The Euro Without Germany

“What makes me optimistic in these difficult times is knowing the strength of our transatlantic union, our alliances, our liberal democracies.” That’s what Annalena Baerbock said in a public conversation we had in Munich just months after becoming Germany’s Foreign Minister and one week before Russia invaded Ukraine. (TIME)

Excerpt from Michael Hudson’s piece after gas leaks (via NC).

“The reaction to the sabotage of three of the four Nord Stream 1 and 2 pipelines in four places on Monday, September 26, has focused on speculations about who did it and whether NATO will make a serious attempt to discover the answer. Yet instead of panic, there has been a great sigh of diplomatic relief, even calm. Disabling these pipelines ends the uncertainty and worries on the part of US/NATO diplomats that nearly reached a crisis proportion the previous week, when large demonstrations took place in Germany calling for the sanctions to end and to commission Nord Stream 2 to resolve energy shortage.

The German public was coming to understand what it meant that their steel companies, fertilizer companies, glass companies and toilet-paper companies were shutting down. These companies were forecasting that they would have to go out of business entirely – or shift operations to the United States – if Germany did not withdraw from the trade and currency sanctions against Russia and permit gas and oil imports to resume, and presumably to fall back from their astronomical eight to tenfold increase.

Yet State Department hawk Victoria Newland already had stated in January that “one way or another Nord Stream 2 will not move forward” if Russia responded to NATO/Ukrainian accelerated military attacks on the Russian-speaking eastern oblasts. President Biden backed up U.S. insistence on February 7, promising that “there will be no longer a Nord Stream 2. We will bring an end to it. … I promise you, we will be able to do it.” …

Where do the euro and dollar go from here?

Looking at how this trade “solution” will reshape the relationship between the U.S. dollar and the euro, one can understand why the seemingly obvious consequences of Germany, Italy and other European economies severing trade ties with Russia have not been discussed openly. The “sanctions debate” has been solved by a German and indeed Europe-wide economic crash. To Europe, the next decade will be a disaster. There may be recriminations against the price paid for letting its trade diplomacy be dictated by NATO, but there is nothing that it can do about it. Nobody (yet) expects it to join the Shanghai Cooperation Organization. What is expected is for its living standards to plunge.

Germany’s industrial exports were the major factor supporting the euro’s exchange rate. The great attraction to Germany in moving from the deutsche mark to the euro would avoid its export surplus from pushing up the D-mark’s exchange rate to a point where German products would be priced out of world markets. Expanding the currency to include Greece, Italy, Portugal, Spain and other countries running balance-of-payments deficit would prevent the currency from soaring. And that would protect the competitiveness of German industry. …

It is true that the end of German industrial competition with United States is ended on trade account. But on capital account, depreciation of the euro will reduce the value of U.S. investments in Europe and the dollar-value of any profits that these investments may still earn as the European economy shrinks. So reported earnings by U.S. multinationals will fall.

As a final kicker, Pepe Escobar pointed out on September 28 that “Germany is contractually obligated to purchase at least 40 billion cubic meters of Russian gas a year until 2030. … Gazprom is legally entitled to get paid even without shipping gas. That’s the spirit of a long-term contract. … Berlin does not get all the gas it needs but still needs to pay.” It looks like a long court battle before money will change hands – but Germany’s ability to pay will be steadily weakening.

For that matter, the ability of many countries’ ability to pay already is reaching the breaking point.

The effect of U.S. sanctions and New Cold War outside of Europe

International raw materials are still priced mainly in dollars, so the dollar’s rising exchange rate will raise import prices proportionally for most countries. This exchange-rate problem is intensified by the US/NATO sanctions forcing up world prices for gas, oil and grain. Many European and Global South countries already have reached the limit of their ability to service their dollar-denominated debts, and are still coping with the Covid pandemic. They cannot afford to import the energy and food that they need to live if they have to pay their foreign debts. The world economy is now exceeding its debt limits, so something has to give. …”

Full post here.

“Revanchism in Germany.”

The following is a very good piece looking into Germany’s past during the 80s with Gorbachev as one of the main actors, not realizing he was played, and it takes a good look at the recent inflammatory speech of chancellor Scholz in Prague in August 2022.

“Revanchism in Germany.”

Russophobia, revenge, and the corruption of memory.

