Angela Merkel

At the time of her election almost six months ago, Angela Merkel, Germany's first woman Chancellor and the first leader since unification to hail from the formerly communist East, was written off by commentators. The leader of the conservative Christian Democrats was forced to lead a coalition government in which many important positions were held by Social Democrats. But the Chancellor now boasts stratospheric approval ratings, and the improvement in the German economy is commonly put down to the "Merkel effect." A nation that had been wallowing in one of its periodic bouts of angst is now so transformed that the newspaper Der Spiegel recently ran a cover calling Germany the "Land of Smiles." Says Henning Kagermann, CEO of software giant SAP: "I'm convinced she really is the right person for Germany."

A physicist by training, Merkel can sometimes seem dull. She has won plaudits not by bonhomie but by a quiet, no-frills stress on competence. Instinctively biased toward free markets and the cause of liberty—growing up in communist East Germany will do that for you—she has already nudged German foreign policy back toward its traditional closeness to Washington. Now she has to tackle the challenges that still face the world's third largest economy. She is likely to do so not by the brass-knuckles methods favored by some U.S. conservatives but by leading a consensus for change. For Merkel, 51, is a European to her fingertips. Literally: she typically communicates with her ministers by text messages from her cell phone. You don't get more Euro than that.

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