Germany in economic chaos – cuts of £25bn spark coalition government crisis

Even the BBC can’t spin this one as being “due to Brexit”

Montage © Facts4EU.Org 2022

EU’s No.1 economy in recession, slashes to health, to childcare, to transport

The EU’s economic crisis is getting worse. Its No.1 economy by far, representing 30% of the Eurozone’s output, is in trouble. Germany is now officially in recession and with an uneasy coalition of socialist, greens, and the right-of-centre Free Democrats it’s hard to see how they will reconcile the mess.

This matters to the EU as a whole because Germany has been keeping the Eurozone – and the EU Commission’s budget – afloat for years. Now the whole project seems to be unravelling.

Brexit Facts4EU.Org Summary

Germany – and the EU – in trouble

Germany’s constitution requires strict fiscal controls
Its overspending on Covid and on Ukraine has placed it in a difficult position
The government now plans to cut spending by over €30 billion euros
There are major disagreements within the coalition government
The right of centre Alternative für Deutschland has won two local elections in the last week

As we reported in May, since the EU Referendum the UK’s economy has grown faster than that of Germany, the EU’s ‘economic powerhouse’.

[Sources: European Central Bank | German government | German media | OECD | IMF.]

Does this sound familiar?

In an echo of Liz Truss’s words last year, Germany’s Finance Minister Christian Lindner said on Wednesday: “We are only at the beginning of the fiscal turnaround. We need to free the state from debt without burdening people and businesses with more taxes."

The focus in Germany right now is on returning to growth after six months in recession. Currently there are no signs this will happen. Divisions in the tripartite coalition are rife and it remains to be seen whether these can be reconciled.

Meanwhile the right-wing Alternative für Deutschland Party is riding high in the polls. Its ratings are now up there with Chancellor Scholz’s ruling Social Democrat Party and in the last two weeks it has won two regional elections, causing consternation amongst the Berlin political bubble.

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The unaccountable judiciary

It isn't only in the UK that courts are interfering in the legitimate business of government. On Wednesday the German constitutional court ruled that the coalition government's bill to delay the phasing out of gas and electric boilers must be delayed, for 'more lengthy consideration'.

It seems that across Europe we are getting to the point where unelected judges exert more power than the elected representatives of the people.

Facts4EU.Org and CIBUK.Org asked the the Rt Hon Sir John Redwood, MP for Wokingham and former Single Market Minister, for his comments

“Germany is suffering from EU policy that wants to close down her successful petrol and diesel vehicle plants as soon as possible and from the need to change dependence on Russian gas.
“The Euro has given Germany high inflation. The EU is now using the German creditworthiness to borrow billions that Germany has to stand behind.
“The UK out of the EU has been doing better than Germany and could do much better if we made more use of the Brexit freedoms.”

Disquiet about Net Zero policies in Germany appears to be growing

Interestingly, the rise of the AfD seems also to have come from the comparative decline of the right-wing CDU, akin to the Conservative Party in the UK. Nigel Farage will not have missed this. The AfD seems to be picking up voters from across the political spectrum.

Polls are showing Germans are deeply unhappy with their country’s relatively mild Net Zero policies. The United Kingdom is still intent on achieving its targets by 2035, whereas in Germany the target date is 2050, as in the EU as a whole.

This is not confined to Germany. Across the EU the sentiment amongst voters appears to be moving to the right and away from globalist, open borders, Net Zero policies, as we have reported on many occasions.

Observations

The dynamics of politics in the EU have been changing for several years. No amount of EU Commission propaganda talking of ‘solidarity’ and ‘unity’ can disguise this. It’s now right out there in the open.

Everywhere EU Commission President Ursula von der Leyen turns in the EU27 there is dissent. The challenge of coming up with a common EU position on major policy issues seems to be growing daily. The growing migrant crisis in the EU is one example.

The list of EU Commission legal actions against its member countries grows each month. These are no longer confined to the “naughty boys” such as Viktor Orban’s Hungary or Mateusz Morawiecki’s Poland. The political fabric of the EU is being stretched.

More exits?

We are not suggesting that there will be a Brexit equivalent in the EU27 soon. Nevertheless as more EU countries become net contributors rather than net recipients of EU money, we suspect sentiment will increasingly turn against the EU. A recent example is Ireland, which benefited from EU largesse for decades but now pays in more than it receives.

Von der Leyen may have been brought up in Brussels, (where her father worked for the EU), but she is German. Her EU Commission shows increasing signs of dictatorial behaviour – and it’s not going down well. On top of this, as German Defence Minister she was deemed by the German media as being the least competent in Merkel’s government.

If Dozy Joe Biden gets his way and she takes over as Secretary General of NATO next year, heaven help us.

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Brexit Facts4EU.Org, Fri 07 Jul 2023

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Reader Comments 13

1. Gazzablack , Friday, July 07, 2023, 11:42:

Germany's economic engine continues to misfire with data out today revealing another contraction in the manufacturing sector, setting up the prospect of a rare three-quarter long recession..

