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After two quarters of no growth the German economy contracted by 0.1% in the third quarter of 2023. The Constitutional Court ruled that German government's diverting $60 billion of unused pandemic funds to its climate and transformation fund was unconstitutional. If cuts are made in public spending as a result it could push Germany into a recession, says IMK Institute.

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Economic growth drops to 0.4% in the eurozone and Germany avoids a recession with slight increase in growth to 0.2% in the 3rd quarter of 2024. Energy cost have hit German industry hard.

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Natural gas prices are down by about half in the last month after warmer weather and higher inventories in Europe and the US. On January 6 2023 wholesale natural gas prices in Europe eased to 74 euros ($78) a megawatt hour, down from a high of 350 euros in late August. This is a significant development as it means blackouts, industrial closures, recession is less likely in Europe. It also helps bring inflation under control. Prices are back down to where they were before the Ukraine invasion. This is still seven times higher than prices in 2020 reports the WSJ. The lower the price the lower the bill for the German government. Across Europe 706 billion euros were allocated for support on natural gas price by governments since September 2021.

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Germany avoided a recession with growth rate of 1.9% in 2022. Imports were higher with higher energy prices and the trade surplus fell from 175 billion euros to 79 billion euros. Trade surplus declined for 5th year in a row. Rising inflation dropped in November and December. Economy Minister Habeck (the Green party) has made a great effort to tackle the energy shortages in a way that Germany can avoid a recession.

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Germany Economy Minister Peter Altmaier says Germany expects a shallower recession. GDP in 2020  is expected to be down by 5.8% much lower than the 10-15% in other countries. Exports in June were up by 15% to China and down by 20% to the U.S. Economies of Spain and the UK are expected to see twice the decline in GDP in 2020. Italy and Germany are seeing a increase in manufacturing output, Spain and France a decline. 

Still Germany remains exposed to other trading partners than China, such as the U.S. and Britain, total exports are expected to be down 12% in 2020. About 11% of workers are using short term work subsidies to stay at home. Cases of the virus are surging in France and Spain. In Germany there is a surge but it is slowing since last week. Mr. Altmaier thinks Germany can avoid a second lockdown.

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This report in WSJ shows how the US central bank, the Federal Reserve's increase in interest rates by 5 percentage points in the short space of 2 years affects Europe. It increases inflation in Europe as energy and many other products are priced in US dollars, with the strengthening of the dollar in relation to the euro. The dollar is $1.07 in relation to the euro. European Union is facing much higher inflation than the US. The German economy has slipped into a mild recession in 2023.

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German economy contracts in second quarter 2024 by 0.1%. Growth is forecast at 0.3% for 2024 and 1.1% for 2025, according to country statistics office Destatis. The contrast could not be greater in Biden's management of the economy as US economic growth was much higher at about 2.8% in 2024. It shows the positive effects of Biden's effort to revive American manufacturing, and to support chips and science and American industry, and the investment of a trillion dollars from the Inflation Reduction Act in American infrastructure. Without these investments American recovery strong at this time would have hobbled along with much worse effects on jobs and inflation, and looming recession, under a Trump administration. Unusual factors such as the concentration of the supply chain in China have influenced US inflation, which Biden is correcting, and also bringing jobs at home. The economic management is excellent it  is the effects of the pandemic and broken supply chains, high mortgage rates and 20% price increases in apartment rentals that are making cost of living a problem for average Americans. Biden has taken cost of living action including canceling student debt and calling for limiting rent increases for apartment rentals to 5%. Harris has a program to support renters when housing takes up more than 30% of their income. ...