“PARIS, 12 SEPTEMBER—The European Union is girding for a long war against Russia that appears clearly contrary to European economic interests and social stability. A war that is apparently irrational—as many are—has deep emotional roots and claims ideological justification. Such wars are hard to end because they extend outside the range of rationality.

For decades after the Soviet Union entered Berlin and decisively defeated the Third Reich, Soviet leaders worried about the threat of “German revanchism.” Since World War II could be seen as German revenge for being deprived of victory in World War I, couldn’t aggressive Germany’s Drang nach Osten, its impulse to press eastward, be revived, especially if it enjoyed Anglo-American support? There had always been a minority in U.S. and U.K. power circles that would have liked to complete Hitler’s war against the Soviet Union.

It was not the desire to spread communism, but the need for a buffer zone to stand in the way of such dangers that was the primary motivation for the ongoing Soviet political and military clampdown on the tier of countries from Poland to Bulgaria that the Red Army had wrested from Nazi occupation.

This concern waned considerably in the early 1980s as a young German generation took to the streets in peace demonstrations against the stationing of nuclear “Euromissiles” that could increase the risk of nuclear war on German soil. The movement created the image of a new, peaceful Germany. I believe Mikhail Gorbachev took this transformation seriously.

On 15 June 1989, Gorbachev went to Bonn, which was then the modest capital of a deceptively modest West Germany. Apparently delighted with the warm and friendly welcome, Gorbachev stopped to shake hands with people along the way in that peaceful university town that had been the scene of large peace demonstrations.

I was there and experienced his unusually warm, firm handshake and eager smile. I have no doubt that Gorbachev sincerely believed in a “common European home” where East and West Europe could live happily side by side united by some sort of democratic socialism.

Gorbachev died at age 91 a month ago, on Aug. 30. His dream of Russia and Germany living happily in their common home had, soon after his visit to Bonn, been fatally undermined by the Clinton administration’s go-ahead to eastward expansion of NATO. But the day before Gorbachev’s death, leading German politicians in Prague wiped out any hope of such a happy end by proclaiming their leadership of a Europe dedicated to combating the Russian enemy.

These were politicians from the very parties—the Social Democrats and the Greens—that took the lead in the 1980s peace movement.

Drang nach Osten.

German Chancellor Olaf Scholz is a colorless SPD politician, but his 29 August speech in Prague was inflammatory in its implications. Scholz called for an expanded, militarized European Union under German leadership. He claimed that the Russian operation in Ukraine raised the question of “where the dividing line will be in the future between this free Europe and a neo-imperial autocracy.” We cannot simply watch, he said, “as free countries are wiped off the map and disappear behind walls or iron curtains.”

To be noted: The conflict in Ukraine is clearly the unfinished business of the collapse of the Soviet Union, aggravated by malicious outside provocation. As during the Cold War, Moscow’s defensive reactions are interpreted as harbingers of Russian invasion of Europe, and thus a pretext for arms buildups.

To meet this imaginary threat, Germany will lead an expanded, militarized E.U. First, Scholz told his European audience in the Czech capital, “I am committed to the enlargement of the European Union to include the states of the western Balkans, Ukraine, Moldova, and, in the long term, Georgia.” Worrying about Russia moving the dividing line West is a bit odd while planning to incorporate three former Soviet states, one of which, Georgia, is geographically and culturally very remote from Europe but on Russia’s doorstep.”


Memory as weapon.

As an aspect of anticommunist lustration, or purges, Eastern European states sponsored “memory institutes” devoted to denouncing the crimes of communism. Of course, such campaigns were used by far-right politicians to cast suspicion on the left in general. As explained by European scholar Zoltan Dujisin, “anticommunist memory entrepreneurs” at the head of these institutes succeeded in lifting their public information activities from the national, to the European Union level, using Western bans on Holocaust denial to complain that while Nazi crimes had been condemned and punished at Nuremberg, communist crimes had not.

The tactic of the anticommunist entrepreneurs was to demand that references to the Holocaust be accompanied by denunciations of the Gulag. This campaign had to deal with a delicate contradiction, since it tended to challenge the uniqueness of the Holocaust, a dogma essential to gaining financial and political support from West European memory institutes.

In 2008, the E.P. adopted a resolution establishing 23 August as “European Day of Remembrance for the victims of Stalinism and Nazism”—for the first time adopting what had been a fairly isolated far-right equation. A 2009 E.P. resolution on “European Conscience and Totalitarianism” called for support of national institutes specializing in totalitarian history.

