Immigration Up 11 Percent In The First Half Of 2013

As expected, immigration into Germany was up significantly in the first six months of 2013, according to destatis. I have written about this new issue and had this to say:

Germany has changed its tactics. Beggar thy neighbor to solve domestic economic issues is dead. Long live beggar thy neighbor to solve demographic problems. Merkel  herself stated on the issue of labor mobility within the EU(my translation):

We have to be open for young people who come to us, since we already know today that we will have six million less workers by 2025. 

So, is it working?

What's Happening In Germany?

• Germany will introduce a minimum wage (The Local): That was a core SPD demand and there was widespread support for such a move amongst the citizens.

• SPD-Left Rapprochement: A Time Bomb in Merkel's Government (Spiegel): The SPD has until now ruled out that it would form a coalition with the left wing Die Linke. SPD, Greens, and Die Linke would have a majority in the Bundestag. Therefore it is a politically smart move by the SPD to open-up to the leftists. Something I have written about right after the election.

• New report lauds East German development (Deutsche Welle): Actually, it highlights that the Eastern states are still not even close to the west 23 years after the re-unification. This is a lesson that the other eurozone members should think about. The Eastern states are still significantly weaker eventhough trillions of euros were transfered there.
   

• EADS Works Council Urges Caution on Job Cuts From Defense Revamp (Bloomberg): EADS might cut up to 8,000 jobs. The story is lacking one key fact. The management of some of the military programs like the A400M was, well, not all that good to put it extremely mildly. AN70 for example is not only just half the price, it can also carry a heavier payload over longer distances.  

•  Euro-Area Factory Production Accelerates as China Cools (Bloomberg): That report could have and probably should have been called: Germany the only country doing OKish in the eurozone. So not really news, but I would like to add a bit of perspective on industrial production in the eurozone :

I think it is time to pronounce the patient dead.

... And Justice For All

On Monday the German Bundestag discussed the NSA revelations in a special session. It was the first opportunity for the upcoming "Grand Coalition" of CDUCSU and SPD to show of how "grand" they will be. As expected, the session yielded little to nothing. Well, the Social Democrats have already adapted to their new role of applauding CDU speakers; and the only real criticism came from the Greens and the left wing Die LINKE. But, Merkel talked about "serious" allegations which have to to be cleared up.

Luckily, we have just the right organisation for that called the Bundesanwaltschaft ("Federal Prosecutor's Office"), who are currently looking into the revelations in a so called "preliminary examination phase". One which will lead to an actual investigation ... hmm well, maybe.

Lowest Common Denominator

Germany still does not have a new government. The talks between Merkel's CDU/CSU Union and the social democrat SPD are stalling. In fact, the only real agreement seems to be on a a quota for women on corporate boards. But, the discussions about a minimum wage (the SPD wants €8.50);  mothers' pension (for mothers of children born before 1992); or the toll for foreigners on the Autobahn that the CSU wants are going nowhere. This weekend the CSU leader Horst Seehofer hinted at new election as an option. Only two things seem certain: this will be the longest time Germany has ever been without a new government; and the next government will likely be one based on the lowest common denominator.

The Economist Hans-Werner Sinn

Krugman in last Friday's op-ed wrote about the euro crisis and the German reaction to the ECB rate cut. He mentioned the reaction of economists to the decision. One of them was Hans-Werner Sinn:

The influential German economist Hans-Werner Sinn declared that Mr. Draghi was just trying to give Italy access to low-interest loans.

Industry, Real Wages, And Childish Managers

This weekend, the CEOs of several German car manufacturers decided to behave like three year old kids because they really want that chocolate bar low labor costs; and are against a minimum wage of €8.50 and for a huge amount of "temporary" workers. The CEOs of Daimler, VW, Opel and BMW were interviewed by the Bild Zeitung and Daimler CEO Zetsche even threatened Mutti* Merkel that the company would "have to think about a relocation of production".

Let's take a look at some of the firms and the overall situation in the German industry.

Massive 0.1 Percent Eurozone Growth In Q3

The European Commission pretended a few months ago that the modest second quarter GDP growth in the eurozone (0.3 percent) proved them right. We have learned today that the success story continues - at an even slower pace of 0.1 percent compared to Q2. Germany "lead" the way again with a 0.3 percent (down from 0.7 percent last quarter).

Sinn, Unsinn, And The ECB

Paul Krugman wrote that there are huge tensions over the ECB rate cut. German "economists" are criticising the rate cut decision. Well, that is true, but for the most part it's just stuff we've heard a hundred thousand times before.

For example, Michael Hüther head of the IW institute said that the policy is both not working in program countries (which is true) and damaging the North (which is wrong) at the same time, because ... poor savers. He claimed that the rate should be "around 3.0 percent to 3.5 percent" for Germany, which is completely laughable if one actually looks at inflation which just "reached" a new low three year low of 1.2 percent in Germany, in Oktober. But hey, the ECB could also look after German savers instead of doing its actual job of keeping inflation close to but below 2.0 percent.

Reforming The Renewable Energy Law... Again

We still don't have a coalition contract for the next government, but today we learned more about the plan to reform the Renewable Energy Law. Merkel has realized that offshore wind energy is quite expensive after, well, Merkel massively increased (from under 9 €ct/kWh to around 15 €ct/kWh - depending on location - for 12 years plus 8 more at a lower level) the subsidies in the form of an allocation fee paid by consumers in 2009.  This new "reform" will not lead to any significant improvements to the consumers.

More Surveillance In Germany?

