Friday, March 15, 2024

Germany Running Out Of Money, Debt Levels Exploding - The Price Of War, Open Borders And Net Zero?

15 March 2024


German Finance Minister Christian Lindner attends the cabinet meeting of the German government at the chancellery in Berlin, Germany. (AP Photo/Markus Schreiber)


An urgent warning about the state of Germany's finances has been given by Finance Minister Christian Lindner, the most senior office holder of the FDP party in the German government. Lindner has bluntly told the government that state borrowing are growing out of hand, and the government urgently needs to reduce spending and implement austerity measures. The other coalition members, the Social Democrats (largest party in government,) and The Greens are both spendthrift lefties so dispute over spending is only expected to escalate, with ever increasing deficits causing open clashes among the three-way left-liberal coalition running the country. Another concern for the classical liberal FDP is that their coalition parties are increasingly showing the authoritarian tendencies associated with the far left.

This is causing panic in the Brussels headquarters of the European Union because should the coalition collapse the Eurosceptic AfD are likely to become the largest party in the new Bundestag, which would mean a right of centre government opposed to the EU's globalist ambitions governing Europe's largest naion and most powerful economy. With negotiations for the 2025 budget about to open, much is at stake. 

However, the picture has been complicated after the country’s top court stymied a move by the SDP and The Greens, ruling that the government could not shift €60 billion in money earmarked for the coronavirus crisis to other areas of the budget, with the court noting that the move was unconstitutional. 

That was the trigger for the current government crisis, when the pro - business FDP demanded financial responsibility and sought to cut the budget in a number of areas, including the removal of subsidies to the country’s farmers. Those cuts had already led to mass protests when hundreds of slow moving tractors brought Berlin and other cities to a standstill and highlighting how completely out of touch with the public mood the government is. 

The situation remains unresolved and could flare up again any time. 

Lindner, whose party is floundering in the polls, having lost support among the rural population and the working class because as coalition members it was forced to support unpopular policies put forward by its much larger partners, is desperate to create some distance from the leftist elements in the government and save his party from electoral obliteration. The finance minster says the financial picture facing Germany is dire, and that the budget shortfall will only grow in the coming years if measures are not taken to rein in spending. 

Unfortunately a major factor weighing against the FDP is the problem of mass immigration. With an Open Borders policy having been inherited from the previous government uncountable numbers of economic migrants and 'asylum seekers' flooding into the country. Illterate, uneducated, unskilled, culturally alien and both unable to speak any German and unwilling to learn they are unemployable and must be supported by the nation's already overloaded welfare system. 

Another element in the government's financial problems has been the rise in energy prices due to EU 'nrt zero' policies and the loss of cheap imports of gas from Russia due to the war in Ukraine and the subsequent economic sanctions imposed by NATO on trade with Russia.

Having been the first to declare its committment to 'net zero' by closing coal fired power stations while simultaneously shutting down its nuclear program under pressure from The Greens (who are apparently against any reliable form of electricity generation,) Germany now looks like being the first to ditch its net zero commitments?

 Things are not going well in Germany’s bid to reach net zero by 2045, five years earlier even than Britain’s own unrealistic target. For months, the German government has been trying to devise a way to save its heavy industry from high energy prices which are sending production fleeing to Asia. Last year, chemicals giant BASF announced that it would invest in a new £10 billion plant in China, due to the cost of energy. This is hitting the jobs market and putting further pressure on the welfare budget

“In an unfavorable scenario, the increasing financing deficits lead to an increase in debt in relation to economic output to around 345 percent in the long term,” reads the Sustainability Report released by Herr Lindner's office. “In a favorable scenario, the rate will rise to around 140 percent of gross domestic product by 2070.”

Under EU law, Germany must limit its debt levels to 60 percent of economic output, but to achieve that would require dramatic savings. Increasing reliance on debt to fund out of control government spending has been a growing problem in the democratic world since the beginning of the current century.

A huge obstacle to succeeding in that is Germany’s rapidly aging population, with a debt explosion on the horizon as more and more citizens reach retirement age while tax revenues shrink and the social welfare system grows, in part due to the country’s exploding immigrant population. 

 Lindner’s partners, the Greens and Social Democrats (SPD), are loath to cut spending further, as this will harm their electoral chances. In fact, Labor Minister Hubertus Heil is pushing for a new pension package that will add billions to the country’s debt, which remarkably, Lindner also supports. While both the SDP and Greens are financially naive socialists who believe debt problems can be solved by simply printing more money the only reason the FDP would support it is that the party will be wtped out in an election. 

The SPD has called for the removal of the country’s debt ceiling to enable funding of large investment projects, however, the FDP ran on a campaign of keeping the brake in place. It can only be removed if the coalition government votes accordingly, and the FDP is determined it will not vote to remove the brake. 

“It must be clear: you cannot buy growth with new debt,” FDP parliamentary group leader Christian Dürr told Swiss newspaper NZZ. “Instead, we have to initiate structural reforms to address the economic policy failures of the Union-led federal governments.”

The FDP wants to cut taxes and reduce regulations, a move sharply rejected by the Greens and SPD.

“The budget discussions will be much more strenuous compared to 2024 – perhaps even the most difficult that I have experienced so far in my time as a parliamentarian,” said SPD leader Lars Klingbeil.

It looks as if whatever happens Germany may be electing a new government later this year.



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