Europe should beware a nationalist Germany
Cheering populists elsewhere should be careful what they wish for
Philip Stephens
Angela Merkel is besieged. The Bavarian sister party of the German chancellor’s Christian Democratic Union wants tougher frontier controls. The anti-migrant pose struck by Horst Seehofer, the Christian Social Union interior minister in Ms Merkel’s coalition, is cheered by populists from Warsaw to Rome, via Vienna and Budapest. Have any of them thought, some of us wonder, what a Germany taking a nationalist turn might actually look like?
Mr Seehofer’s motives are transparent. The CSU suffered a mauling at the hands of the unashamedly xenophobic Alternative for Germany (AfD) in the 2017 national election. Facing a state poll in October, the party now wants to outflank AfD. EU leaders will discuss a European-wide migration scheme later this month. If he is not happy, Mr Seehofer is threatening unilateral controls.
Many Germans — a majority, the latest poll suggests — remain suspicious of the chancellor’s open borders strategy. Among neighbours, the Visegrad Four — Poland, Slovakia, the Czech Republic and Hungary — are fierce critics. Jaroslaw Kaczynski, the leader of Poland’s ruling Law and Justice party and Hungary’s prime minister, Viktor Orban, scorn efforts to disperse asylum seekers across the union.
Italy’s new government — a populist coalition of the Five Star Movement and the anti-migrant League — is shutting ports to refugees crossing from north Africa. Matteo Salvini, the interior minister and leader of the League, made it an early act to turn away the rescue ship Aquarius. Austrian conservative leader Sebastian Kurz proposes an “axis” with fellow hardliners in Rome and Berlin to seal the frontiers.
The populists are united in their simple sloganising. Hungary’s population is shrinking and ageing, as talented young people seek opportunities elsewhere. Yet Budapest is proud of its barbed-wire camps for asylum seekers and migrants unfortunate enough to cross the border.
The reality, of course, is that no single government can take control of its frontiers. The narrow national interests held dear by populists frequently collide with each other. It is forgotten now, but Ms Merkel kept open Germany’s borders in 2015 to ease pressure on Austria. Vienna risked being overwhelmed by refugees bussed from, well, Mr Orban’s Hungary.
The nationalists’ pitch is to fear and emotion rather than reason. If they thought about it, they would know that beggar-thy-neighbour policies cannot work. Closing a border has a ricochet effect. Mr Kurz must surely realise that Mr Seehofer’s plans would leave Austria to cope with refugees stranded on the wrong side of the German border.
Does Mr Salvini understand, one wonders, that Mr Seehofer wants those arriving at the German frontier to be returned to the place they were first registered? Much of the time, that would be Italy. The Mediterranean front-line states complain their northern partners do not share the migrant burden. Polish and Hungarian nationalists would be the very last to make such an offer.
Untying this Gordian knot with a migration system that is humane, fair and sustainable requires a collective effort to harden the EU’s external borders and equitably accommodate those granted asylum. It demands also more effort — and aid — to help sub-Saharan Africa. This is what Ms Merkel and Emmanuel Macron, the French president, have been discussing. Mr Seehofer has no real alternative.
He is far from alone, however, in selling his party as one that puts Germany First. Nor is a rising nationalist mood confined to hostility towards migration. Markus Söder, the CSU prime minister of Bavaria, thinks the country has broader lessons to learn from Donald Trump’s belligerent unilateralism.
It is not at all hard to imagine where a new German nationalism could lead. The AfD made its name opposing financial support for weaker members of the eurozone — the so-called transfer union that leaves Germans at the mercy of supposedly profligate southern Europeans. As principal EU paymaster, why not extend the principle beyond the single currency to other projects?
Mr Kaczynski is forever hurling insults in the direction of Berlin. Yet Poland is the biggest recipient of EU aid. Why should German taxpayers write large cheques to Warsaw? Likewise for Hungary, where the government is substituting crony capitalism for the market economy — in significant part at Germany’s expense. Berlin could better deploy its economic clout to projects that confer direct national advantage.
Those with dark memories of war have less to fear. There is nothing militaristic about Germany First politics. The impulse, rather, is isolationist. Most Germans would probably spend less on defence. And why not? The nation is too powerful to be threatened by its neighbours. Berlin can always reach an accommodation with Moscow: Russian energy for German technology makes for a natural fit. Let Poland and others on the EU’s eastern frontier pay for Nato if they feel threatened by Russia.
Germany is some way off reaching such judgments. Ms Merkel is still convinced — and rightly so — that the nation’s long-term interests reside in liberal internationalism. The chancellor will not easily surrender her convictions. But she has been weakened. After 12 years, her time is running out. And Mr Seehofer and his allies are setting a different direction of travel. Those cheering populists elsewhere should be careful what they wish for.
EUROPE SHOULD BEWARE A NATIONALIST GERMANY / THE FINANCIAL TIMES OP EDITORIAL
DON´T CRASH IT: COULD A TRADE WAR DERAIL GLOBAL GROWTH? / THE ECONOMIST
Don’t crash it
Could a trade war derail global growth?
Rising tariffs are the worst of many threats to the world economy
LOOK at the headlines, and you would struggle to believe that the global economy is in good health. President Donald Trump continues to fire off volleys in his inchoate trade war, throwing financial markets into turmoil and drawing retaliation. The Federal Reserve is raising interest rates—an activity that usually ends in a recession in America. Tighter credit and a rising dollar are squeezing emerging markets, some of which, such as Argentina, are under severe stress.
