An Inconvenient Truth

Germany hides the awkward truth about the euro.

Germany

Mr Kohl’s offence — the original sin, I would say, at the launch of the single currency — was to shy away from spelling out to German voters the inescapable meaning of the bargain. It still goes unsaid. In short, Germany is the biggest beneficiary of European integration. The EU supplies the democratic stability and economic certainty on which its prosperity has been built. No country has more to lose from a break-up.

These benefits, understandably, carry a price tag. As the EU’s most powerful economy, Germany bears a proportionate responsibility for the stability of the enterprise.

The mantra in Berlin continues to obfuscate. Germany, it says, will never accept a “transfer union”. In real life, of course, that horse has already bolted. The true choice is between the shadow transfer union represented by the mountain of national central bank liabilities that have built up at the ECB — so-called Target balances — and the creation of an economic union that admits the role of fiscal policy in managing economic demand.

The present catch-22 is that those with room to operate the fiscal levers — Germany and its northern neighbours — refuse to do so. Those pressing for a more expansionary stance — led by France — lack the budgetary headroom.

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Speaking Of Null…

Zero, that is.

Debt

Germany May Abandon Its Beloved Black Zero – Chancellor Angela Merkel is still clinging to her policy of a balanced budget, but it is becoming increasingly clear that Germany’s economic downturn could soon usher in a return to deficit spending…

For years now, a balanced federal budget, known here in Germany as the “schwarze Null,” or black zero, without any fresh borrowing, has been a permanent fixture of German fiscal policy. After four decades of chronic borrowing to finance the German national budget, the shift stood for the renunciation of the debt state and became a symbol of sound policy. But now the issue is the subject of debate again — not only due to expensive political plans, but also the threat of a recession in Germany…

“We can accomplish the tasks at hand without accruing new debt.”

And You Thought Paying Back Your Student Loan Was A Bitch

And I’m sure it was but…

Debt

Germany’s World War I Debt Was So Crushing It Took 92 Years to Pay Off – After the Treaty of Versailles called for punishing reparations, economic collapse and another world war thwarted Germany’s ability to pay…

The Allies exacted reparations for World War II, too. They weren’t paid in actual money, but through industrial dismantling, the removal of intellectual property and forced labor for millions of German POWs. After the surrender, Germany was divided into four occupation zones, and in 1949 the country was split in two. Economic recovery, much less reparations payments, seemed unlikely.

By then, West Germany owed 30 billion Deutschmarks to 70 different countries, according to Deutsche Welle’s Andreas Becker, and was in desperate need of cash. But an unexpected ray of hope broke through when West Germany’s president, Konrad Adenauer, struck a deal with a variety of western nations in 1953. The London Debt Conference canceled half of Germany’s debt and extended payment deadlines. And because West Germany was required to pay only when it had a trade surplus, the agreement gave breathing room for economic expansion.

Soon, West Germany, bolstered by Marshall Plan aid and relieved of most of its reparations burden, was Europe’s fastest-growing economy. This “economic miracle” helped stabilize the economy, and the new plan used the potential of reparations payments to encourage countries to trade with West Germany.

Still, it took decades for Germany to pay off the rest of its reparations debt. At the London Conference, West Germany argued it shouldn’t be responsible for all of the debt the old Germany had incurred during World War I, and the parties agreed that part of its back interest wouldn’t become due until Germany reunified. Once that happened, Germany slowly chipped away at the last bit of debt. It made its last debt payment on October 3, 2010—the 20th anniversary of German reunification.

Illustrious? At Risk?

What Germany are these journalists writing about?

Merkel

Merkel’s illustrious reign is at risk of being tarnished. Huh?

That nobody really much cares about or follows what is going on in Germany is one thing but to start churning out science fiction about a parallel German universe is simply irresponsible.

There is nothing “illustrious” about Angela Merkel’s “reign” and there is absolutely, positively no risk that it could become tarnished. It already is tarnished. It can’t get more tarnished than it already is, in fact. Ask any German on the street and he/she will tell you. The journalists at CNBC ought to consider giving that a try.

Sakrileg, the German word for sacrilege: the violation or misuse of what is regarded as sacred. I’m about to go there. Has German Chancellor Angela Merkel been a disaster for Europe, and is her prolonged tenure at the Federal Chancellery extending the region’s problems rather than holding them back?

German Of The Day: Nichts klappt

That means nothing works. Or how about “failed State?” That means failed state. You know, like the failed city-state of Berlin?

