Tag Archives: germany

ECRI explains the global slowdown, and what lies ahead

Summary: The Economic Cycle Research Institute (ECRI), who correctly predicted the slow recovery, looks at the multi-year slowing in the economies of the developed nations — its causes (the world is becoming Japan) and likely consequences.

The Business Cycle

ECRI’s Simple Math Goes Global

ECRI, 20 June 2016.
Reposted with their generous permission.

The risk of a global recession is edging up, as the global slowdown we first noted last fall continues (ICO Essentials, September 2015). This danger is heightened because longer-term trend growth is slowing in every Group of Seven (G7) economy, as dictated by simple math: growth in output per hour, i.e., labor productivity – plus growth in the potential labor force – a proxy for hours worked – adding up to real GDP growth.

As we laid out over a year ago (USCO Essentials, June 2015), this simple combination of productivity and demographic trends reveals that U.S. trend GDP growth is converging toward 1%. This is reminiscent of Japan during its “lost decades,” where average annual real GDP growth  registered just ¾%,  which is why we have cautioned that the U.S. is “becoming Japan” (USCO Essentials, February 2016) and (ICO, July 2013).

Expanding this analysis to the rest of the G7, we find that every economy is effectively becoming Japan, and the sharpest slowdowns are happening outside North America. Thus, as trend growth falls in the world’s largest advanced economies amid the ongoing global slowdown, the threat of a global recession is growing.

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Politics of the EU: “Vanity and Venality”

Summary: Today Britain votes on the same choice Americans face in November — choosing between a bad choice endorsed by ruling elites, and a leap into a probably worse unknown. Here’s a brilliant analysis of Europe by Susan Watson (from 2013, still the best brief I’ve seen about the EU’s politics). It reminds us why so many Brits want to leave the EU — and the role of the US government in its mismanaged crisis. Much of it reads as if written yesterday, showing how little reform the crisis has produced. No matter what the result today, the EU still serves its people poorly as its elites gather political power (reversing centuries of democratization) — and further crises lie in its future.

Flag of the European Union

Vanity and Venality

by Susan Watkins
London Review of Books
29 August 2013
Posted with her generous permission.

Books reviewed

All quiet on the euro front? Seen from Berlin, it looks as though the continent is now under control at last, after the macro-financial warfare of the last 3 years. A new authority, the Troika, is policing the countries that got themselves into trouble; governments are constitutionally bound to the principles of good housekeeping. Further measures will be needed for the banks – but all in good time. The euro has survived; order has been restored. The new status quo is already a significant achievement.

Seen from the besieged parliaments of Athens and Madrid, from the shuttered shops and boarded-up homes in Lisbon and Dublin, the single currency has turned into a monetary choke-lead …Why has the crisis taken such a severe form in Europe?

Part of the answer lies in the flawed construction of the European Union itself. Though Americans have been hard hit by the great recession, the US political system has not been shaken. In contrast to most European incumbents, Obama sailed through his re-election. Only in isolated pockets like Detroit has elected government been replaced by technocrats.

In Europe, private and public debt levels were generally lower before the financial crisis struck. But the polity of the European Union is a makeshift, designed in the 1950s to foster an industrial association embracing two large countries, France and Germany, with a population of about fifty million each, and their three small neighbours. It was then expanded, piecemeal fashion, to incorporate nearly 30 states, two-thirds of which adopted a shared currency at the height of the globalisation boom – a project aimed in part at preventing a significantly larger, reunified Germany from dominating the rest.

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Stratfor: Germany and ECB Face Off. Better than any WWF fight.

Summary: The monetary experiments central banks are running in Japan, Europe, and America will shape the global economy of the 21st century — no matter what the result. Here Stratfor looks at the growing tensions between the ECB and Germany. It’s a sound analysis. But note Stratfor’s top-down perspective. By “Germany” they refer not to its people, but to its corporations and elites. Stratfor provides a useful look at how the 1% (and their minions) see the world.


Germany and the European Central Bank Face Off

Stratfor, 20 April 2016


  • The European Central Bank (ECB) looks as though it will stay on the course of loose monetary policy in the coming months.
  • Germany’s insurance and banking sectors will suffer as a result, whipping up anti-ECB sentiment among German voters.
  • The frustration of German voters will increase friction between Germany and the ECB.


The ECB is gearing up to hold its first monetary policy meeting since bank President Mario Draghi announced a new package of measures that included more quantitative easing and an interest cut that will push rates, already in the negatives, even lower. During the April 21 meeting, Draghi will probably address concerns raised by German Finance Minister Wolfgang Schaeuble that loose ECB policies created and fueled the rise of the German opposition party Alternative for Germany (AfD). As Schaeuble’s statements highlight, the relationship between Germany and the ECB is antagonistic — and it is going to get worse.

Because the eurozone lacks a unified fiscal institution for its central bank, the ECB, to collaborate with, the bank plays more of a political role than peer institutions such as the U.S. Federal Reserve do. Unlike the Fed, the ECB has to balance the competing demands of the national economies under its jurisdiction. Aiding one country’s economy often means harming another’s.