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Gregory White and Anton Troianovski provide this exceptional account of how Russian president Putin miscalculated all through 2013 and 2014 about the way Germany and the EU would respond to Russia's actions in Ukraine. Putin also according to other accounts miscalculated how Saudi Arabia and OPEC nations would act on maintaining oil production in the middle of a slowdown in the economies of Asia and Europe. A combination of events beyond his control such as the economic slowdown in the second half of 2014, with the miscalculations on OPEC price moves particularly following Russia's failed Syrian intervention disrupting Saudi-Russian relations, caused the damage. Major miscalculations were made about German cooperation in the face of Putin's moves- the changed convictions of German chancellor Merkel about Russian intentions following repeated Ukraine interventions, and changes in German public opinion following the downing of a Malaysian airliner flight in which many Dutch citizens lost their lives. Putin used subterfuge to coverup his actions making his story line less credible with Germans with each repetition. The result of these miscalculations and lost confidence in Russia's economy and policymaking is that the Ruble dropped to 62 to the dollar, losing nearly half its value in 2014, and a deep recession expected in 2015. Even though Russian takeover in Crimea enjoys support and Putin still has widespread support for nationalist policy with a tightly controlled media, many officials in the government and business leaders warned about the dangers for Russia's economy in 2014. Former finance minister Kudrin, and the head of Sberbank, who were principal architects for Russian finances and economic policy reforms, were clear about the dangers. Only by Nov- Dec 2014 were their voices being heard. ...

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The Harz labor reforms in Germany in 2003 changed the way unemployment was treated. The idea was to get the government to work more closely with private employers through several initiatives to fund jobs that did constructive work within these companies. This helped reduce structural unemployment because of the almost indefinite unemployment benefits that existed earlier, reducing it from 12.7% in 2005 to 7.1% in November 2008. In November 2009 even after a year of recesion it stands at 8.6%. Are there lessons for other countries in the German experience? THe Harz reforms directed the German Labor Agency to work closely with private employers to fund newly created jobs. One such program paid a Dutch staffing agency Randstad to teach 15,000 Germans information technology, business English an other skills. THe Labor agency funds jobs at a Daimler truck facility in Worth, near Stuttgart, where short term employees instead of being laid off work as mechanic trainees. Another initiative pays parts of the wages of workers hired from those who are jobless, so that the costs of retraining are shared by the government and the employer, making it more attractive to take a chance and go out and hire. And if you lose your job the Harz reforms made it possible to get unemployment benefits for an additional 6 months, if you went out and started a small business. Like the case of an employee who worked at a Kawasaki motorbicycle dealership, who started his own bike repair shop. There are political pressures to extend unemployment benefits as the recesssion becomes more severe. And the structural mismatch in jobs going unfilled, and the number turned out by universities is still a problem. One study by Adecco Institute, shows 29% of large German companies having trouble filling technical jobs, which is why these companies try to keep all their experienced employees....

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In 2015 the new government of Antonio Costa took a U turn from austerity policies followed in return for a bailout from the European Union. This has helped Portugal achieve the highest growth in a decade coming back from a severe slump. Unemployment is cut in half with growth in the tourist industry, and investment in agriculture, construction, aerospace.  Traditional industries such as paper mills and textiles have invested in new technology resulting in a boom in exports. German companies Bosch, Mercedes Benz, and others have also invested in the country. Portugal has a good relationship with Germany and the European Union which has also helped attract foreign investment. Prime minister Antonio Costa says "too much austerity deepens a recession and leads to a vicious circle." Antonio Costa came to power in 2015 on promises to reverse cuts in income made by the previous government to reduce the deficit in exchange for a 78 billion euro international bailout. The government backed by left parties left out of government since 1974 with the collapse of the dictatorship, was able to increase public sector salaries, the minimum wage and pensions, over objections of the IMF and the German government. Incentives were given to small business in the form of tax incentives, development subsidies and funding. Budget balancing was achieved by cutting expenditure on infrastructure and other spending, cutting the budget deficit from 4.4% when Costa took office to 1%. A surplus is planned for 2020, ending a quarter century of budget deficits. ...

