The Duran Podcast - Three factors causing German economic collapse

Episode Date: December 22, 2024

Three factors causing German economic collapse

All right, Alexander, let's talk about the situation in Germany. We will have elections most likely February 23rd. Olaf Schultz has lost the confidence vote. Merch is considered to be the most likely next chancellor of Germany. Very hawkish, Frederick Merz. The interesting part is that he will most likely have to enter into a coalition with the SPD and Schultz to govern, which is interesting. And we have more bad, very bad economic news and forecasts for Germany. The German economy does look like it is heading towards some sort of

slow, protracted collapse. What are your thoughts on what's going on in Germany? This is absolutely true. And of course, it's the last problem, the crisis in the economy, which is in effect creating the entire political crisis that we have seen. The reason there is, there is, the elections are happening now is because the German economy has in effect been in a kind of recessionary situation for some years now, ever since they started to impose sanctions on Russian energy back in 2022. Of course, they have been doing things with the numbers. So even as German industry has been contracting, they've been denying that they are in recession, but they actually are. And because there's been this recession, and because they've been

spending money on Ukraine, and they've been spending money on all kinds of other things, which we would discuss, some of our green policies and that kind of thing. Germany has gone into, its budget has gone into deficit. There's been an argument amongst the parties of the coalition about what to do about the deficit, the budget deficit. They couldn't agree. The government fell apart. We've had huge amount of argument and bitterness between the coalition partners.

Schultz has now been incredibly abusive about the Free Democrats and Lintner and the result is the government fell apart. We've had now this no-confidence vote, which Schultz himself engineered, by the way, he wanted a no-confidence vote. He had the option of trying to remain Chancellor until September and running a minority government, but he took a decision, which makes political.

political sense, by the way, to hold the elections now. And the result is that we're likely to get elections now. So none of the parties, none of the main parties, the Christian Democrats led by Mertz, Olaf Schultz and the Social Democrats, the Greens led by Harbeck, Lindner with leading the Free Democrats. None of them have a plan about how to turn this crisis. in Germany round because none of them want to address the fundamental issues that are causing the crisis and those issues are three firstly and firstly the euro the whole system of economic integration that has been created in Europe over the last 30 years it's in some ways benefited Germany until recently. But what you have been seeing is a steady process of stagnation and immobilism, which has been getting an ever stronger grip on the European economy. And it's finally reached the European core, Germany and France. Both of these countries are now struggling with those kind of problems. But there is no conceivable way that any of the parties we've identified is

going to rebel against the euro or start going against the orthodoxes in brussels or do any of those things and there's been a lot of discussion about germany doing away with the constitutional break on spending but i think what a lot of people don't understand is that one of the reasons why that break exists is because Germany running what is in effect a balanced budget. Given that Germany is the economic hegemon of the European economy of the EU, that that balanced budget at the core of the Eurozone has been absolutely key. in keeping the credibility of the Eurozone, of the Euro, and of ensuring that it has continued to function. So if Germany does away with the debt break and starts to accumulate debt as rapidly as other European economies have been doing,

it might in the short term leads to an uptick in the growth figures, though it would not deal with the industrial crisis that Germany is facing. But there is a real possibility and a real risk that it could start to destabilise the euro and the entire structure of the euro zone. So one problem Germany faces is the euro. The other problem that is holding back Germany is the decision which we've talked about many times to cut Germany off from imports of cheap, reliable, steady Russian gas. Now, there was a huge amount of denial about this when it happened.

Harbeck and Schultz back in 2022, letters told everybody that the problem had been overcome. The Germany had found a way that, you know, they were importing LNG, what has happened is that it's become increasingly clear that the only way they avoided blackouts in 2022 was because the winter that year was relatively mild and because of very severe demand suppression. In other words, they forced German industry to reduce output and therefore consumption of power. That could only work for a while. That period that was won through that process has now been exhausted. It's clear that without Russian energy, at the high energy prices that Germany is paying,

Germany, German competitiveness has basically been thrown out of the window. We're seeing a major industrial crisis. Nobody in Germany is. seriously considering, at least nobody in amongst the mainstream parties is seriously considering going back to the Russians reopening the one branch of the Nord Stream pipeline that continues to function, trying to work out some kind of way that would lead to a recovery, an industrial recovery in Germany based on a resumption of Russian gas imports. In fact, I think that's gone forever. The Russians anyway, if the Germans came to them and asked them to do it, the Russians

almost certainly would say no. But nobody, as I said, within the mainstream parties, is even addressing that issue. And the third reason, and it's the one that many people have been talking about, but it's true, is the economic stagnation and immobilism that has existed in Germany for a very long time. We used to talk about it whilst Angela Merkel was Chancellor. Now everybody's talking about it. We used

to talk about it when Angela Merkel was Chancellor when she was being hailed across the West as the Queen of Europe, the pillar of liberalism, all of that kind of thing. People now can see that this