2. Sparky , Friday, July 07, 2023, 11:44:

Another pointless dig at BBC.
.
Inflation in Germany is lower than UK. Debt to GDP is 69% compared to 100% in UK. Bond yields for Germany is half the UK rate of 4.7% and the BOE interest rate is around double Germany. Facts4EU has once again been selective.
.
Available on YouTube Ben Habib being put right on Alexis Conran show about his recent claims on UK exports and imports growth on his defense of Brexit.
.
Leaving the single market was a mistake!
.
The realization that Brexit was a mistake is really sinking in, it was sold on the basis of false promises and over optimistic assumptions. Vote Leave web site and videos are still available to see what those were.

3. Gazzablack , Friday, July 07, 2023, 13:27:

2, sparky
German inflation may be lower than the UK at the moment, but it hasn't been over the last few years
And it suddenly jumped in June as a rise in transport prices hit the EU's biggest economy.
And in March it was reported that food inflation was rising even as the headline figure eased.
I note that you saw fit not make reference to GDP growth which is higher in the UK than the EU at the moment.
.
Now compare UK debt ratio to French, Italian and Greek ratios.
.
Here's an export statistic for you.
British recorded music exports smashed through £700 million for the first time in 2022, a 20% increase over the previous year.
UK goods exports to the EU reached a record £16.9 billion in May, their highest level since the series began in 1997 the latest ONS figures reveal.
.
Here's an interesting tidbit for you
A number of years ago Tesco unimpressed with the extortionate price of Levi jeans being charged by wholesalers in the EU, bought Levis from US wholesalers, and imported the jeans themselves.
This enabled them to sell to consumers at greatly reduced prices
EU wholesalers took umbrage and thus Tesco to the ECJ, who ruled against Tesco, thus ensuring that UK consumers paid inflated prices.
.
Now outside of the EU, UK retailers are free to source goods more cheaply from elsewhere, without being subject to an EU
ruled premium.

4. terence patrick hewett , Friday, July 07, 2023, 13:34:

@sparky
The German economy is going down the tubes: no more cheap Russian energy, and the other mainstay, automotive, is about to be trashed by China. I have, unlike yourself, worked as a professional engineer for 2 famous German multi-nationals, and 2 German Mittelstand, I have a pretty good idea what is going on. On top of that they have Mutti's millions of ropers to deal with: not a pleasant prospect. Whether the EU will survive in it's present form, is a wager on which the wise would not bet the farm.

5. NH , Friday, July 07, 2023, 14:19:

2 Sparky , "Inflation in Germany is lower than UK. Debt to GDP is 69% compared to 100% in UK. Bond yields for Germany is half the UK rate of 4.7% and the BOE interest rate is around double Germany. Facts4EU has once again been selective"
.
You are comparing two very different systems. The UK is an independent country with full control of it's economy and currency. Germany is part of the eurozone which it can not control and it is also exposed to defaults and other liabilities which it has no control over. When comparing German's debt levels you have to include debt held by the European Union and debt held by the Bundesbank for ECB bailout programs.
.
The reduction in government spending shown above seem suspiciously similar to the losses the Bundesbank recently incurred from the ECB bailout programs. This cost is an annual cost which will continue until interest rates come down to a very low level. Germany voted against this system in 2015 but, as it was majority voting, they were out voted and they are now paying for it. This is the problem with "majority voting" when the majority of countries receive handouts.
.
If the UK were to rejoin the EU we would now be paying similar amounts to Germany (slightly less) as the bailout programs are based on a countries GDP. This is in addition to all the other costs plus the proposed new taxes the EU wants to impose. The costs involved make the £350 million shown on "Boris's Big Red Bus" seem absolutely miniscule.

6. Gazzablack , Friday, July 07, 2023, 14:33:

Japan ministers confirm that, following the lead of the UK, Ukraine formally applied to join CPTPP on May 5th.

7. Sparky , Friday, July 07, 2023, 16:30:

3G. Didn’t mention GDP and other countries as piece is about German GDP.
.
Re exports, 2021 and 22 not a good comp due to covid. See YouTube I mentioned, take account of inflation exports are flat or down.
.
Re Levi’s, it was Levi’s that took Tesco to court to protect the brand, they didn’t want them being sold in supermarkets.
.
4 TPH. Not too concerned about German car manufacturers, but am about UK. EV manufacturing in UK at risk due to being outside EU with cliff edge approaching and slow EV battery development. Looks like Oz firm Recharge that bought BritishVolt May be in trouble.
.
You guys have been predicting collapse of EU for years.
.
NH. UK not re-joining EU. Brexit was too devisive, we wouldn’t have as good a deal as the one we threw away by listening to Farage, Johnson etc (rebate, GBP) and I don’t think the EU would allow us back in

8. Gazzablack , Friday, July 07, 2023, 18:03:

7, s
You made a comparison of German vis a vis the UK, so I reiterate.
You didn't compare GDP
.
Re. Music
What part of "highest ever" don't you understand?
.
're Levis
It was the EU court that ruled the practise illegal, thereby allowing the likes of Levis to demand extortionate prices.
The consumer was never a consideration for the EU.
.

9. LuxuryBalloon , Friday, July 07, 2023, 19:08:

Facts4EU correctly predicted many months ago that Germany’s economy would go into meltdown when Putin turned off the gas tap.

10. Gazzablack , Friday, July 07, 2023, 19:41:

Donald Tusk, once the social media scourge of Brexiteers, urged Poles to 'Take back control' in election campaign.
.

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