Snowden's revelations have shown the world that the US and British governments cannot be trusted. Additionally, it is very likely that many if not all allied intelligence services aided the NSA and GCHQ; and also used similar methods though likely on a smaller scale, which is probably much more of a funding issue than anything else. Some believed that there would be a change in thinking now. The current coalition talks in Germany show that this is the case, sadly in a very different direction than many expected.

Hate To Say I Told You So

Well, that did not take long. The answers to the US criticism on the German export dependence are in and they are exactly the ones which could have been expected.

Using The Right Words When Criticising German Export Dependency

This weak both the European Commission and the US Treasury Department have criticised the German export dependency. The "Report to Congress on International Economic and Exchange Rate Policies" uses untypically clear language:

Quotas For Women On Company Boards

Merkel's conservative CDU/CSU Union and the social democrat SPD are still working towards a coalition contract. According to Sueddeutsche, they have come closer to a agreement on quotas for women for supervisory (Aufsichtsrat) and management boards (Vorstand) of the largest German companies.

Good Policy vs Policy of Good Numbers

Two press releases one year apart covering the same subject and exactly the same time. People are at risk of poverty, if they earn less than 60 percent of the median income. Severe material deprivation is a sign of social exclusion and not poverty at least in the eyes of the EU. Those three million that disappeared are probably all millionaires, who work little and don't want to spent any of their money aka self-inflicted severe material deprivation. Without further comment:

Press release 2012-10-23

About one in five people (19.9%) in Germany – some 16 million – were affected by poverty or social exclusion in 2011 (2010: 19.7%).[..]According to the definition of the European Union (EU), there is poverty or social exclusion when one or more of the following three criteria are met by the households covered: risk of poverty, severe material deprivation, household with low work intensity.

Press release 2013-10-25

Almost one out of every six people was at risk of poverty in Germany in 2011 – that is 16.1% of the population or approximately 13 million people. The Federal Statistical Office (Destatis) also reports that their share was up somewhat on 2010 (15.8%). 

President Obama Has Damaged US Foreign Relations Even More Than Republicans Ever Could

President Obama received a lot of premature praise, especially in Europe, where almost everybody was happy that Bush's successor was a democrat. He made many promises, none of those that Europeans were looking forward to were kept. And now this weekend we saw conflicting reports about Obama's knowledge of the spy programs. Bild claimed the US president learned about eavesdropping on Merkel in 2010, while Spiegel reported that he was informed this Summer.

Republicans Are Damaging US Foreign Relations

It is not just economic damage that Republicans are causing. Their unbelievable arrogance combined with childish ignorance made Republicans say really stupid things on US television this weekend. On "Meet The Press" Representative Peter King not only made up stories about thousands of lives saved by NSA spying, he also felt the need to pretend that eavesdropping on Merkel was somehow excusable because some of the 9/11 terrorists had lived in Germany.

Satire Lags Behind Reality

(via)Once in a while newspapers get fooled by satire because it the premise of an article feels real, and the journalists do not take the time to fact check the story, and onion style stories can end up on in the news cycle. Yesterday the opposite happened. The Postillon, a German award-winning daily political satire homepage, wrote on the issue of more and more people being dependent on basic security at old age that one could increase the bottle deposit as a "social measure" supporting those collecting bottles. A premise which feels unreal, but is close enough to the position of German politicians that it will make an excellent satirical article. Well, sadly reality was faster.

NSA, Merkel's Phone, And Hypocrisy

According to Spiegel, Angela Merkel's private phone "might have been tapped" "for years" by US intelligence. Of course, the Bundesregierung "unequivocally disapproves". When the revelations were still about the German citizens her Minister of the Interior Friedrich called the critics "anti-American", and "naive".

Minimum Wage In Germany

Coalition negotiations between Merkel's CDU/CSU Union and the SPD will begin shortly. One of the major issues was the minimum wage of €8.50 per hour, that the SPD wants. Many German economists fear that jobs will be lost. They are right that this might be the case in the short term but in the long run they are absolutely wrong.

What's Happening In German Politics

First up, Germany doesn't have a new Government yet, but the Greens will not be Merkel's next coalition partner. This isn't really news, a so called grand coalition with the SPD (new labor) was much more likely from the start.

Second, Merkel prevented a new EU compromise on car emissions. She wants higher Super Credits for environmental friendly cars, which basically just means counting these vehicles more than once when calculating the average fuel consumption of the whole automotive manufacturer's fleet. I have written  about super credits (counting electrical cars more than once against the CO2 emissions of the whole fleet) before; and described why I think they are important:

Super credits have the potential to increase the production capacity of zero emission vehicles, and also give companies an incentive to accept lower profit margins on these, therefore Merkel was right to stop the current proposal.

 So, again I completely agree with Merkel to stop an idiotic regulation based on fantasy assumptions of how much development potential is left concerning conventional engines. Also, we in the current form the regulation favors plug-in hybrids. Plug-in hybrid only produce less CO2 if one ignores the fact that more needs to be used in the production for the second engine and that the current German electricity comes in large parts from coal and lignite.

Still, CO2 regulation has become important for another reason. The CDU's biggest donor is the Quant family. The BMW shareholders gave €690,000 to Merkel's party this week. Of course, one would have to be an idiot to think that the Germany's biggest party can be bought with €690.000, still the timing is absolutely mind boggling.

Instead of a discussion about the size of super credits (should electrical vehicles be counted twice or thrice against the rest of the car fleet, for example), we now have a discussion about corruption. Super credits make sense since the buyers of large cars will cross finance zero-emission vehicles and thereby make them cheaper, but I have not seen a single article in the German media talking about this fact.

Other than that nothing will be happening until the coalition contract is written, which might take a while. Also there is a very small chance that we wont see a grand coalition in the end which would mean that there would be new elections, but that is extremely unlikely.