The A42 motorway is illuminated as white smoke billows from the Schwelgern blast furnace at the factory of German industrial conglomerate ThyssenKrupp in Duisburg, western Germany, on February 4, 2021.
Atlantico: What is the success of the German economy still based on today?
Don Diego de la Vega: Germany is the story of the one-eyed man in the country of the blind. His success is mainly based on the failure of others. The Germans are the monetary anchor of the eurozone and the European monetary system. The country tries to make concessions to Frankfurt, but in the end they keep the currency. Thanks to the ECB headquarters in Frankfurt, they have a kind of veto power over the currency from the judges in Karlsruhe, Berlin and the Bundesbank. His concessions and sacrifices are a strategy to better sanctify his domain.
This domain has been Germany’s trump card for 25 years. During the 2008 crisis, this allowed them to teach the whole of Europe while acting in the opposite direction. We can give the example of the 450,000 million euros of doubtful that have disappeared from the Landesbanken. You should know that Germany has a very bad system of regional banks. In this case, the claims faded into an ad hoc claims system controlled by the Ministry of Finance and the Bundesbank. A sleight of hand that Greeks or Italians were banned the following year. In Europe, Germany has always been “do what I say, but not what I do”. Note that this position is only possible if one is the monetary anchor of the Eurozone.
Germany has a kind of off-scale discretion. It is monetary sovereign while its European partners are not. This allows you to have the lowest interest rates in the galaxy and this is interesting when you want to borrow at low prices. The country has returned to other areas such as energy, immigration or geopolitics because Germany acts as a stowaway against NATO or the United States and with Russia for energy.
Breathless: The German economic model modeled by Gerhard Schröder is reaching its limits
This impunity is linked to the fact that Germany is central and to the non-existence of the Franco-German couple.
The big gamble of the German economy for this turn of the century seemed to be based on free and open world trade, growing demand from China, an efficient domestic workforce, and cheap Russian energy. Have these pillars collapsed?
The system on which the Germans were based has only one time. The monetary anchor is only valid if the euro is held. The parasitism can only be sustained if the situation with Russia is not tense and if the Americans continue to write checks.
Germany’s interesting base is its top-tier industrial position as an exporter to China, made up of quality family-owned businesses. It is not collapsing, but the Chinese have less need for machine tools because they are no longer in a logic of equipment, but of services. They will no longer be able to sell overpriced sedans to the Spanish and soon they will no longer be able to sell them to the Chinese who will equip themselves with Tesla cars. German industry is at risk of dissolving and this disruption is being felt at Volkswagen, which has made the decision to fire Herbert Diess. They made the choice of continuity because they do not want to reform. Thus, the threat of a real immersion materializes, its economy could be dismembered by Elon Musk on the one hand and by the general evolution of the world. German industry will be reducer and will never be in the current perimeter.
So we will see if the Germans can continue to be a monetary anchor, an opportunist and a giver of lessons as the heart of the heart of their manufacturing dominance is crumbling.
If Germany has been spared outsourcing factory jobs like France, is this happening to them?
Yes and no. So far, they have held up the industry quite well in terms of value added and employment. The heart of its manufacturing advantage comes from thermal cars, but this area is at the end of its course. Given the evolution of the sector, they will have to change, but it is difficult to ask them in a few years to build software on wheels with batteries because they have fallen far behind in this. For them it is very problematic because it represents a large part of their GDP and commands a lot of the third sector related to that.
The financial markets give us clues about the future of Germany and there are hardly any German high-tech companies. If there are, it is only what corresponds to the mid caps in the United States. Porsche is worth almost nothing, Volkswagen begins to lose ground and with the departure of Herbert Diess there will be a real break.
They failed to bring in new actors. The actors are almost all historical, which is effective in a clear world where there is a productivity gain of 1% every year. When it comes to making a break, the Germans are not there.
One of his other problems comes from his financing because German banks are in difficulty. When we look at Deutsch Bank’s balance sheet we have reason to be scared. The German financial sector is undersized, corrupt and clandestinely sponsored by the Bundesbank. They never really recovered from the 2008 crisis.
Could Germany react?
It seems difficult… Their political class is not up to the level and is even worse than the one we have in France. Across the Rhine, we are reaching a real level of mediocrity. This class is structured by institutions that do not want a leader to emerge. This can be a good idea to avoid the appearance of personalities as we know them in France, but when you have to create a rebound it is problematic.
There was a deep anesthesia during Angela Merkel’s 16-year reign because she prevented all possible reforms and Germany is crushed by the weight of the blank checks she signed as in the immigration and energy file. They told each other that France would pay, NATO or that an operation of the Holy Spirit would come to save them.
Has the model you built become ineffective if there are disturbances?
It was a system of complacency and not reform. He intended to infantilize France, which is already becoming rather infantilised, to dominate the peripheries through monetary blackmail, but which is slowly beginning to crumble. The German model in all points is reaching its limit. In a relatively old country, one wonders if there is still any rebound capacity.
Is this an opportunity France should not miss?
We could take advantage of it if we had a true alliance strategy. If we had not made a pact of submission to Germany, we could make a pact with the English. However, our elites have a kind of deference to Germany and are not Anglophile at all, neither for Gaullist nor communist reasons, nor by ideological model. However, there is an opportunity for France as long as we review our alliances. We have to put up with the Italians and get closer to the English. Except we don’t…
We try to separate ourselves as much as possible from the English trying to stick as much as possible to Germany when they are going to take us in their misfortune. There is no longer a Franco-German couple and this can be seen in the archives.
We can take advantage of Germany’s difficulties only if there is a redistribution of powers in the ECB. Christine Lagarde must change the ECB, which today is a kind of Germanic superego. We must regain control of monetary affairs, but that is not at all what the Macron government has in mind.
Geopolitically, Germany is capable of agreeing with Russia. So we must be able to act in this way by showing that in terms of armament we can ally ourselves with the English because it is impossible to make a plane with the Germans. At least we must bring competition into play, but unfortunately in Paris this is not the mood… We have a political class that has made German its first language.
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