Northern European countries such as Germany have historically preferred a tighter monetary policy so as to control inflation. Southern European countries such as Italy, by contrast, are more accustomed to looser monetary policy and to the economic stimulation that follows. Their confrontation over monetary policy has snowballed since the beginning of the global financial crisis, and the ECB is stuck in the middle.

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Sociologist Wolfgang Streeck explains the politics of the migrant crisis reshaping Europe

Summary: This essay by German sociologist Wolfgang Streeck provides a look at the the political crisis of Germany — and Europe — created by its leaders open of their borders, and more broadly about the new form of political leadership in the West (as Bush Jr. demonstrated for America after 9/11). He provides a different perspective than we see in the US news media. It is brilliant (the title is sarcasm).

One way nations are re-shaped

Migrants to Germany.

Migrants enter Germany on 20 October 2015. By Christof Stache/AFP/Getty Images.

Scenario for a Wonderful Tomorrow

By Wolfgang Streeck
London Review of Books, 31 March 2016
Published with his generous permission.

About Merkel, a model 21stC politician and architect of the new Europe

Europe is falling apart, destroyed by its most devoted fans, the Germans. In the summer of 2015, having humiliated the Greeks by forcing another reform diktat down their throats, Angela Merkel started a new game, aimed at diverting attention from the economic and political disaster monetary union had become.

Abrupt changes of policy are nothing new to Merkel, who is best described as a postmodern politician with a premodern, Machiavellian contempt for both causes and people. Having made her party adopt a radically neoliberal, deregulationist anti-labour platform in 2003, she barely escaped defeat two years later at the hands of Gerhard Schroeder. When she became chancellor, she used her office and the Grand Coalition with the post-Schroeder Social Democratic Party (SPD) to purge her own party of neoliberalism and neoliberals, and social-democratise it beyond recognition.

In 2011, after the nuclear accident at Fukushima, which received extensive media coverage in Germany, it took Merkel, then known as the Atomkanzlerin, no more than a few days to order the immediate closure of eight nuclear power plants and to initiate legislation to end all nuclear power generation by 2022 at the latest. This was only a few months after she had, with much political arm-twisting, got the Bundestag to repeal the nuclear phase-out passed by the Red-Green coalition in 2001, and to extend the operating licences of German nuclear plants by an average of ten years.

The refugee crisis

Last year, the refugee crisis offered Merkel another opportunity to demonstrate just how fast she can change tack. Once again, media coverage influenced her decision-making, just as it would a few months later when smartphone videos of the New Year’s Eve riot at Cologne Central Station triggered another 180 degree turn in her policies.

In July a PR event, part of a government campaign to encourage cabinet members to meet ordinary citizens and listen to their ideas, went wrong. One of the young people invited to take part in a ‘dialogue’ with Merkel on the environment, the 14-year-old daughter of Palestinian asylum seekers, unexpectedly complained in front of the TV cameras that her family, who had been living in Germany for four years, might be sent back to the Lebanon at any moment. She asked, in flawless German, why she wasn’t allowed to stay in Germany ‘to enjoy life like everybody else’. Merkel said something like, ‘we cannot take in everyone, much as we might want to.’ The girl began to cry. Not knowing what to do, Merkel started patting the child’s head with a helpless expression on her face. {See the story here.}

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Stratfor: The Refugee Crisis Redefines German Politics. It could get ugly.

Summary: Stratfor looks at this week’s regional elections in Germany. Much of the value of Stratfor’s analysis is their top-down analysis provides a window into the thinking of the West’s ruling elites (essentially their clients). Stratfor’s analysis suggests that German’s leaders remain delusionally complacent about the rising anger at their open borders policy and its resulting flood of immigrants. This suggests a great future for Germany’s far Right parties. Bet on increased social and political turmoil in Europe.


The Refugee Crisis Redefines German Politics
Stratfor, 14 March 2016


In Germany’s March 13 regional elections, voters revealed their disenchantment with mainstream parties. The elections, held in three of the country’s 16 regions, resulted in a record performance by the anti-immigration Alternative for Germany (AfD) party and waning support for most of the traditional political forces. Since taking over the government more than a decade ago, German Chancellor Angela Merkel has not faced a bigger challenge than the refugee crisis. Within six months of its start, the crisis considerably strengthened the anti-immigration opposition, divided the ruling coalition and weakened Berlin’s role in the European Union.


The election results suggest that some German voters are fed up with their leaders. Merkel’s Christian Democratic Union (CDU) won in only one of the regions (Saxony-Anhalt) but with fewer votes than in the last round of elections held four years ago. The CDU’s campaign was marked by contradiction and internal conflict as some of its candidates criticized Merkel’s refugee policy. The center-left Social Democratic Party (SPD) also won in one region (Rhineland-Palatinate) but was relegated to fourth place in the other two. Finally, the Greens managed to win a region (Baden-Wurttemberg) but saw negligible results in Saxony-Anhalt and Rhineland-Palatinate.