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Public opinion in Germany now senses that politicians including Angela Merkel are reluctant to tell Germans that debt reduction has to be part of the solution for Greece, that some of the billions are lost and never coming back. They sense that Merkel and the Christian Democrats are waiting till after the elections in 2013 to bring this up directly. Even people on the street in Berlin know that Greece can never get back on its feet on the basis of spending cuts without debt reduction. The loan instalment approved in Nov. 2012 reflects the new approach of debt reduction but the German government is reluctant to talk about it. Opposition parliamentary leader Frank-Walter Steinmeier of the Social Democrats told ZDF German television: "The debt cut has not been avoided, it has been postponed to a time after the parliamentary elections. We are realistic and try to tell the people honestly and sincerely whats going on. Schauble and the present government try once more to finagle their way around the truth." Greece's debt has already reached 170% of GDP and can only go up as the economy shrinks further in year after year of recession. Norbert Barthle, a senior Christian Democrat, says if the debt reduction takes place today it sends the wrong signal to all the program countries, reducing the pressure for reforms and changes....

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Since taking over Italy's right wing Northern League Party in 2013, Matteo Salvini, 44 years old, has improved the party's appeal by appealing to parts of Italy's north beyond its base in Lombardy, Piedmont and Veneto. The Milan native called for greater autonomy for the northern region, and even secession, supporting the northerners view that tax money from the prosperous north was being wasted on the poorer regions in the south. He also entered into an alliance with Silvio Belusconi's Forza Italia party. He took a hard line on immigration. Salvini has called for a train service for Milanese only, to draw attention to immigrants from non-EU countries. The head of the Five Star Movement  Party of Beppe Grillo, is Luigi Di Maio, who has called for ending the "taxi service" that brings to Italy migrants stranded on small boats in the Mediterranean. The shift in sentiment in Italy towards immigration has helped parties on the right as it has done in Italy and to a lesser extent in Germany with AfD's larger presence in the German parliament. ...

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The IMF report on Italy in July 2012 says Italy faces another year of recession. Debt as a percentage of GDP is expected to reach 126% in 2013. One bright spot is that Italy is expected to post a primary surplus by 2013- that is government revenues will cover promised services, excluding interest payments on oustanding bonds of $2 trillion. Because of the recession small shocks could change the outlook says the IMF, and it emphasized the importance of the changes being made to the labor market and for improving competitiveness. These changes need to be implemented early because of elections expected in spring 2013. A key concern is borrowing rates which are near 7% for Italy and Spain. The European Stability Mechanism, the rescue fund, was authorized to make purchases of Italian and Spanish bonds in the June 2012 summit. The ESM becomes operational in the summer of 2012, after the German Constitutional Court makes its ruling about it being legal and after ratification by national governments....