Yet the world economy is thriving. Growth has slowed slightly since 2017, but still seems to be beating the languid pace set in the five years before that. America may even be speeding up, thanks to Mr Trump’s tax cuts and spending binge. A higher oil price, which in past economic cycles might have been a drag, is today spurring investment in the production of American shale. Some forecasts have growth exceeding 4% in the second quarter of 2018.
This sugar rush, however, brings dangers. The first is that it provides temporary political cover for Mr Trump’s recklessness. The second is that, if America accelerates and the rest of the world slows, widening differentials in interest rates would push up the dollar still more. That would worsen problems in emerging markets and further provoke Mr Trump by making it harder for him to achieve his goal of balanced trade.
The trade war is the biggest threat to global growth (see article). On June 15th the White House confirmed that a 25% tariff on up to $50bn of Chinese imports would soon go into effect. Three days later, after China promised to retaliate, the president expanded, by as much as $400bn, the other goods America is threatening to tax. If he follows through, nine-tenths of roughly $500bn-worth of goods imported from China each year will face American levies. Meanwhile, the European Union is poised to impose retaliatory tariffs in response to America’s action against EU steel and aluminium. No wonder markets have caught the jitters.
I’ll see you and erase you
The president is unafraid of escalating trade disputes because he believes he has a winning hand.
America buys from China almost four times as much as it sells there, limiting China’s ability to match tariffs. The White House hopes this imbalance will lead China to yield to its demands, some of which (cutting the theft of American firms’ intellectual property) are more reasonable than others (shrinking the bilateral trade deficit).
But Mr Trump overestimates his bargaining power. If China runs out of American goods to tax, it could raise existing tariffs higher. Or it could harass American firms operating in China.
More important, the president’s mercantilism blinds him to the damage he could inflict on America. He thinks it is better not to trade at all than to run a trade deficit. This folly also dictates his tactics towards Canada, Mexico and the EU. Mr Trump could yet withdraw from the North American Free-Trade Agreement and slap tariffs on cars.
The problem is not that America depends on trade. In fact, it is a big enough free-trade area for the eventual damage to GDP, even from a fully fledged trade war, to be limited to a few percentage points (smaller, specialised economies are more dependent on trade and would suffer a lot more). Such self-inflicted harm would impose a pointless cost on the average American household of perhaps thousands of dollars. That would be bad, but it would hardly be fatal.
The bigger issue is the vast disruption that would occur in the transition to more autarky. America’s economy is configured for designing iPhones, not assembling their components; the innards of its cars and planes cross national borders many times before the final product is ready. Faced with tariffs, firms have to redirect labour and capital to replace imports.
Some analysts attribute Mr Trump’s presidency to the economic shock from trade with China after 2000. The turmoil caused by reversing globalisation would be just as bad. One estimate puts American job losses from a trade war at 550,000. The hit to China would also be severe. Any adjustment would be prolonged by Mr Trump’s unpredictability. Without knowing whether tariffs might rise or fall, what company would think it wise to invest in a new supply chain?
It is difficult to imagine such a realignment without a global recession. Tariffs temporarily push up inflation, making it harder for central banks to cushion the blow. The flight to safety accompanying any global downturn would keep the dollar strong, even as America’s fiscal stimulus peters out after 2019.
So be wary. The trade war may yet be contained, to the benefit of the world economy. But America is the engine of global growth. In Mr Trump, a dangerous driver is at the wheel.
THE FUTURE OF GERMAN-CHINESE TRADE: PROSPECTS AND PITFALLS / GEOPOLITICAL FUTURES
The Future of German-Chinese Trade: Prospects and Pitfalls
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THE UNITED STATES IS EVEN MORE BROKE THAN WE THINK / SEEKING ALPHA
The United States Is Even More Broke Than We Think
by: Ronald Surz
- If we add "off-the-books" net obligations like Social Security and Medicare, our all-in debt, or so-called "fiscal gap", rises to $110 trillion, or 390% of GDP. It's scary.
- Raising taxes and reducing benefits won't restore solvency. Something is going to break, and it won't be pretty.
Yes, Uncle Sam can avoid permanently raising all federal taxes by almost 60 percent.
But this means reneging on his spending promises. But even if he cuts all forms of spending (defense spending, entitlement spending, infrastructure spending, gassing up Air Force One, you name it), the needed permanent percentage cut is 47 percent!
A 60-percent permanent tax hike or a 47-percent permanent spending cut? These are our options the day after the ("magnificent" to some) tax bill was passed? How can things possibly be this bad?
Here's how: Successive Congresses and administrations have been systematically lying about our fiscal condition. They spent the past six decades accumulating massive liabilities that they kept off the books via clever use of language.
I say "perhaps" because foreign and cryptos can be volatile, and might not hold up in a U.S. hyperinflation.
But they too would suffer from debasing, plus some pension plans are broke, and the insurance behind them from the Pension Benefit Guarantee Corporation (PBGC) is on the brink of bankruptcy. When the PBGC was created in 1974, Jack Treynor, Pat Regan & Bill Priest wrote The Financial Reality of Pension Funding under ERISA, where they predicted the ultimate collapse of the PBGC because it was created to insure an uninsurable risk. It would appear that the day of collapse is at hand. As it stands now, healthy plans are paying most of the premiums and have to be thinking about terminating their plans because the premiums are not fair. The PBGC is going to break unless taxpayers pick up the slack, which is totally unfair.
Bienvenida
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
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