German crisis marks end of post-war order | gulf news

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Tuesday November 21, 2017 - 21:37:18 in Maqaallo by nur yare
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    German crisis marks end of post-war order | gulf news

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Macron will emerge by default as the de facto leader of the EU for a while as Merkel grapples with coalition woes, though this is unlikely to do the French president any good

The last time Germany proved unable to form a government was under the Weimar Republic. We will not see a repeat of the Thirties this time, but the failure of the "Jamaica” coalition talks is not a trivial matter either. The country faces a constitutional crisis. There is no clear-cut legal mechanism for snap elections. A fresh vote is unlikely to resolve the deadlock in any case since the fragmentation of the Bundestag may well be greater.

"It is an unprecedented situation in the history of the federal republic,” said President Frank-Walter Steinmeier. Opinion polls suggest that minor parties in various states of populist or ideological revolt — above all the hard-Right Alternative for Deutschland — will make further gains. With hindsight the election in September is taking on much greater significance: in reality it marked the end of Germany’s post-war order, the happy era of moderation and the dominance of two great incumbent volksparteien. This rupture is a direct result of the economic and political model pursued by the German elites for the last 15 years, known to critics on both the Left and Right as "hyper globalisation”.

 

 

"It is better not to govern at all than to govern badly,” said Christian Lindner, leader of the pro-market Free Democrats (FDP), after cutting off the talks. His real game is to tap into simmering discontent over immigration, calculating that Chancellor Angela Merkel’s Christian Democrats have left him an open goal.

"Germany is turning to soft nationalism,” said Ashoka Mody, a former bailout chief for the International Monetary Fund in Europe. "People on low incomes are voting against authority because the consensus on equality and justice has broken down. It is the same pattern across Europe.” Mody said the bottom half of German society had not seen any increase in real incomes in a generation.

The Hartz IV reforms in 2003 and 2004 made it easier to fire workers, leading to wage compression as companies threatened to move plants to Eastern Europe. The reforms pushed seven million people into part-time "mini-jobs” paying €450 (Dh1,938) a month. It led to corrosive "pauperisation”. This remains the case even though the economy is humming and surging exports have pushed the current account surplus to 8.5 per cent of gross domestic product. The electoral landscape is a cry of protest by those left behind. The Marxist Linke party is running at 10 per cent in the polls.
AfD and the FDP are between them on 25 per cent with competing kulturkampf platforms, with the Bavarian Social Christians shifting in their direction to cover the Right flank. The economy has been firing on all cylinders this year. Growth was 0.8 per cent last quarter. The momentum will carry Germany through the next year whether or not it has a government, but this does not in itself alleviate the deeper crisis for the post-Rhineland model.
The Bundesbank says the current boom is unsustainable. It is cyclical overheating due to ultra-loose monetary policy. Behind this screen is the curse of stagnant productivity (as in Britain), lowering the future economic speed limit. Trend growth rates are heading for 0.75 per cent a year by 2021.
One’s perception of the Wirtschaftswunder depends on where one sits. Marcel Fratzscher, head of the German Economic Institute, writes in Die Deutschland Illusion that Germany’s growth since 2000 has lagged East Asia, Scandinavia and the Anglo-Saxon states. It has fallen far below the country’s own past standards. "It only looks like a boom in comparison to the dire performance of the southern eurozone,” said Simon Tilford from the Centre for European Reform.

"Germany’s real weakness has been the lack of public investment. They have been running down their public sector stock even though they could borrow at negative rates,” he said. The austerity doctrine and the quest for a balanced budget above all else have left deep structural problems. The country has neglected digital infrastructure. It has the lowest ratio of high-speed broadband in the OECD [Organisation for Economic Cooperation and Development] club. The collapse of coalition talks kills off any lingering hopes of a "grand bargain” between France and Germany, intended to relaunch the eurozone on viable foundations with a fully fledged fiscal union.

French President Emmanuel Macron will emerge by default as the de facto leader of the EU for a while as Germany grapples with its internal crisis, but this is unlikely to do him any good. "There may be a eurozone finance minister as a fig-leaf appointment. The likelihood of a substantive pooling of resources is zero,” said Tilford.

Monetary union will face the next global downturn with the old unresolved pathologies and no real buffers against an asymmetric shock, but this probably would have happened anyway with a "Jamaica” government.

Tilford said that months of introspection in Germany spells trouble for Brexit talks. "Germany is absolutely crucial in brokering a deal between the other member states. A disengaged leadership caught up in internal wrangling is not going to be focused on knocking heads together,” he said.

Florian Hense from Berenberg Bank said there was a unified view across Germany that the cohesion of the EU single market was sacrosanct and could not be compromised, even if it meant disregarding the interests of German car makers. "It makes no difference which government is in power,” he said.
There is a view that Germany is the real problem for Britain in Brexit talks since the whole structure of the single market, the euro and the European Union (EU) regulatory regime has worked so well to its advantage. Europeanist moral rhetoric is a mask for German power. The country has the greatest strategic stake in preserving the EU status quo.
"They always talk about European interests when they really mean German interests,” said Gisela Stuart, head of Change Britain and herself Bavarian-born. It was Germany and France that took the toughest line before the last EU summit in October, overruling Brexit negotiator Michel Barnier when he called for compromise.
"The commission is more technically pragmatic and in an odd way it may be easier to reach a deal if left to them,” she said. Stranger things have happened.

— The Telegraph Group Limited, London, 2017





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