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The tech boom bust since 2000 that has hurt America and Europe and which also laid the foundations for the loss of manufacturing and technology to China, ceding American leadership and critical advantage, is shown here in the WSJ. The role of the finance sector  is explained here. That has added one more factor to the factor of endless wars in the Middle East, where American and European investment in healthcare, education and new infrastructure was somehow diverted away, and much of America's and Europe's resources wasted- or not turned to the benefit of the people of America or Europe.  One financial firm that rode the tech boom to the hilt finds itself with unacceptable losses except in a severe recession. Tiger Global Management was using tens of billions of dollars from pensions, endowments and rich clients riding on some of Silicon Valley's hottest stocks.  With the plunge in tech stock values including startups in which Tiger pushed into aggressively now facing large losses after hyper valuations, Tiger's hedge fund which managed $23 billion at the end of 2021 was down 52% in 2022. Another of its funds that managed $11 billion has lost 62%. WSJ says this wiped out two thirds of the gains Tiger has made in the tech stocks since its founding. In addition large writedowns are expected on its venture funds valued at $64 billion at the end of 2021, says WSJ.  WSJ says cheap money (money somehow diverted from infrastructure and funding manufacturing in China instead of the US now goes by the misnomer cheap money) reshaped Silicon Valley in the last decade, as pension funds, rich investors and celebrities turned to well connected money managers such as Tiger to put money in tech stocks and startups. This WSJ report says compared to Sequoia Capital and an earlier generation of venture companies Tiger Global is simply not interested in management of companies it invests in, taking a broad brush approach, using Bain Capital for research, and trying to haul in a large load of fish like trawlers at sea hoping for some companies to make big gains. Many pension funds such as Calpers California's public pension fund invest in Tiger with a $400 million investment. WSJ also reports that Tiger Global's venture funds do not reflect the realities of the tech business as venture stocks will reflect the drop over 2022 and 2023, including its ByteDance Chinese tech investment which will need larger writedowns. Tiger has also not hesitated to get into cryptocurrency which has loss of about $1.5 trillion dollars. It is of interest to note that Julian Robertson, hedge fund manager of the 2000 period (when Clinton-Bush were US presidents) who ran Tiger Management provided the impetus for Mr. Coleman, then 25 years old, for the start of Tiger Global. Julian Robertson closed his fund in 2000 during the dot com bust. Coleman hired a Blackstone analyst and started on the next cycle of tech with social media platform Facebook now Meta, followed by China's JD.com as investments in a new China boom were started. The end result is that during a period of Middle East wars under Bush and Obama, and building dependence on Russian oil and gas supplies under Schroeder and Merkel, China was the gainer as the US and EU lost much of its manufacturing and technology to China. During this period US and Europe neglected investment in infrastructure that would benefit the people of America in ease of living and quality of life. Just as money was wasted in wars much of the tech investment was wasted. The companies that added value over time were started long before and relied on sales growth and new products that revolutionized their field such as Apple with smartphones that started well before the nineteen eighties, Amazon with logistics and its own style of management, Microsoft from an even earlier era. Tech monopolies Facebook, Google, and others would not be missed much in terms of real progress for the people of America. The cost is many decades of ceding manufacturing and technology advantage to China by US and the EU led by Germany. China 2030 and the war in Ukraine with China's support have shown how fragile the foundations have been with weak political leadership and a finance sector running backwards in terms of America's and Europe's strengths in new infrastructure, better healthcare, services and education for the people of America and Europe. Leaving it to the Biden administration and a new coalition of Greens and Scholz in Germany to begin the task of rebuilding America and Europe on strong foundations, including the dignity of the workers and families, that makes who we are and what we believe in, and why the free world believes in us. ...

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The story is an encouraging one as the president and bipartisan Congressmen persevered with courage and patience to invest in America. The story is told by Biden adviser Gene Sperling in the WSJ today Feb 16, 2024, and is on this page. The US federal Budget deficit rises to 6.1%  in 2025 from 5.6% in 2024, then slows to 5.2% in 2027 and 2028, going back to 6.1% in 2034. Because these projections depend on assumptions inflation, interest rates, wages, which may be different in actual numbers in future years the broad guage one can get is that the extra surge in investment of five tenths or six tenths of a percentage point of GDP help the US make the investments in an aging or crumbling infrastructure and in manufacturing, better technologies, not replaced since the 1950's or 1970's, is needed for economic growth and better living conditions for the American people. It is this investment that in trillions of dollars of spending under president Biden that has generated growth of 3.1% in the last 2 years compared to the recession in Germany, UK, France and otehr European countries. UK is the latest to fall into recession this month. Sluggish growth can also be seen in China with a bloated construction center hindering growth. The US is in abetter position after the pandemic than any other country with the exception of India. ...

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A ZDF poll in Dec. 2016 shows 64% of the German people support chancellor Merkel's decision to run for fourth term. Of CDU supporters 89% support Merkel. If the election were held today CDU/CSU would win 36%, SPD 21%, Greens 11% and FDP 5%. Schulz is a lot more popular than Sigmar Gabriel in the SPD. About 51% of the German people support Martin Schulz, current head of the European parliament, Gabriel gets only 29%. With SPD supporters Schulz has 64%. Merkel could form a government with Greens and FDP support. See the related article on Greens and CDU positions coming closer.

