury, which was essential to Europe’s pending fiscal union and was designed to
strengthen the new single currency architecture. Merkel convinced her EU peers that the Union
should not be divided into creditor and debtor countries (as had occurred in the 2008 crisis). The
pandemic was a common enemy that called for unity of action. She also had to persuade German
public opinion and members of her own party who were opposed to what they called “a transfer
union”, where funding from richer countries like Germany was redistributed to poorer ones.

The main impact of the new NextGen the Fund, as it was called, was to indirectly validate the work
of the European Central Bank, that had been questioned by the German Constitutional Court. With
the creation of the Fund, the EU sent a powerful political signal that it fully backed the ECB.
Emmanuel Macron, president of France, gave Merkel a bottle of white wine at the EU summit to
celebrate the triumph.

A Scientist in Charge

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From the beginning of the pandemic, Merkel surrounded herself with Germany’s top scientists and
medical experts before making decisions. She was comfortable talking about the science behind
policies and decisions. “With the pandemic,” wrote journalist Guy Chazan, “you need a cool head.
Germany’s crisis manager is back.”1

She also abandoned changed her reserved, cautious style in favour of transparent
communication. On March 18, 2020, she made a speech on national television, something she
had almost never done in 15 years as chancellor except for the annual Christmas address that
official protocol demanded of her. In an emotional speech, she pleaded to her fellow citizens for
responsibility and unity in the wake of what she described as “the most difficult situation since
Second World War”, a challenge that could only be tackled with a spirit of solidarity. She reminded
everyone how hard it was for someone who had suffered communism in East Germany to curtail
freedom: “For someone like me, for whom freedom of movement was a hard­fought right, such
restrictions can only be justified by their absolute necessity.” Her popularity with the German
population was soon restored, in huge contrast with the impression a year earlier when her political
career seemed over and she risked becoming a lame duck.

On April 2020, journalist Saskia Miller wrote:

“For weeks now, Germany’s leader has deployed her characteristic rationality, coupled
with an uncharacteristic sentimentality, to guide the country through what has thus far
been a relatively successful battle against COVID-19. The pandemic is proving to be
the crowning challenge for a politician whose leadership style has consistently been
described as analytic, unemotional, and cautious. In her quest for social and economic
stability during this outbreak, Merkel enjoys several advantages: a well-respected,
coordinated system of scientific and medical expertise distributed across Germany;
the hard-earned trust of the public; and the undeniable fact that steady and sensible
leadership is suddenly back in style.” (…)

Merkel has never spoken publicly about why she left science, but perhaps that is
because it never really left her. Scientific thinking—her deliberate probing of each new
bit of information, her cautious consultation with experts—remains integral to Merkel’s
daily decision-making process and her political persona.” 2

Her Last European Battles

The Chancellor led from behind in the EU to soften the blow of Brexit. She felt continental Europe
would miss a key partner with the UK’s departure, a country with great global skills that was more
market­oriented than France, even if she often did not always agree with London’s policies. Merkel
wanted the UK to remain as close as possible to the EU and avoid the risk of a no­deal or hard
Brexit, championed by some Conservatives­turned­die­hard­nationalists.

She also realized how important it was to show unity among the 27 Member States when dealing
with the UK. Boris Johnson had been elected prime minister to deliver Brexit ‘no matter what’. A
former Brussels journalist himself, he had espoused populist rhetoric not just to win the election

1 Guy Chazan, “Angela Merkel: Germany’s crisis manager is back”, Financial Times, March 27, 2020
2 Saskia Miller, “The Secret to Germany’s COVID­19 Success: Angela Merkel Is a Scientist”, The Atlantic, April 20, 2021

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but to deal with the highly complex issues related to the UK’s future relationship with the EU.
Brussels had the upper hand in trade negotiations: the closer Britain wanted to stay to the EU
market, the more EU rules it would have to accept. And to preserve the 1998 Good Friday peace
agreement on the island of Ireland, the withdrawal pact had to guarantee free movement of goods
in that territory based on European principles.

When Joe Biden won the US elections in November 2020, Merkel had a sense of relief and
recognition. Biden and moderate Democrats deeply admired the Chancellor as a reliable ally, and
sided with the EU on the Irish question. The UK would have to wait to develop the special
relationship in economic matters that Boris Johnson had promised. The new US administration
quickly signalled that it was ready to repair and re­launch the trans­Atlantic partnership damaged
by Donald Trump, looking to Merkel to work together on fixing multilateral institutions, global trade
regimes, and cooperation on health and climate change. Yet Merkel went on to sign an EU­China
economic and investment agreement disliked by Washington, and later sided with French
president Emmanuel Macron to defend Europe’s autonomy in external relations. Despite her pro­
Atlantic credentials, she understood that US priorities had long shifted to the Asian continent. She
felt that the EU should develop its own strategy to engage with China and with Russia.

In staging her political comeback, Merkel perfected her approach to leading the EU. She preferred
to work with allies and let EU institutions present and develop the projects that she backed –
influencing without making a lot of noise. When, in December 2020, the governments of Poland
and Hungary threatened to block regulations on the new NextGen Fund to fight the pandemic
through massive loans and subsidies, she backed an arcane legal strategy to deal with the
problem. The two countries opposed the conditions (to respect the rule of law and fundamental
rights) imposed as part of the aid scheme. With the Council blocked by Warsaw and Budapest,
the Commission announced that it was ready to propose the necessary legislation through the
enhanced cooperation mechanism of the EU Treaty. Though seldom used, this meant that special
EU legislation could be approved without the participation of the two countries. Fear of being left
out was enough for the rebel countries to back down.

King-maker at the Party Conference

In mid­January 2021, the CDU met to elect a new chair and candidate for chancellor in the
September elections. At the party convention, Merkel made one of the most boring speeches of
her career. She did not openly back any of the three candidates: Armin Laschet, Norbert Röttgen
and Friedrich Merz.

The stage was set for a final showdown with Merz. The conservative politician­turned­banker had
made clear in various press interviews that he represented a different type of centre­right politics,
was critical of the ECB’s activism and of Brussels’ economic and financial plan to fight the
pandemic, and that he sided with the party hard­liners on immigration. At the start of the meeting
Merz was the favourite according to the polls, but Merkel worked behind the scenes to help
Laschet, the centrist pro­immigration prime minister of North Rhine­Westphalia, win the day. After
Röttgen, the third candidate, bowed out, 56,2% of the delegates’ votes went to Laschet. A few
months later he became the CDU candidate for the elections in September 2021.

The chancellor had chosen a weak successor who made evident mistakes during the campaign.
The social­democrat candidate, Olaf Scholz, came in first and started negotiations to lead a

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coalition government with the Greens and the Free Democrats. The new chancellor, however, was
in many ways a follower of Merkel, given his centrist, pro­European stance. His electoral message
had been one of continuity and stability. He even imitated Merkel during the debates, holding his
fingers to form a diamond shape.

Merkel, whose approval ratings stood at 84% after almost 16 years in power, accepted the tribute
from her rival, even if she could not be happy with the way she and her party had failed. But at
this point she transcended partisan politics. As she bowed out from the political scene, for most
Germans, as pollster Manfred Güllner put it, “Mrs Merkel is a living safety­net.” 3

3 Guy Chazan, Financial Times, op. cit.

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