The Global Recession of 2016

Forecaster David Levy sees a spreading global recession intensifying and ultimately engulfing the world’s economies.

By Lawrence C. Strauss   

Although the U.S. economy is in pretty good shape, it doesn’t have enough strength to fend off weakening fundamentals elsewhere, particularly in the emerging markets. That’s the view of David Levy, the 60-year-old chairman of the Jerome Levy Forecasting Center in Mount Kisco, N.Y. Levy, who helps write the Levy Forecast, the firm’s newsletter, argues that the more bullish consensus view underestimates the linkages between the U.S. and emerging markets, which account for roughly 40% of global gross domestic product.
And he worries that China will have a very tough time making a soft landing as it tries to refocus its economy. To discuss his observations and their investing implications, Barron’s sat down recently with Levy at our offices.
Barron’s: When we last spoke in August 2013, you were worried about the global economy. What’s your latest assessment?
Levy: At the time, we had a lot of concerns about China and the rest of the emerging markets. We were also worried about various political decisions. Europe, for example, was thinking about more austerity, the U.S. was thinking about very sharp budget cuts, and, as for China, who knew what they were going to do? But they were struggling. Essentially, our biggest worry was that if these more counter-stimulatory moves were made, that might put the world in a recession. More than two years later, we have started to see what I consider to be the housing bubble of this cycle. But this time around, it’s the emerging market expansion bubble that’s starting to break down. Even by the start of 2015, there were a few countries in recession. In other countries, such as Taiwan, there’s clearly a general decline in the strength of the expansions. By the time we get third-quarter data, I expect to see that more of those countries are in—or very close to—recession. The problem is that, much like with the housing bubble, it’s not something that shows up in economics textbooks.

Photo: David Yellen for Barron's

Where is it showing up?

In the financial dimension of the economy, where balance sheets live, and in profits. Looking at the entire global economy as one entity, the biggest source of profit growth in recent years was the net investment in emerging market export capacity. But now that net investment is slowing gradually in the emerging markets. It is evident not only from the data on exports from major capital goods exporters, but also from companies. One after another, when they talk about their outlook and performance, companies refer to weakness, weakening, or greater weakness in the emerging markets. It is much like the housing bubble in the U.S. nearly a decade ago when it started, because the deterioration of the emerging markets has the ability to topple the global economy.

How close are we to a global recession?

Parts of the global economy have already turned down, including Russia, which has some special problems related to energy and economic sanctions, and Brazil. Most of South America looks pretty close to recession, and we’ve seen slowdowns in other parts of the world. The one area that has picked up somewhat is Europe. But when we analyze what has been boosting their profits, it is entirely accounted for by the improvement in Europe’s current-account balance.
Obviously, the cheaper euro helped their exports. And they get an extra bonus from falling petroleum prices, but Europe’s momentum is showing signs of starting to fade.

How strong is the U.S. economy?

The U.S. is doing fairly well. It does, however, have impediments to rapid growth, including a lot of debt, expensive housing, a crash in domestic energy investment, and, contrary to some views, a lack of incentives to expand fixed-capital investment much. But the one thing that has actually caused the economy to weaken a little is sagging profits. We’ve heard people use the term “profits recession,” but there is no profits recession without a real recession. I see signs of things slowing as a result of that profits decline, which can be blamed pretty much directly on weakening exports and, to some extent, the dollar’s strength. But most of it is because emerging markets have bogged down.

So the U.S. economy is weakening?

Yes, it is, but there is no way the U.S. by itself is about to keel over. The danger is not so much that we’re going to start to slide sharply, but rather that conditions overseas will become much rockier.

Which could pull the U.S. into a recession?

Yes, and there are several reasons why. Such a scenario has never happened, certainly not in modern history. There is no postwar recession prior to which the U.S. economy was doing fine, only to get knocked down by the rest of the world. That’s one reason people don’t see the risk.
But the emerging markets are not just going into a recession, they are going through a secular adjustment. Their strategy for the past 20 years—most evidently in China, but in other countries, as well—has been just massive investing and exporting. But they are too big to play that game anymore.

When investment drops, profitability falls. And there are the financial consequences of having created a lot of business facilities—in some cases, public facilities that are expected to earn income, toll roads, for example. When those assets aren’t earning income, it not only causes problems with the debt used to finance them, but it also starts to undermine the collateral values, and it starts to cause equity values to drop.