Dujisin explains,

Europe is now haunted by the specter of a new memory. The Holocaust’s singular standing as a negative founding formula of European integration, the culmination of long-standing efforts from prominent Western leaders … is increasingly challenged by a memory of communism, which disputes its uniqueness.

East European memory institutes together formed the “Platform of European Memory and Conscience,” which, from 2012 to 2016, organized a series of exhibits on “Totalitarianism in Europe: Fascism—Nazism—Communism,” traveling to museums, memorials, foundations, city halls, parliaments, cultural centers, and universities in 15 European countries, supposedly to “improve public awareness and education about the gravest crimes committed by the totalitarian dictatorships.”

These are only excerpts. Read the whole at The Scrum.

Good this economist does not run a business

Economists, don’t we all love them? Almost automatically the catchphrase comes up “Assume a can opener”. To be frank, Adam Tooze is worth reading but in one of his latest posts he latches on to one German economist who claims all that cheap Russian gas Germany was enjoying did not contribute to Germany’s export dominance. That is a strange when you read this in ZEIT:

“Die deutsche Wirtschaft hatte sich damals für den leitungsgebundenen Gastransport aus Russland entschieden, weil das ökonomisch billiger war als Flüssiggas aus Saudi-Arabien, Katar und den Vereinigten Arabischen Emiraten und später auch aus den USA.”

“At the time, German industry had opted for piped gas transport from Russia because it was economically cheaper than liquefied gas from Saudi Arabia, Qatar and the United Arab Emirates, and later from the United States.”

Tooze claims in his post “Why “Cheap Russian Gas” Was A Strategic Snare But Not The Secret To German Export Success.” What struck me was this graph about Energy unit costs (Energiestückkosten).

Tooze writes: “Try one last thought experiment. In light of the chart above, do low energy costs help explain the success of UK manufacturing in recent years? Or, if you prefer the comparison, does Italy’s heavy reliance on Russian gas, second only to that of Germany, explain the performance of its exports since the early 2000s? Neither question suggests a plausible narrative and we should avoid drawing simplistic conclusions in the German case as well.”

I am not quite sure, but an energy cost difference between Spain and Germany of 2.5%, or a roughly 30% cost advantage for Germany is quite a lot. Imagine you run into Tim Cook’s office and tell him you’ve found a way of saving 30% in costs in one critical component for the iPhone. You sure get a bonus at the end of the year plus promotion.

Justice Minister Buschmann, why is Germany so darn dodgy?

cc FDS, AG München, Public prosecutor, Social Court Munich, Bav SC

G’day at the Federal Ministry of Justice BMJ, g’day Justice Minister Buschmann,

I originally tried to submit this request via this thing ‘FragDenStaat’, but the cute adolescents there depublished it, as they do so often. They are lovely kids, no bad feelings.

Anyway, I believe JM Buschmann is the Arbiter Elegantiarum to address my humble concern. He is not just a democrat, no, he is a Free Democrat, the Brahman of democrats and supported by a solid single-digit approval rating of his party. Allow me to cut straight to the chase.

§ 243 Code of Criminal Procedure states under

(2) The presiding judge shall question the accused about his personal circumstances.

‘Personal circumstances’ is an odd phrasing here, it means the judge asks name, gender, birth date, etc.

Fair enough, unless the venue is a Munich court.

It so happened on Aug. 19, 2022 in case 813 Ds 259 Js 202987/21 (in which I called a “judge” what he is, a racist, a criminal, a stalker, naughty brat and various simile) that I asked the precocious young public prosecutor for her name. To my surprise she refused to disclose her name and she felt it necessary to accompany her refusal with a smug smile. The kind of smug smile predominantly displayed from young girls who, well, being a chevalier I leave it at that.

One wishes to know what prevents a public prosecutor from disclosing his name? (Sorry, but I am not in the ludicrous business of gendering.) What is the agenda of the public prosecutor? In particular, when that public prosecutor already showed a complete disregard of § 163a Code of Criminal Procedure. Which reminds me of a severe smackdown of the Bavarian prosecution from the ECHR a couple of years ago.

Incidentally, this blog post appeared in July 2022, “Why is Germany so darn dodgy?” It sure has to do with its history, me thinks. One of the bloggers used to be with the FT. FT, remember?!

Minister, ministerial servants, I appreciate your attention and I wish your country a lot of energy.