Palmer

When the prominent Mayor of Tübingen Boris Palmer (Greens) has to come to Berlin for business he says to himself “Watch out, you are now leaving the functioning part of Germany.” He just can’t deal with the mix of crime, drug dealing and bitter poverty confronting him here on the street. “I don’t want to have these conditions in Tübingen,” he says.

Don’t worry. You never will. And you’re right, of course. Nothing works here in Berlin. But isn’t that the point? Oddly, for whatever the reason (decades of SPD-Green-Left Party mismanagement at city hall? Half the population being on welfare?) nobody in Berlin seems to care. And sheesh. In all fairness, this guy has clearly never been to an American city.

Berlin, ein „failed State“? Irgendwie schon, so Tübingens Oberbürgermeister Boris Palmer. Die Mischung aus Kriminalität, Drogenhandel und bitterer Armut auf der Straße verunsichere ihn als Baden-Württemberger nachhaltig.

German Of The Day: Länderfinanzausgleich

That’s a beauty, isn’t it? And it means “German Länder fiscal equalization scam.” I mean scheme.

Länderfinanzausgleich

And THAT means.. Well, think Robin Hood. The rich and therefore “bad” German states (the ones on the left in the image) must be punished for this and therefore the Robin Hoodlums in the Bundestag take some of their money and give it to the poor and therefore “good” German states (on the right side of the image). Berlin, on top, is actually on bottom, so-to-speak, being the poorest of the poor. The Robin Hoods and the Bundestag are located in Berlin, by the way. But that’s just a coincidence, of course.

The theory being, I’m assuming here, is that this kind of completely unjust robbery and redistribution will encourage the poor “good” German states to finally get their acts together already so the rich “bad” German states don’t have to pay their bills anymore. That’s just a theory, like I said, of mine. I must say, though, this redistribution initiative has certainly had a positive effect here in Berlin these past thirty, forty, fifty years. Once you ignore the fact that not a thing has changed.

Berlin Schlusslicht, Bayern Zahlmeister.

EU + Brexit = 3.5+ For Germany

That’s 3.5 billion more. Euros. To pay, I mean. Annually.

Oettinger

Somebody has to compensate for the Brexit shortfall and Greece won’t answer the phone. Nor will Italy, France or anybody else out there. Maybe the EU dream team back then should have tried a little harder to keep Britain in and compromised just that little tiny bit more but hey, that was then and this is now. Get out your checkbook, Berlin.

What a mess.

Konkret sprach Oettinger gegenüber der Bild-Zeitung von “mindestens 3 oder 3,5 Milliarden Euro” jährlich. Zu den neuen Aufgaben gehörten etwa der Schutz der Außengrenzen oder der Kampf gegen Terror. Zudem könnten zusätzliche Zahlungen Deutschlands dazu beitragen, die durch den Austritt Großbritanniens aus der EU entstehende Lücke zu schließen.

Dysfunctional, Datfunctional, Main Thing Nothing Works

And costs everybody else in the country a whole lot of money. Berlin, my kind of town. My kind of town??

Berlin

Berlin, the capital of Europe’s most successful economy, is surprisingly badly governed. The new airport, the city’s biggest flagship project, missed its seventh opening date earlier this year and may not open until 2021, ten years after it was originally supposed to. The jobless rate is among the highest in the country. Schools are dismal. Courts and police are so overworked that hundreds of millions of euros in fines and taxes have not been collected; and the city failed to keep tabs on Anis Amri, the jihadist who killed 11 people with a lorry last Christmas, despite warnings about him three weeks earlier…

Astonishingly for a capital city, Berlin makes Germany poorer. Without it, Germany’s GDP per person would be 0.2% higher. By comparison, if Britain lost London, its GDP per person would be 11.1% lower; France without Paris would be 14.8% poorer…

“We have a deeply held suspicion of anything that smacks of efficiency and competence.”

German Of The Day: Albtraum

That means nightmare. You know, like Nightmare on Elm Street? Or Nightmare at Deutsche Bank?

Deutsche Bank

Read my lips, the usual suspects are saying: Everything is fine, the German government is not preparing a bailout, there have been no secret talks with the chancellor and there is nothing here that needs to be rescued in the first place. Now say that ten times really fast.

The German government denied it was working on a rescue of Deutsche Bank as Germany’s biggest lender boosted its balance sheet by selling its British insurance business on Wednesday.

Deutsche is facing a $14 billion fine from the Department of Justice, and concerns over its funding pushed its shares to a record low on Tuesday and heightened concerns about the health of the financial sector in Europe’s largest economy.

“Die Situation des Konzerns ist viel besser, als sie von außen wahrgenommen wird.”