How is the U.S. affected by all of this?

We expect not only a global recession, but also general asset deflation, aggravated by the fact that there is no room to cut interest rates at the major central banks. That’s a huge difference, compared with other cycles. People are used to having the option of rate cuts that will do something.

What else is the consensus overlooking?

How serious the problems are. Let’s take China; many people think that all it needs to do is rebalance its GDP. A little bit less investment, together with a little bit more consumption, and everything will be fine, the thinking goes. First of all, China cannot make a gradual adjustment to its investment, because they already have enormous excess capacity. Manufacturing capacity utilization is probably about 50%, possibly less, and 46% of their GDP comes from investment.
That is insane, and it’s way above even the worst of the Japanese bubble. At its peak, government and private investment in Japan totaled 33% of GDP in 1990.

In contrast, in the post–World War II boom in the U.S., with all of those interstate highways and schools being built, the highest we got to was about 25%. To invest 46%, as China is doing, you need the most ridiculous growth rate to make that work. Every year that they allow this to happen, they are undermining the finances of their entire economy. China must make some kind of rapid adjustment, not a gradual one, but it’s not easy to do that.

One reason cited for the strength of the U.S. economy is that the housing market is on the mend. Is that thinking flawed?
Real incomes aren’t where they used to be, and housing, when looked at historically, is very expensive. Housing, of course, had a tremendous rise during the bubble, and then came down a long way—but only back to normal valuations. Now, it is probably 30% of the way back up from the bottom. Buying a house when real incomes have not been growing can be pretty difficult. Certainly, the lower interest rates, and lower payments, are making mortgages more affordable. But the costs of down payments, real estate taxes, and insurance are all factors to consider, as well. People often get excited that all these kids in their 20s who have been living at home with mom and dad will finally move out. The problem, however, is that the jobs they are getting, in most cases, aren’t making it very easy to move out. Another thing to consider is that apartment rentals are historically quite high. It is a tough time to get into new housing, which is really driven more by what people can afford.

What is wrong with the notion that the labor market is tightening, and that this typically doesn’t occur when the economy is heading into a recession?

First of all, employment is a lagging indicator. It may be a leading indicator of forecasts, because when it is strong, people get excited and it makes them more optimistic. But, in fact, it usually doesn’t peak until sometime close to the beginning of a recession. The real deceleration—and the real loss of jobs—comes as a reaction to weakening conditions, not as a cause of them.

How should investors be thinking about their portfolios?

Investors typically work with basic tenets, whether it’s “don’t put all your eggs in one basket” or you need to balance income and growth. Normally, that makes sense. The problem is that a lot of these tenets actually have to change, or at least be reinterpreted, when we’re talking about an economy headed toward deflation in multiple parts of the world. There is barely any inflation in the U.S. and Europe, and another cyclical downturn would certainly push those economies towards deflation. We’re already seeing it in commodities.

All of that changes things, and then when you can’t cut interest rates, it’s setting up for all of the so-called baskets of eggs to be broken.

This is a time when shorting strategies—or at least underweighting emerging markets, if you are allocating assets—make sense. The one thing that keeps its value, with no risk attached, is Treasuries, and maybe a few other types of fixed income. We’ve remained long-term bulls on Treasuries, although we aren’t expecting it all to happen at once. We have not yet seen the bottom, but we have seen negative yields on German Bunds lately. I am not sure that will happen here in the U.S. But in the next recession, we certainly will see a lot of downward pressure on foreign currencies—and on asset classes of all sorts—and a big rally in Treasuries, pushing yields to new lows.

Where will the 10-year U.S. Treasury, which was yielding about 2.21% recently, be trading a year from now?

We’ve been saying for a long time that, when we do get into a recession, the 10-year yield is going under 1%, which is a pretty conservative target. It would be very easy for a recession to push it below that level.

Do you expect to see that next year?

Bit by bit, the global economy is falling into recession, with the U.S. bringing up the rear. The Fed announced last week that it is raising the federal-funds rate by 25 basis points, or 0.25%, so it made at least one rate increase. Meanwhile, the global economy continues to deteriorate, and the U.S. expansion is showing broad signs of deceleration. We expect that the Fed will reverse course later next year. In all probability, the slowly spreading global recession will intensify and ultimately engulf the entire planet. It’s at least 2 to 1 that we’ll be in a recession at the end of 2016.

