Short Note: Switzerland Conducting Military Maneuver in Which the French Attack

All militaries undertake maneuvers. Typically, they want to train for a realistic scenario. In Germany it was "Red Land" attacks "Blue Land" in the past; and Germany being part of the latter was the first line of defence.

Switzerland, which has no enemies felt it had to get a bit more creative, according to Tages Anzeiger. Their scenario was that France breaks up due to the crisis in the eurozone. One of the new states thinks that Switzerland is responsible for their woes, so they try to acheive debt forgiveness by conducting terrorist attacks. [The simulated French "plan" sounds a bit mad, but so is shutting down a government to try to reach an unachievable goal, or breaking up a coalition to blackmail the president into giving amnesty to Berlusconi. Mad but not unrealistic, I'd say.]

A Swiss tank brigade had to fight off that enemy. Of course, France isn't happy with that scenario. Also, this isn't the first time that Switzerland has trained for a eurozone breakup. Last year, in a similar scenario the country simulated the army having to keep refugees out of Switzerland.

In my opinion, a euro breakup is the only realistic scenario in which Swiss troops would have to fight, since the country is strictly neutral and the army is used almost exclusively for defensive purposes, though they did participate in the KFOR mission in Kosovo. So, I don't understand the French criticism that Switzerland should rather train for "threats of the 21st century." They would have been right three years ago, but the utter incompetence of the leadership in the eurozone has turned such scenarios into possible "threats of the 21st century".

Bundesliga Matchday 7 Roundup

Roundup below the fold

Siemens to cut 15,000 jobs

Siemens, the Munich based engineering and technology firm, is in the process of cutting 15,000 jobs worldwide 5,000 of these in Germany. The companies industrial sector with the fields automation, propulsion, and services is the most affected in Germany, according to a spokesperson.

First major victory for ICSIF

The International Conspiracy To Sap And Impurify Our Precious Bodily Fluids (ICSIF) has achieved its first major victory. (I wonder why almost nobody read that post) Italy probably does not have a government able to do its job anymore, now that Berlusconi has withdrawn his ministers from their post. Prime minister Letta will try to find a solution next week, but it seems unlikely that anything but new elections are possible. 

Beppe Grillo could be quite happy that the "establishment" is just as incompetent and unpatriotic as he always claimed.  His five star movement, which looked like it was getting weaker, will now be stronger than ever. He rightly wrote that "what has died is democracy" in his recounting of the events that led to this government, which was bound to fail from the beginning. 

How are the other fronts that ICSIF is fighting on looking?

• Nothing new on the western front: the republicans will most likely force a shutdown of the US government. Stan Collender sees a 90 percent chance that it will happen.
• Greece banned a protest march by special forces reservists, who seemed to be calling for a revolution. They are also arresting members of the neo-Fascist Golden Dawn party. 
• In Germany the euro and Europe play absolutely no role at the moment. The after election talks are about if Germany should increase the top tax rate or not. All parties seem to think that we are some kind of island that cannot be affected by the chaos that we caused and which surrounds us. 

 Oktober will be a very interesting month. It is quite understandable that Greek citizens are extremely disenchanted by the German election result. Germans have likely voted for four more years of destruction in Greece.The ICSIF might just win if Greece becomes less stable and the German Constitutional Court decides that the Bundesbank cannot participate in the ECB's OMT program.

German Tea Party

I have written, that the CSU (sister party of Merkel's CDU - together they form a Union in the Bundestag) is completely void of any economic knowledge. Just in case somebody thinks that that was a hyperbole. I give you CSU party leader Horst Seehofer:

For possible talks about the forming of a coalition with the SPD or the Green there can only be one basis: the party program of CDU and CSU. In there you will find nothing about either tax increases or higher debt - quite the opposite! The foregoing of higher taxes and higher debt is a brand essence of the Union.

I think that for him higher taxes and higher debt are more than random phrases he knows little about, other than that both are bad. So, for him it makes sense to put them into a sentence. Of course, higher taxes would mean higher revenue and therefore lower debt, but Seehofer doesn't care.

Fun fact: he also ruled out a coalition with the Greens just a few days ago. He doesn't seem to do that anymore. 

Germany As Currency Manipulator

Paul Krugman today wrote about Germany as a currency manipulator.

"The general point is that if we imagine a euro breakup, I think everyone would agree that the new mark would soar in value, making German manufacturing much less competitive.

Well, I guess I am not everyone. A euro break up would wipe out most of the banking sector in Germany, so no I don't think that the new mark would soar at all. But the general point that Krugman seems to be making is that the euro is weak, much weaker than the mark would have been if the euro had never happened. But, I also disagree on that point.

• Compared to the yen, the euro is today 33 percent stronger than it was one year ago.
• Dollar 5 percent stronger
• Pound sterling 5.8 percent stronger
• Rouble 9.6 percent stronger

The euro is now relatively strong compared to other currencies. The German trade balance is below what it was in 2008. Non domestic new orders have been pretty much unchanged for two years now.

 

Add in inflation and the German trade surplus is actually becoming smaller. I think the picture we are seeing is that the euro is pretty close to the level that the Deutsche mark would be. Is this good or even acceptable? Hell no! This is an absolute disaster for all other eurozone countries. Germany needs higher inflation, much higher inflation. It is a pretty strange situation in Germany wages need to be higher and at the same time the ECB should try to weaken the euro to get all other countries more competitive.. But, the German media starts crying Weimar if we even get close to two percent. 

One more thing. Krugman shows a graphic of Target2 to support his point. But the German Target2 net position has been falling, without affecting the trade balance at all, since the announcement of the ECB OMT program in 2012.

So, yes Germany is a currency manipulator. It is keeping the euro stronger than it should be. Either Germany starts accepting high inflation, or it should leave the euro.

International Conspiracy To Sap And Impurify Our Precious Bodily Fluids.

I mentioned several reasons yesterday, why it is possible that the new German government might have to fight a battle for the euro they cannot win. I included the Republicans and their most likely successful attempt to damage the reputation of the US. But we are seeing struggles against sanity for the purity of our bodily fluids elsewhere, too.

Merkel and Europe

Will Germany change course on austerity after the elections? The German news media is divided on the issue. But, Merkel's next coalition partner will either be the social democrat SPD or the Greens, both want a less austerity and both want eurobonds.

The Past Coalition Partners Of Merkel - Or Why It Seems Possible That Merkel Will Not Be Chancellor For The Whole Term

Merkel will clearly be the next chancellor of Germany. But the fate of the two former coalition parties the social democrat SPD and the liberal FDP should be a lesson for her next partner.

Election - Afterthoughts - Four More Years?

As expected Merkel will lead the next Bundesregierung (federal government). What came as quite a surprise is that she almost could have done it without a coalition partner, since neither the liberal FDP (her former coalition partner) nor the AfD, the euro-sceptical party, managed to jump the 5 percent hurdle to get into Bundestag, which reduced the percentage needed to get the absolute majority in the next Bundestag to around 42 percent. Merkel's CDU/CSU Union got 41.5 percent. An improvement of 7.7 percent over the result of 2009. A excellent result for the party, but overall the next Bundestag is definitely not what Merkel wanted.

Seats:

Which coalition can be expected and what might happen in the next four years?