German Budget Surplus Offers German Politicians Further Ways Not To Spend It

The dramatic growth in Germany’s public sector surplus over the first half means the government has extra room for manoeuvre, Finance Minister Olaf Scholz said on Friday after data was released showing the surplus at a record high.

Scholz

“I’ll be looking into as many ways as possible not to spend any of it,” he said. Or could have said. And this is social democrat, too. This savings mania is a German thang.

And saving money is generally a very sound idea, I understand that. But how about considering giving that surplus back to the people you took it from in the first place? I’m just saying.

Der FDP-Politiker Dürr verlangte angesichts der hohen Überschüsse, den Solidaritätszuschlag abzuschaffen. Auch der Bund der Steuerzahler forderte eine Entlastung der Bürger.

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What’s Wrong With The SPD?

First they roll out a foreign minister who talks tough to Russia and then they provide a finance minister who has trouble spending other people’s money.

Scholz

Damn. Maybe I could become a social democrat (bourgeois socialist), too.

Germany’s new Social Democrat finance minister, Olaf Scholz, is frustrating both key ally France and his own struggling center-left party by adopting the same fiscal rigor as his conservative predecessor, Wolfgang Schaeuble.

During his first two months as treasury chief of Europe’s largest economy, Scholz has committed to a continued goal of no new debt and limited public spending.

“We act pragmatically and properly – and do not worship a fetish (of fiscal conservatism).”

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.

What’s A Few 4500 Billion Euros These Days?

Give or take 1000 billion? Fur European taxpayers, I mean. When the financial system “Draghi crases” and burns after the interest rates start heading up again.

Drahgi

Bank expert Markus Krall shows in the book “The Draghi Crash” what drastic measures are needed to save Europe from the death of the financial system. Five measures are necessary – otherwise threatening costs up to 4500 billion euros.

The vast abuses in the banking sector hang like a sword of Damocles on Europe. “We are all trapped in the trap that the ECB has dug for itself and us with its Keynesian interest rate policy,” warns Markus Krall. The imbalances in the credit sector are so huge that even a small turnaround in interest rates could lead to a crash.

The problem: the Eurozone countries do not have the resources to deal with the consequences this time around. In Germany 3000 billion euros of national wealth are at stake. Krall estimates the total amount of defaulted loans in the European banking system to be at least 1000 billion euros. And when interest rates rose, an unprecedented wave of bankruptcies threatened Europe’s zombie companies. “That costs again up to 1500 billion euros,” said the consultant.

Staatsschulden, Lebensversicherungen, Bankbilanzen – Banken-Experte Markus Krall zeigt in dem Buch “Der Draghi-Crash”, welche drastischen Maßnahmen nötig sind, um Europa vor dem Exitus des Finanzsystems zu retten. Fünf Maßnahmen seien nötig – sonst drohen Kosten bis zu 4500 Milliarden Euro.

Maybe London’s Just Not All That Much Into You, Frankfurt

Now that national interest rates are up, I mean.

London

A German bid to buy the London Stock Exchange has been sunk by the EU competition watchdog.

The Frankfurt-based German exchange Deutsche Boerse was bidding to buy the LSE in a deal that critics have warned would be against Britain’s national interest.

The Art of the Deal: Die Europäische Union, aber auch die britische Regierung betreten damit ein völlig unbekanntes Gebiet. Desintegration war bislang nicht vorgesehen.

It’s Good To Be In A Crisis

Money is like water (or maybe like beer). It has to go somewhere. And 40 billion euros just made its way to Germany.

Crisis

While fear has driven money away from Greece and Spain and co, making the government cost of repaying debt in these countries seem prohibitive, in Germany it has been quite different. Fear has boosted Germany coffers…

One thing is for sure, putting it in Greek bonds is risky. Spanish, Italian and Portuguese bonds don’t seem much safer either. But German bonds, in contrast, feel as safe as a safe house in a land with no crime. In fact so safe are German government bonds or bunds, perceived to be, that there have been times when the yields on some of them have been negative.

So actually, Germany has done rather well out of fear created by the euro crisis – or should that be the other way around – a euro crisis created by fear?

Poor But Sexy But Inter-State Fiscally Adjusted

Berlin is.

Waste

Here’s a new German word for you: Länderfinanzausgleich. In a nutshell, this means that wealthy German states like Bavaria and Hesse (so-called donor states) are obligated to subsidize poor but sometimes sexy German states like Berlin and Bremen (so-called recipient states) because, well, hell if I know why.