huge immobilism took place. Germany failed to develop. new technologies, it failed to develop new industries, its entire industrial structure stagnated. And again, there are structural reasons for this in the way that the German political and industrial system intersect, and no one in Germany is really addressing those. And beyond that, at each inherent part of this intersection between the political and economic structures and a significant course in Germany's loss of dynamism and the immobilism that we have seen is that and the immobilism that over which Merkel presided is of course the adoption of green policies

regardless of cost, regardless of any attempt to conduct proper cost, benefit analyses, or all of those sort of things, so that to the extent that there was any innovation done in the economy at all, it was all done in the wrong direction. So these are the major problems that Germany is confronting. And none of the leaders, not maths, not shorthy, not sure, not Lindner, especially not Harbeck, are really interested or are able to visit them, to look at them, to conduct that proper systematic exploration of what Germany needs to do in order to get itself out of this crisis that needs to be done. So we're going to have an election.

It's going to be an election of ghosts because these are all exhaustive parties from a political system that has failed Germany and the German people. And whatever government we get, yes, it will be more hawkish on the margins. If it's meant, we can see attempts to cut taxes and do those kind of things, perhaps to relax the debt break, those kind of things. But none of them are going to address Germany's fundamental problems because all of these leaders are in denial about them. Yeah, the only way Germany can can somehow claw its way back is if it establishes relations with Russia again. Absolutely. And gets that Nord Stream pipe up and running again. And there is one, Putin has said it many times. There still is one pipeline. All you have to do

is just let us know and we'll turn it back on. But they will never do it. They'll never admit it. Germany has collapsed on the hill that is Project Ukraine. And they are collapsing. Politico actually read an article with the title Europe's economic apocalypse. Stagnation, flagging competitiveness. Donald Trump, the continent is facing an existential threat, an existential challenge, sorry. And in this article, Alexandria, they actually say that Europe is in danger of becoming an open-air museum with American and Chinese tourists, because they think. are going so bad for Europe and there is no innovation. That's what the political article says.

Europe has no innovation. The auto industry, which is where there was, whatever innovation there was, was all focused on the auto industry, and that's being lost to China. And then in the article, Politico says that faced with some of the world's highest energy costs, expensive labor, and onerous regulation, many big German companies are simply upping, stakes, and relocating to other regions. Nearly 40% of German industrial companies are considering such a move, according to a recent poll, by D-IHK, a business lobby. Absolutely. As Germany goes, so does the European Union. Yes.

Now, there's a real back three years, and you'll find that we were doing programs saying exactly this. And we were also talking about the immobilism and the stagnation in Germany. We were talking about this years ago. Germany has failed to develop a single tech company. I mean, it is an extraordinary failure. Not one. All of Europe. All of Europe.

The whole of Europe. But of course, Germany, which is, you know, the industrial, technological, heartland, never came up with one. I mean, they are not, they're not abreast in any of the key technologies. They're falling further and further behind. And there's a huge investment crisis in Germany. And, of course, the relocation of all of these companies to other places, to the United States and China. A lot of them going to China, too, by the way, now.

What will mean is that in time these companies will cease to, will start to lose their German personality if they survive at all. Because they are transferring to other economic landscapes that are unfamiliar to them. Yeah. Yeah. And the only thing they have is Ukraine. Yeah. I think about it now. The only thing they have is war.

Yes. And keeping the US in Europe. Yes. That's it. Yes. Yes. That's why they're so panicked about Trump as well. And possibly having some of that money and some of those military bases and everything that's

been going on in and around Ukraine as well. That's why they're so worried about some of that leaving or all of that leaving. Because if that goes, then they're in big trouble. Absolutely. Now, just to quickly say about the election, I mean, what possible outcome? of the election could be. I think everybody expects that Friedrich Mautz and the CDU will emerge as the biggest party.

That almost certainly means that Mautz, who is not particularly liked in Germany, by the way, he is less popular than the CDU. He's always been seen as an abrasive and unpopular man, and he's also been seen as somebody who made his money very fast and got very close to some cutthroat, American capitalist funds and things of that guy.

So he's not particularly liked, but he will probably emerge from this as Chancellor. But the CDU will not have a majority. So they're not prepared to go into coalition with the IFD. That's absolutely rolled out. They're obviously not going to go into coalition with the BSW with Sarah Wagner, Zagw, Zagw Gnecht's group. It's not yet certain, by the way, that the BSW will win enough votes to get into the Bundestag.

But we'll see. Maybe they will. So what that means is another coalition. And the parties that the CDU will have to look to in order to form a coalition are Olaf Schultz's Social Democrats and probably Robert Habek's Greens. possibly even both, in which case we will have got exactly the same government in effect as the one that has just collapsed. That is Germanist crisis. The immobilism of the Merkel era is still there. It's just become institutionalized.

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