By frank peters @Adobe Stock
Trump Told You So
The world does not seem to be going Germany’s way. Walter Russel Mead reports that Germany just authorized the use of cannabis and, as Mr. Mead notes in the WSJ, Germany’s leadership is going to need all the mellow it can get. Being higher than a kite might help Germany forget reality, but there’s plenty of trouble about to sober up the German tribes.
Russia vs Ukraine
- Russian advances in Ukraine and American paralysis over the next aid package are reinforcing the reality that Germany needs to defend itself but lacks the power to do so. So are developments in the Red Sea, where German manufacturers must cope with shipping delays as the Biden administration fails to keep the vital waterway clear.
Defense Spending
- Forget the 2% of gross domestic product that Germany has repeatedly promised and failed to spend on defense. Defense Minister Boris Pistorius shocked many observers this month when he said that in the new world situation, Germany may have to spend as much as 5% of GDPfor defense.
Grim Economic News
- Last year Germany’sGDP shrank 0.3%, and last week the government slashed 2024 growth estimates to a pitiful 0.2%. Economists expect negative growth during the first quarter of 2024, placing the country in recession. The outlook for housing is bleak, with business confidence reaching all-time lows. The news in manufacturing is little better. This month the widely followed HCOB German Flash Composite Purchasing Managers’ Index fell to 46.1, the eighth month in a row that the index has pointed to decreasing economic activity.
Goaded by Energy Prices
- The chemical giant BASF announced €1 billion in spending cuts in its German operations, blaming a mix of weak demand in the German market and “structurally higher energy prices.” Enormous U.S. subsidies under the so-called Inflation Reduction Act are leading German companies to look across the Atlantic.
China – Still a Migraine
- Chinese competition is another massive worry. China long ago passed Germany as the world’s largest car producer. Increasingly, especially in electric vehicles, it is challenging Germany as both a low-cost and high-quality manufacturer. Beijing aims to marginalize German capital goods and automobile companies in China while Chinese exporters challenge German dominance in world markets.
A Bitter Pill to Swallow
… Germany’s establishment may be the realization that on the most important issues facing Germany, Donald Trump was right where they were wrong. Getting in bed with Vladimir Putin for cheap energy was both foolish and deeply disloyal to the West. German defense policy was self-defeating and dangerous. China wasn’t a reliable partner.
Everything Working Fine?
Mr. Meade is not surprised that anti-establishment parties are growing in Germany. When Meade visited Germany over a year ago, he heard from government officials and think tank economists, 16 months before cannabis was made legal, how well things were going:
- Russia was failing in Ukraine.
- The energy transition would boost German competitiveness and employment.
- Germany’s Mittelstand would handle anything China could throw at it.
The far right Alternative for Germany (AfD) currently has more support than any of the governing parties, with one recent poll showing the AfD at 19%, the Social Democrats at 14%, the Greens at 13%, and the Free Democrats at 4%.
If Donald Trump returns to the White House, bets Mr. Meade, his message will likely be “Das habe ich gleich gesagt,” or “I told you so.”