This is also known as “inter-state fiscal adjustment” here. You know, good old fashioned Umverteilung (redistribution of somebody else’s money) or subsidies, if you prefer.

Anyways, Bavaria and Hesse, for one (or two), are mad as hell and aren’t going to take it (or give it) anymore and are bringing an action before the German Verfassungsgericht (Supreme Court) claiming that this type of thing is constitutionally imbalanced and needs to be done away with – at least when it comes to Berlin because the Berlin city/state government consists of a worthless bunch of lazy and wasteful bums who are completely out of control when it comes to spending and would never think of stopping their spending if they aren’t forced to, which is, well, a pretty accurate analysis of the situation here.

This will probably go nowhere, however, because Germans are big fans of something they like to call Solidarität (no English equivalent that I can find other than maybe “supporting lazy and wasteful and sometimes sexy bums”).

“Das Gesamtsystem leidet unter einer zu weitgehenden Nivellierung der Länderfinanzkraft, die den politisch Verantwortlichen eines Landes das Eigeninteresse nimmt, Maßnahmen zur Stärkung der originären Steuerkraft zu ergreifen.”

No Contradiction Here

Just move along, folks. Nothing to look at here.

Loans

While German dedication to saving the German environment by ridding the country of nuclear power is in full swing (sort of), the German government has absolutely no problem using public money to guarantee the construction of nuclear power plants in other countries at the same time.

It’s not a contradiction really, though. Honest. Environment Minister Peter Almaier’s current ministry slogan is “high time that something changed” and they are even trying to set up an international club of countries who have done/will do away with nuclear energy. And that’s the main thing. So something has changed, sort of. The countries Germany is helping to build atomic energy programs for just won’t be allowed to join their club, that’s all.

“It is a gross contradiction, that we are pushing forwards with the change in energy generation while supporting atomic energy abroad.”  

The Lesser Of Two Evils

“Finally, a rating agency showed a sense for good timing. The announcement could hardly have come at a better time: Moody’s casts doubts on Germany’s top rating. The rating agency provided its top grade “AAA” rating with a negative outlook. This is perfect timing for the debate which has taken place these past few days concerning additional help payments to Greece.”

“The agency gives two main arguments behind taking this step, and they should be clear to everyone.

First there is the danger that Greece would leave the euro: Then the danger of further contamination for other countries like Italy and Spain would be a threat.

But secondly there is another, far greater danger: If none of these countries leave the euro, then financially weak states would have to be supported indefinitely by the stronger ones.”

“Germany continues to find itself in a very solid economic and financial situation.”

The Great European Divide

There’s Germany, it seems. And then there’s (practically) everybody else in Europe.

The Economist notes: The hope is that Germany, which produces over a quarter of euro-zone output, can pull along the rest. But the worry is that the latest bout of euro sickness may sap confidence even in Germany, aborting a broader recovery.

With unemployment at 6% compared with a 15-year high of 11% across the euro zone and over 20% in Spain and Greece, Germans feel less pressure to save in case they lose their jobs. And a more confident Germany helps everyone by spending more on imports. German inflation at 2.2% is now below average.

German resilience reflects several strengths. Although growth in the first quarter was helped by exports, the usual mainstay, it has increasingly been backed by domestic demand, which accounted for three-quarters of GDP growth in 2011. This reorientation has happened because Germany avoided the debt excesses (? hmmm, relatively speaking perhaps, but I’ve seen some other numbers here), both private and public, that inhibit growth elsewhere. With relatively low debt, German households and firms can borrow more. What is more, they can do it at rock-bottom rates. Paradoxically, Germany is benefiting from the euro crisis, as investors seek a haven. Yields on ten-year German government bonds have fallen below 1.5%.

Paradoxically, Germany is benefiting from the euro crisis, as investors seek a haven. Yields on ten-year German government bonds have fallen below 1.5%.

And yet, after having read all these impressive figures up there, there’s another German paradox I keep running into here all the time: Germans on the street aren’t nearly as confident as this article wants to imply, at least not when it comes to the euro and the euro-zone. How else do you explain the fact that nearly every second German now thinks that the introduction of the euro was a big honking mistake in the first place?

Die Euro-Einführung war ein Fehler, glauben knapp die Hälfte der Deutschen.