Thanks, David. 

Argentina’s Economic Big Bang

Mohamed A. El-Erian

 Maurico Macri, President of Argentina
FRANKFURT – Last week, the government of newly elected Argentine President Mauricio Macri launched a bold plan to revitalize a bruised and beleaguered economy plagued by high inflation. At a time of daunting crisis conditions, one should not underestimate the importance of this move not just for Argentina, but also for other countries, where leaders are watching closely for clues about how to deal with their own economic woes.
Thanks to years of economic mismanagement, Argentina’s economy has been badly underperforming for decades. Previous governments sought to avoid difficult policy choices and obfuscate fundamental issues by implementing inefficient controls that grossly misallocated resources and undermined Argentina’s ability to generate the foreign-exchange earnings needed to cover its import bill, resulting in domestic shortages. The recent drop in commodity prices has exacerbated the situation, depleting what little growth dynamism the economy had left, while fueling inflation, deepening poverty, and spreading economic insecurity and financial instability.
In theory, governments in such a situation have five basic options to contain crisis conditions, pending the effects of measures to reinvigorate growth and employment engines.
· Run down the financial reserves and wealth that were accumulated when the economy was doing better.
· Borrow from foreign and domestic lenders.
· Cut public-sector spending directly, while creating incentives to induce lower private-sector expenditure.
· Generate revenues through higher taxes and fees, and earn more from abroad.
· Use the price mechanism to accelerate adjustments throughout the economy, as well as in trade and financial interactions with other countries.
Through careful design and sequencing, these five measures can help not only to deal with immediate economic and financial problems, but also to create the conditions for higher growth, job creation, and financial stability in the longer term. In this manner, they can contain the spread of economic hardship among the population, protect the most vulnerable segments, and put future generations on a better footing.
In practice, however, governments often face complications that undermine effective implementation of these measures. If policymakers are not careful, two problems, in particular, can reinforce each other, potentially pushing the economy over the precipice.
The first problem arises when specific factors, real or perceived, block some options from the adjustment menu. Some measures may already have been exhausted: the country may not have any wealth or reserves left to tap, and there may be a shortage of willing lenders. Other measures, such as fiscal adjustment, must be implemented very carefully, in order to avoid torpedoing the growth objective.
The second problem is timing, with governments struggling to ensure that the measures take effect in the right sequence. Effective implementation requires understanding key features of economic and financial interactions, including not just feedback effects, but also the behavioral aspects of private-sector responses. And all of this must be closely coordinated with the pursuit of supply-side reforms that promote robust, durable, and inclusive growth.
Here is where the Macri government’s approach is an historical exception. Macri took over the presidency with a bang, launching an audacious – and highly risky – strategy that places aggressive price liberalization and the removal of quantitative controls front and center, ahead of the five measures relating to demand management and financial assistance. Already, most export taxes and currency controls have been scrapped, income taxes have been cut, and the exchange rate has been freed up, allowing for an immediate 30% depreciation of the peso.
Historically, few governments have pursued this type of sequencing, much less with such fervor; indeed, most governments have hesitated, especially when it comes to full currency liberalization. When governments have taken similar steps, they usually have done so after – or at least alongside – the provision of financial injections and efforts to restrain demand.
The reason is clear: by taking time to set the stage for liberalization, governments hoped to limit the initial spike in price inflation, thereby avoiding a wage-price spiral and curbing capital flight. They worried that, if these problems emerged, they would derail reform measures and erode the public support needed to press on.
To revive the Argentine economy in a durable and inclusive manner, Macri’s government needs to act fast to mobilize sizeable external financial assistance, generate additional domestic resources, and implement deeper structural reforms. If it does, Argentina’s bold economic strategy will become a model for other countries, both now and in the future. But if the approach falters – whether because of incorrect sequencing or a surge of popular dissatisfaction – other countries will become even more hesitant to lift controls and fully liberalize their currencies. The resulting policy confusion would be bad for everyone.

Trump’s Ceiling Is His Wallet

Running for president is about to become a lot more expensive, and his business interests are vulnerable.

By Holman W. Jenkins, Jr.

Republican presidential hopeful Donald Trump campaigning in Richmond, Va., Oct. 14.

Republican presidential hopeful Donald Trump campaigning in Richmond, Va., Oct. 14. Photo: Steve Helber/Associated Press  

None of his offenses against propriety seem to have dinged the support that, in a crowded race, keeps Donald Trump atop the GOP primary polls.

