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Third-Term Merkel Faces Energy, Europe

She did it again. Angela Merkel won the re-election just three months ago thanks to a  vote in the lower house of parliament. A rare moment indeed, but Angela Merkel, along with the rest of her coalition, are sitting pretty right now. The German economy is at its best over the past seven years, and surprisingly, the country’s investor sentiment survey exceeded the expectations for December.

The German economy could possibly grow by 2% in 2014, according to Credit Suisse‘ (CS) Robert Parker.

Robert Parker, Credit Suisse, says, “That will I think be associated with an improvement in consumption in Germany and an improvement in investment spending. And obviously one has to emphasize in the case of Germany, in contrast to many other European countries, that unemployment is actually very low.”

But it’s certainly not safe to assume it will be an easy ride for Merkel and her Christian Democrats and Social Democrats. The national minimum wage must be implemented, which the SPD fought tirelessly for during coalition discussions.

Energy is now one of the government’s top priorities. By 2022, Germany is going to turn off nuclear power. Due to generous incentives for solar and wind power, costs for renewable energy skyrocketed for consumers. Now, Germany is looking for a way to reform this ever-so-complex renewable energy law. SPD Chairman Sigmar Gabriel will spearhead the ministry responsible for the economy and energy policy. He faces two challenges: 1) Help the industry by reducing incentives for renewables… 2) Guarantee investment doesn’t come to a halt.

Wolfgang Schäuble remains finance minister, and it’s unlikely for Merkel’s stance on austerity to change. It’s neighbor’s problems could still hurt Germany…

Robert Parker, Credit Suisse, says, “Economic indicators in France are looking I think quite worrying, and then the second concern is although I think that the dollar will recover against the euro from current levels, the risk is that I may be wrong and the euro stays at current levels. In which case the euro north of 1.35 against the US dollar is not positive for the German export industry.”

Only the third post-war Chancellor to win a third term, Merkel has kept Germany afloat during the euro zone crisis. However, analysts argue that she isn’t linked directly to any large projects. With four years ahead, her goal will be to create a legacy, locally and worldwide.