Conversely, AfD {Alternative for Deutschland} performed well in all three regions. The party traditionally has been strongest in eastern Germany, where unemployment rates are higher and nationalist parties tend to be relatively popular. The March 13 elections confirmed this trend as AfD received 24.2 percent of the vote in Saxony-Anhalt, only 5 points fewer than the CDU. But AfD also saw record performances in Baden-Wurttemberg, with 15.1 percent of the vote, and in Rhineland-Palatinate, with 12.6 percent. The party’s success there is an important development because it shows AfD has managed to expand its presence beyond its traditional strongholds in the east.

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Stratfor: Germany Does an About-Face on Greece, hoping to save Europe

Summary: Mass immigration and the collapse of Greece’s economy have combined to bring the European Union to the breaking point. Now the two issues have merged as Greece becomes a gateway into Europe. Germany has loosened its grip on Greece, hoping to use it as a buffer state for the flow of migrants. It buys time for more drastic solutions, which so far they’re unwilling to take.

Germany’s Embrace of Migrants Spawns Rise of Far-Right Leader.
— False NYT headline. German’s leaders embraced mass immigration. It’s people were not consulted.


Germany’s Tactical About-Face on Greece

Stratfor, 3 March 2016

Germany and Greece were on opposing sides during last year’s negotiations over Athens’ third bailout program, but the European refugee crisis is forcing them to form a tactical alliance. The German government tried for months to treat the bailout program and the migration crisis as separate issues, but Berlin has now come to terms with the idea that Greece needs help on both. The Greek government, in turn, understands that cooperation with Germany is essential to prevent Greece’s isolation in the European Union and to receive the next tranche of bailout funds.

Berlin is still trying to push for a unified European response to the refugee crisis. From the German government’s perspective, Europe needs to cooperate with Turkey to reduce the influx of asylum seekers entering EU states and member states need to enforce the EU plan approved in late 2015 to apportion asylum seekers among member states. Greece is key to both goals. Germany needs Greece to become more efficient at receiving and identifying those eligible for asylum, so that redistribution efforts are more effective. Berlin also needs Athens to cooperate with Ankara on the plan to coordinate intelligence sharing by NATO vessels in the Aegean Sea on human trafficking organizations.

In addition, Germany is wary of the multiplication of unilateral and regional moves in Europe. The refugee crisis has only exacerbated Europe’s political fragmentation, and a growing number of countries, especially those along the Balkan migration route that connects Greece with Austria, are defending the reintroduction of border controls.

German Chancellor Angela Merkel fears that Berlin and Brussels are losing control of the political process in Europe. The end of free passage under the Schengen Agreement would hamper European economies by, among other things, increasing transportation costs. Closing borders would have serious political consequences, as countries could try to sever other aspects of the process of Continental integration in the future. Merkel is also worried that the current climate in Europe would have political repercussions at home, as anti-immigration groups gain traction.

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Stratfor: How immigration will change German politics, which will change Europe

Summary: Believing that the European Union made them immune to popular opinion, Europe’s elites acted on their class interests by opening the door to massive immigration, providing cheap workers in their business and homes. Now the resulting popular opposition, still in its early stages of arousal, has forced Germany to take steps to limit the inflow — violating the Schengen Agreement for open borders within Europe but probably insufficient to quiet public protests. They have unleashed the wild forces of populism in Europe. Here Stratfor begins to assess the consequences. Much of Stratfor’s value comes from the window it provides into thinking of Western elites, its most-important customers.


How German Politics Will Change Europe

Stratfor, 22 January 2016


  • Conservative voters and politicians, increasingly fearful of the economic, social and political repercussions of the refugee crisis, will continue to pressure the German government.
  • German Chancellor Angela Merkel will survive the political impasse, but her policies will change in the coming months as she toughens Germany’s asylum policies and remains reluctant to support Greek debt relief.
  • Germany, the largest EU economy, will increasingly question fundamental aspects of Continental integration, including the composition of the eurozone and the free movement of people.


As the European Union continues to fracture, debates in Germany could change Berlin’s domestic and foreign policies, reshaping the entire Continent in the process. A group of conservative politicians is questioning German Chancellor Angela Merkel’s ability to address the immigration crisis, with some even threatening to launch a no-confidence vote against her. Merkel will probably survive these attacks, but this is the second rebellion against her leadership in less than a year.

Regardless of whether Merkel keeps her job, German conservatives are, and will continue to be, concerned about the rise of anti-establishment and anti-immigration groups in the country. Even if these emerging forces are still far from accessing power, they will influence mainstream parties. In addition, future challenges such as the integration of asylum seekers into the labor force and the economic impact of the downturn in emerging markets will create fertile ground for anti-establishment sentiments to prevail. If Germany takes a more isolationist stance on EU issues, Europe will only further fragment.

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