Republicans are now talking about a brokered convention, which could be a disaster for the country, and for the GOP, and quite possibly hand the election to Hillary Clinton without a real contest or even critique of her agenda.

So goes the fear. But unless we miss our guess, our long national nightmare-cum-sketch comedy show actually has a termination date. It will end the moment campaigning begins to threaten Mr. Trump’s finances and business interests.

Mr. Trump has gotten extraordinarily far based on free media plus a degree of self-funding that might come from petty cash. But he hasn’t shown even the willingness to spend the $44 million that Mitt Romney spent on his failed 2008 effort. Running for president is expensive—a billion-dollars-plus expensive, even with a party behind you, and it’s not clear that even with the nomination Mr. Trump would have the GOP behind him in any meaningful sense, its foot soldiers, its donors, its super PACs.

Mr. Trump claimed when he launched his campaign in June, “I’m not using donors. I don’t care. I’m really rich.” But not only has he not dipped into capital, lending his campaign a mere $1.8 million through the third quarter. His capital is not as deep ($10 billion) as he lets on.

Forbes and Bloomberg News put his wealth at $2 billion to $4 billion. And assets that he could reasonably convert to cash are even less. Bloomberg puts the figure as low as $70 million, less than what several candidates in the race (Bush, Clinton, Cruz) and their super PACs already have raised.

And running is about to become a lot more expensive. When the campaign goes national after Iowa and New Hampshire, Mr. Trump would have to spend money on TV ads. To participate in widespread primaries and a convention fight he would have to hire staff. Mr. Trump, from day one, has likely never been down with any of that.

He won’t want to liquidate major holdings. He won’t want to sign his name to nine-figure mortgages. There’s a reason other candidates have been fundraising for years. Mr. Trump’s $3.7 million in “unsolicited donations” (average: $50) in the third quarter were nice, but these aren’t the makings of a major fundraising network even in the unlikely event that Mr. Trump could find an army of like-minded affluent Americans who want to support his campaign.

The second way he’s vulnerable is damage to his business interests. Mr. Trump has had an easy punching bag in the U.S. immigration system, which, at last count, was sufficiently incompetent that 12 million people reside in the U.S. illegally. To say Muslim immigration should be suspended until we’re sure we can tell who is a terrorist might seem reasonable on first glance.

But the idea becomes insupportable when you remember there are one billion Muslims in the world, and that many important U.S. business leaders and entrepreneurs and professionals are immigrants and can hardly be barred from departing and returning on a routine basis.

In any case, his comments have become an opening. Already Mr. Trump’s Middle Eastern business interests are under assault. He lost a few U.S. deals early on due to his slurs on Mexican-Americans. Now a handful of Silicon Valley biggies—the CEOs of Apple, Facebook FB -2.05 % and Google—have ventured criticism without mustering quite the courage to mention him by name.

What happens when important business partners start letting Mr. Trump know, publicly and noisily, they think he’s doing serious damage to the country? By Mr. Trump’s own inflated reckoning, most of his net worth resides in the value of his name.

Our guess is that Mr. Trump has always planned on being satisfied with making a splash and ventilating his high opinion of himself. He will rightly be able to claim that he gave neglected voters a voice and transformed the debate. Notice that he manages to maintain his jolly equanimity even when being vilified. He is not grimly “on a mission” as so many candidates are whose self-image is wrapped up in electoral success.

We could be wrong but the Trump effort is probably self-liquidating. Expect a glorious, “I’ve got better things to do than hang around with you losers” exit just about the time he would have to start spending real money to keep going.

Scary signal

Brazil’s worrying change of finance ministers

Joaquim Levy’s resignation is reason for alarm

WHEN he became Brazil’s finance minister a year ago, Joaquim Levy (pictured left) faced an impossible task. He had to close an enormous budget deficit, avert the loss of Brazil’s investment-grade credit rating and reverse the heavy-handed economic interventionism practised by his boss, Dilma Rousseff, during her first term as president from 2011 to 2014. To make matters more difficult, Brazil was entering its worst recession in decades. A vast bribery scandal had already destroyed the credibility of the president’s party, the left-wing Workers’ Party (PT).

