BERLIN // Hit by a slump in popularity and acrimonious rifts within her government, the German chancellor Angela Merkel faces the biggest test of her political career on Wednesday when parliament elects a new president.
If the candidate she has nominated for the largely ceremonial post, Christian Wulff, fails to win a convincing majority, it would be a serious blow to her authority and the latest sign of a dramatic fall from grace since she was re-elected for a second term last September.
Mr Wulff's majority is looking shaky because even members of Mrs Merkel's own centre-right coalition regard the regional governor as an uninspiring choice compared with the rival put up by the centre-left opposition parties - Joachim Gauck, a charismatic Protestant pastor from eastern Germany who campaigned against the communist dictatorship.
The president in Germany is the head of state but his political powers are limited. He or she is elected by a parliamentary assembly of the 622 lawmakers from the lower house, or Bundestag, and an equal number of delegates appointed by the 16 regional states.
Mrs Merkel's coalition has a comfortable majority of more than 20 in the assembly. But several lawmakers within her ranks have said they prefer Mr Gauck and opinion polls show a majority of Germans back him.
Wednesday's election became necessary after the surprise resignation of the previous incumbent, Horst Köhler, who was unable to cope with a storm of criticism over remarks he made about the German military mission in Afghanistan.
Political pundits are saying Mrs Merkel would be seriously weakened if Wednesday's vote doesn't go her way, and that she might be ousted by her party or forced to call a new election if Mr Wulff loses.
At this stage, such speculation looks exaggerated. But it would be difficult for her to repair the damage, and there would be serious doubt about whether she would win a third term.
"If Wulff doesn't get elected it will be the beginning of the end of the coalition," Professor Gerd Langguth, Mrs Merkel's biographer, said in an interview.
Mrs Merkel's decline has been surprising since she cruised to victory in last September's election after a successful first term in which she gained a reputation as an astute leader both at home and in the rest of Europe.
But in recent months there has been a growing impression that she is losing her touch.
The ?80 billion (Dh363bn) austerity programme she announced this month has drawn fire even from within her own ranks for being socially unjust by cutting benefits for the unemployed and refraining from hiking taxes on the rich.
And she is failing to restore order in her fractious coalition of conservatives and pro-business Free Democrats (FDP) who have taken to hurling public abuse at each other over disagreements on healthcare reform, taxation and the future of nuclear power.
In the last few weeks, senior officials from the ruling parties have described each other as "wild pigs" and a "bunch of idiots" and the defence minister, Karl-Theodor zu Guttenberg, was dismissed by one fellow conservative as "Rumpelstiltskin" for his insistence on scrapping military service. Rumpelstiltskin is a fairy tale dwarf who hopped about angrily and put his foot through the floor when he didn't get what he wanted.
"Mrs Merkel's success in the past has stemmed from the fact that she was in synch with the mainstream, but now she has had to take some deeply unpopular decisions for the first time," said Mr Langguth.
"In addition, she hasn't managed to identify a common theme for her coalition. She hasn't said what she really wants. She often just waits to see which way the political wind is blowing before taking a decision."
In other parts of Europe too, the woman once feted as "Mrs Europe" has lost many of the admirers she made in her first term. Known for skillful mediation and tactical shrewdness, Mrs Merkel displayed an unusual lack of judgment in her handling of the Greek debt crisis.
Her hesitant response to calls for a bailout to protect the euro single currency damaged Germany's standing as a reliable partner in the EU and weakened her leadership in Europe, even though she ended up pledging the lion's share - ?170 billion - towards rescue packages for Greece and the euro zone.
Mrs Merkel's tough line on Greece also failed to score points with voters at home and her Christian Democrat party lost power in the large state of North Rhine-Westphalia in an election in May. That has deprived her of a majority in the upper house of parliament and will make it harder for her to get legislation passed.
Opinion polls have shown a sharp drop in Mrs Merkel's approval ratings and in support for her party. A survey by the Infratest institute in mid-June showed only 40 per cent of Germans were satisfied with her performance, down eight points from the beginning of the month. It was her worst rating since she became chancellor in 2005.
If an election were held now, her coalition would no longer have a majority, polls show. In fact that is the reason she is likely to survive Wednesday's vote even if Mr Wulff were to lose. The prospect of calling and losing an election could restore discipline in her ranks for the time being and thwart a leadership challenge.
"If Mr Wulff loses there are two possibilities: either the coalition will get its act together or the in-fighting will increase. This could be Mrs Merkel's twilight," said Mr Langguth.
foreign.desk@thenational.ae
BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
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DUBAI CARNIVAL RESULTS
6.30pm Handicap US$135,000 (Turf) 2,410m
Winner Dubai Future, Harry Bentley (jockey), Saeed bin Suroor (trainer).
7.05pm UAE 1000 Guineas Listed $250,000 (Dirt) 1,600m
Winner Dubai Love, Patrick Cosgrave, Saeed bin Suroor.
7.40pm Dubai Dash Listed $175,000 (T) 1,000m
Winner: Equilateral, James Doyle, Charles Hills.
8.15pm Al Bastakiya Trial Conditions $100,000 (D) 1.900m
Winner Laser Show, Kevin Stott, Saeed bin Suroor.
8.50pm Al Fahidi Fort Group Two $250,000 (T) 1,400m
Winner Glorious Journey, James Doyle, Charlie Appleby.
9.25pm Handicap $135,000 (D) 2,000m
Winner George Villiers, Tadhg O’Shea, Satish Seemar.
Going grey? A stylist's advice
If you’re going to go grey, a great style, well-cared for hair (in a sleek, classy style, like a bob), and a young spirit and attitude go a long way, says Maria Dowling, founder of the Maria Dowling Salon in Dubai.
It’s easier to go grey from a lighter colour, so you may want to do that first. And this is the time to try a shorter style, she advises. Then a stylist can introduce highlights, start lightening up the roots, and let it fade out. Once it’s entirely grey, a purple shampoo will prevent yellowing.
“Get professional help – there’s no other way to go around it,” she says. “And don’t just let it grow out because that looks really bad. Put effort into it: properly condition, straighten, get regular trims, make sure it’s glossy.”
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5