More Debt Is The New Normal

In Germany too.

Schulden

The govenment might not directly admit it but the days when they at least strove to reach a balanced budget (black zero) are over.

Germany’s spending to counter the coronavirus crisis and modernize its economy means the country shouldn’t return to a balanced budget anytime soon, according to a senior Finance Ministry official…

Chancellor Angela Merkel’s government abandoned its balanced-budget policy this year and is set to borrow about 218 billion euros ($258 billion). A deficit of more than 80 billion euros is set for next year to fight the fallout from the pandemic, people familiar with the matter have said…

Germany’s constitutional debt brake obliges the government to keep debt under control. In good times, the rule allows for a structural deficit of 0.35% of gross domestic product. In times of recession, new borrowing can go up in proportion with the economic decline.

“A balanced budget isn’t obligatory.”

No Way Back

No way out. No doubt about it.

Out

Spending other people’s money is so exciting. Joint debt is the bestest kind of debt there is. It’s free. Somebody else will pay it back. In this case, the Germans. Germans who haven’t even been born yet, but still.

Germany’s Scholz (SPD) sees ‘no way back’ from EU joint debt – German Finance Minister Olaf Scholz said Sunday (23 August) that the European Union’s recovery package financed by joint borrowing was a long-term measure rather than a short-term coronavirus crisis fix, contradicting Chancellor Angela Merkel.

“The Recovery Fund is a real step forward for Germany and for Europe, one we won’t go back on,” Scholz, who is also the centre-left Social Democratic Party (SPD) candidate to succeed Merkel in 2021 elections, told the Funke newspaper group.

Germany Would Be So Much Poorer Without Berlin

Not. Not according to this latest study.

Berlin

Normally, the per capita economic output (GDP) in capital cities in Europe is higher than in the rest of the given country. There is one big exception, however. Germany would be wealthier without Berlin.

Poor but sexy” is out. Now Berlin is just poor. Actually, it’s been that way for ages but nobody seems inclined to do anything about it. See the current red-redder-green city government.

Jeder Deutsche wäre ohne Berlin knapp 80 Euro reicher. Every German would be about 80 euros richer without it.

What’s An Increase Of 42% Among Friends?

Somebody just slammed Germany in the face with a brick. I mean a Brexit.

EU

Germany to contribute 42% more to EU budget: report – The European Commission would like to see €13 billion more per year from Europe’s largest economy. EU leaders, including Angela Merkel, are meeting Friday to discuss the bloc’s future budget.

Germany currently contributes an average of €31 billion a year to the EU budget. The proposal for the new budget would raise that contribution to €44 billion — an increase of 42%.

$1.5 Trillion?

There must be a better word than “stimulus” for that.

Stimulus

Wherever medication is given in huge and sudden doses, there’s a risk of unpleasant side effects. In Germany, and Europe generally, one of these may be a lasting shift in governing philosophy from market-friendly policies to state interventionism. That needn’t end in central planning. But even going part of the way would mean buying relief today at the price of misery tomorrow…

First, governments tend to confuse a company’s size with strength. Second, they’re usually worse than private investors at spotting winners, and always worse at pulling money out of losers. Third, they turn the economy into a big lobbying competition for businesses, which eventually hurts taxpayers and consumers.

Ha, Ha, Ha

A new slogan will make “Europe strong again?” Gemeinsam. Europa wieder stark machen.

Europe

Back off, Trump. Germany wants to Make Europe Strong Again. Berlin’s EU presidency motto has echoes of MAGA.

Slogans, as we all know, are merely slogans. The track record here is what you have to go by and it ain’t pretty. The Eurozone hasn’t even begun to deal with Brexit while Angela Merkel signals submission to France to accept a Schuldenunion (a debt union – paying the debt for Southern European countries – yes, they have a North and a South problem here too) when all of a sudden this little thing we call Corona has prompted Brussels to suggest an $826 billion economic stimulus plan (even more debt)  for a “union” of countries that can’t even protect their borders and that only appears to be unified when it comes to supporting  anything that weakens the United States (see China) and on and on we go but together they will make Europe strong. Again. Again?

Make Europe Strong Again. MESA? All I see is a MESA problems that nobody is prepared to fix.

Austria Doing Germany’s Job Again

Frugality? Refusing to pay other countries’ debts? That was “old Germany.”

Austria

Now the Germans need a country like Austria to take care of the problem for them – just like the Austrians took care of Merkel’s migrant madness by closing their borders way back when.

‘Frugal four’ nations counter Franco-German EU initiative – Four EU countries have teamed up, rejecting Macron and Merkel’s persistent lobbying for a €500 billion rescue fund. Instead, they have their own scheme on how to save Europe from economic fallout amid the pandemic…

The four countries also indicated that they will neither agree to a mutualization of debt nor an increase in the EU budget. Their draft proposal was seen by the German Press Agency (DPA) on Saturday.

“Our objective is to provide temporary, dedicated funding through the EU budgetû and to offer favorable loans to those who have been most severely affected by the crisis.”

German Of The Day: Wiederaufbaufonds

That means reconstruction bonds. Or Eurobonds/Coronabonds light. Or Germany breaking a taboo and knuckling under to France to share debt with other EU countries, if you prefer.

Merkel

It’s hard to keep up with them. Politicians just can’t burn money fast enough these days.

German Chancellor Angela Merkel broke with her country’s longstanding opposition to raising money together with other – often poorer – EU countries. But the proposal made with French President Emmanuel Macron is limited in scale and duration, which could help her sell it to skeptics back home.

It consists of 500 billion euros ($550 billion) in loans and grants to help countries through the recession, and is viewed by some as a step toward stronger EU ties as the 27-country union faces challenges not just from the virus crisis, but from populist forces in member countries Hungary and Poland who want to loosen the bloc’s ties.

Werteunion ruft zu Widerstand gegen Merkel auf.

“Incomprehensible” And “Meaningless”

Are the previous court decisions ruling that the European Court of Justice can have primacy over national law in Germany. It’s also “incomprehensible” that it took so long for everybody to figure this out. I sure hope that this latest ruling won’t be ruled out as “meaningless” later but I’ve had my hopes dashed before.

Judge

Germany’s constitutional court sent shockwaves through Europe last week by ruling that the German government and the EU’s top judges failed to properly scrutinise the European Central Bank’s bond-buying programme.

The judgment threatens to turn the European Commission against Germany, the EU’s biggest member state. It raises doubts over the primacy of the European Court of Justice over national law. It also risks driving a wedge between the ECB and its biggest shareholder, the Bundesbank.

Germany’s highest court dismissed an earlier ECJ ruling in ECB’s favour as “incomprehensible” and “meaningless”. That bombshell decision opened the door to potential legal challenges against the EU from other countries, such as Poland and Hungary, whose authoritarian governments are already at odds with Brussels.

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.