Ms Rousseff’s approval ratings have since fallen to single digits and she faces impeachment proceedings for breaking budget-accounting laws. Many finance ministers would have given up long ago. Mr Levy lasted until December 18th, when he resigned and was replaced by the planning minister, Nelson Barbosa (pictured right). 

That change is likely to make a terrible situation worse. It suggests that Mr Levy lost an argument within the government about whether austerity is the right cure for Brazil’s sickly economy, and that he lost it not because his economic remedy was wrong but because it was politically unpalatable. 

Mr Levy and his team “did everything that was asked of us,” he told journalists hours before his resignation was made public. It would be truer to say that he tried valiantly and failed. Dubbed “Scissor Hands” after his first stint as a senior treasury official in 2003-06, he managed to cut discretionary spending in 2015 by a record 70 billion reais ($18 billion). Yet without the co-operation of Congress, which had no interest in helping an unpopular president, he could do little to the nine-tenths of government expenditure that is ring-fenced. On December 16th Fitch became the second credit-rating agency to downgrade Brazil’s debt to junk status.

Mr Levy’s task was made harder by the recession. GDP is expected to have dropped by 3.5% in 2015, dragging down tax receipts. On top of this, the government had to recognise spending promises that it should have booked in 2014. This is forecast to widen the budget deficit to 9.5% of GDP in 2015 from an already elevated 6.5% the year before. Mr Levy argued correctly that only austerity could restrain the growth of Brazil’s debt, restore its credibility with investors, tame inflation and forestall further rises in interest rates. 

Ms Rousseff only half believed him. Her commitment to austerity wavered further as the motion to impeach her (based on her administration’s accounting practices) began to wend its way through Congress in December. To survive, she must rally her left-wing base, which impugns Mr Levy’s policies as heartless “neoliberalism” and calls for more public spending to boost the economy.

That explains her choice of Mr Barbosa. Although he left her first government in 2013 and became a critic of uncontrolled spending—and of the concealment of it—he is seen as more dovish than his predecessor. He was instrumental in formulating a “new economic matrix” of fiscal and monetary stimulus designed to restart growth after the global financial crisis.

Ms Rousseff adopted it during her first term—and took it further than he envisaged.

Mr Barbosa also lobbied for a disastrous budget proposal for 2016 that incorporated a large primary deficit (ie, before interest payments). This triggered a downgrade of Brazil’s credit rating by Standard & Poor’s in September. The proposal was reversed days later at Mr Levy’s urging, but the downgrade stands.

Now that he has Mr Levy’s job, Mr Barbosa promises to persist with his policies. “Our biggest challenge is fiscal,” he averred during a press conference after his appointment. Markets are not so sure. Both the real and the São Paulo stockmarket dipped on news of Mr Levy’s resignation.

Even if Mr Barbosa is sincere, fiscal reforms are unlikely to happen until the impeachment drama plays itself out over the next two months or so. Priorities one, two and three are to defeat the impeachment motion resoundingly, says a PT congressman. Indeed, the motion has acted like a tonic on Ms Rousseff’s demoralised supporters. For the first time in 2015 pro-government demonstrations in mid-December were bigger than those held by its opponents.

Only after the “coup-mongers” are defeated, say the PT’s backers, can the government get back to tackling the fiscal crisis and governing the country, in partnership with a re-energised congressional base.

The question is whether Ms Rousseff would then harness that energy to overcome Brazil’s fiscal problems, or allow herself to be dragged toward greater irresponsibility. The omens are not encouraging. The appointment of Mr Barbosa looks like an attempt to split the difference between Mr Levy’s orthodoxy and the spending demands of her left-wing supporters. It looks no more likely to succeed than the president’s earlier machinations. 

Reflecting on Refugees

A Plea for Measured Debate

An Editorial by Klaus Brinkbäumer

  A boat full of refugees on the Aegean Sea between Turkey and Greece. What would we do in their situation?

REUTERS A boat full of refugees on the Aegean Sea between Turkey and Greece. What would we do in their situation?

The debate over refugees in Germany has grown divisive. Those in favor are unwilling to recognize the difficulties ahead while those opposed too often veer toward prejudice and xenophobia. Neither is helpful. What's needed is an atmosphere of critical empathy.

In periods of structural change, books and learned professors tell us, those affected tend to align themselves into three groups. The first group, rarely larger than 25 percent, doesn't shy away from uncertainty and welcomes change with expectant anticipation. The third group, often larger than the first, hates what is happening out of fear for the new. And the second group, in the middle, waits to see how things will develop. They are uneasy, but not aggressive.

They also aren't inflexible, but they are concerned. And it's true: That which happens in times of change is new and therefore risky, diffuse and difficult to interpret. The consequences are unclear.

In the refugee crisis, those in Germany who find themselves part of the first group are in the best of spirits -- some out of a desire to help their fellow humans and others for more calculated reasons, such as their conviction that immigration is vital for the future of the German economy. The third group feels threatened and is afraid of the outsiders pouring into the country. It is this part of the population out of which the German Tea Party is growing, a movement that furiously rejects all that is foreign, spreads rumors, bad-mouths the chancellor and is disdainful of education, the elite and the media. It is, as described by author Volker Zastrow in the Frankfurter Allgemeine Sonntagszeitung, a "new völkisch movement."

The first and third groups are easy to document because they are vocal about where they stand.

Between them, though, is the second group, the center -- and members of this group are quietly unnerved. Who can be trusted? Can we really do it? What is the correct, commensurate approach in times like these?

What Would We Do?

An "either-or" approach is not the way to go, the division between those who growl "We Are the People!" and those who paint "Welcome to Germany!" on their signs -- the split into cynicism and naiveté, head or heart. Linguistic warfare of the kind currently on display in the US is likewise destructive. The correct approach would be one of critical empathy or, vice versa, empathetic critique. That would be an approach consistent with Western democracy.

No migrant leaves his or her home casually, frivolously or even with any kind of pleasure at all.

It is a far-reaching decision and all who pull up roots know it, even those who are still in their formative years. In 2005, the photographer Markus Matzel and I travelled together with refugees from Ghana to Spain via Togo, Benin, Nigeria, Niger, Algeria and Morocco, a trip that became a SPIEGEL cover story and a book. We spoke to hundreds of people on trucks, in camps and in the Sahara Desert, all of whom had heavy hearts at having bid farewell to loved ones and left home -- and all dreamed of finding a life worth living. Many were afraid of what was ahead of them because they knew that the journey, particularly the Mediterranean Sea, could be dangerous -- and only a few of them knew that they wouldn't be welcome in Europe.

These hopes and fears are not something that should make us Europeans feel superior.

Arrogance doesn't become us. The migrants who come to us merit empathy -- and what choice do those people have who come from war-torn Syria? What would we do in their situation?

For SPIEGEL, empathetic critique means months of stories in which we have profiled refugees, described the migrant trafficking mafia and run cover stories such as "Dark Germany, Bright Germany." What we have shunned this year are headlines such as "Dangerously Foreign," a questionable title used by SPIEGEL back in 1997. Media and people in the public spotlight should be cautious. That is always the case, but in times of extreme emotion it is particularly important to find precise formulations and to shy away from inflammatory language.

Creating Mistrust

When Chancellor Angela Merkel was chosen as Time magazine's Person of the Year, the well-known German lawyer Joachim Steinhöfel tweeted, "Isn't that nice? Our FDJ-lassie person of the year. 2016 then Robert Mugabe." (FDJ is a reference to the East German socialist youth group.) Such words, such blustering, adds fuel to the fire. And when an otherwise competent journalist like Michael Hanfeld refers to the journalistically responsible public television stations ARD and ZDF as the "Welcome Broadcasters," he too is playing with fire. Readers remember such disparagements, and they serve to create mistrust.

Nevertheless, we journalists can (indeed, we must) be forthright about what is happening and draw conclusions about possible developments. When Europe errs and the German government makes mistakes because it misjudges its partners in the crisis or reacts too late or too slow, we will tell our readers about it. Many outlets do exactly the same without becoming xenophobic or racist.

It is difficult to achieve objectivity in a crisis as complex as this one. There is proof for everything -- for almost every thesis as well as for its antithesis. There are fewer helpers than there were during the summer, but there are still quite a lot. Regions that have integrated many migrants in the past are prosperous today, but integration only works if the state doesn't lose control, and Germany at present has lost control. Of course there is a basic human right to asylum, but without an upper limit -- enforced, if necessary, with border controls -- it will be almost impossible to find a way out of the crisis.

For the media, that means: We have to describe all aspects of the story, with a carefully measured tone and as balanced as possible. Empathy and critique can exist alongside one another -- because head and heart belong together.