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Strack of DW.com reports on the 2016 CDU convention where Merkel received 89.5% of the vote. Merkel receives applause for the burqa ban, and her denunciation of populist hate sentiment, of Islamism and parallel societies, parallel cultures. The best passages of Merkel's speech says Strack, were about reunification, about how she started in politics from the natural sciences, her start at SPD, then shifting  quickly to the "Democratic Beginning" leading to the CDU. "Head into the open," "that is where freedom is," and says Strack she had the hall listening to a chancellor speaking with emotion when in the past she has been cool and reserved. Parallels to the 1994 campaign of Kohl for a fourth term when enthusiasm came only from "generation" Kohl are being made.

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Roland Nelles gives 6 reasons why chancellor Merkel is likely to run for chancellor in 2017 and do well. Nelles says the alternative is a Greens, Left party, SPD coalition as in Berlin. But the rest of Germany is too conservative and the very idea of that coalition could bring conservatives together behind Merkel, including the CSU. It would give CDU voters second thoughts about switching to the anti-immigrant AfD party. Also important he says is that the immediacy of the refugee issue could fade as the German government better handles the refugee situation, including security, housing and integration. And as the agreement with Turkey is holding for controlling flow of refugees and turning them back. Also compared to SPD Merkel is still 8-10 points ahead in polls today says Nelles, so that there are still many Merkel supporters. In addition to what Nelles says, Strack in DW.com points out how Merkel's openness even showing emotions sometimes, about how the refugee crisis caught her and the German government unprepared, could help her in coming months. ...

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A government watchdog in Germany keeps track of what members of Germany's parliament the Bundestag earn in secondary income from speaking fees and other sources. The watchdog is called Abgeordnetenwatch or parliamentarian-watch. German parliamentarians are now required to list what bracket they are in with the highest at 250,000 euros with no ceiling set. One exception is for lawyers, consultants and farmers who can avoid transparency for upto 3.3 million euros. Unusually these professional backgrounds are left as exceptions. Still Germany is making an effort in this direction where such an effort is absent in the U.S. leading to a credibility gap for established parties and politicians, and leaving an opening for criticism from outsiders who can say they have no connection to lobbyists. German members of parliament earn an income of 9300 euros a month.

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The Netherlands government of prime minister Mark Rutte collapsed on April 22, 2012, after the Freedom party of Geert Wilders said it would not support futher budget cuts. Mr. Wilders said: "We don't want our pensioners to bleed just to meet the dictates coming from Brussels." Government forecasts had predicted the Netherlands deficit at 4.6% of GDP in 2012, above the 3% goal set by the European Union. And negotiations that collapsed were about making $18 billion in budget cuts to help meet the deficit goal. Rutte will now lead a caretaker government till elections in September or October 2012. Credit agencies may lower the Netherlands credit ratings from AAA and this would raise Netherlands borrowing costs in coming months. The result would be to increase the deficit even further. The Netherlands government was a strong supporter of Germany to introduce strict austerity measures and budget cuts in the eurozone during the debt crisis in EU countries in 2010-2011. With the elections in France and the defeat of French president Sarkozy in the first phase of elections by Socialist candidate Francois Hollande, the austerity programs in Europe appear to be unravelling. The deeper Europe goes into a recession in 2012-2013, the more likely new measures will be needed to address competitiveness, growth, interest rates and overvalued currencies as opposed to largely fiscal and budget measures alone....

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Peter Altmaier is director of the chancellery in Berlin, and is the person closest to Angela Merkel. This report in the Economist points out that Altmaier has played a critical role in steps taken by Merkel- as chief whip in parliament for the CDU during the Greece financial crisis and bailouts, as environment minister implementing the program away from coal based electricity, and in negotiating deals such as the deal with Turkey on refugees, and now with Brexit negotiations. Merkel has asked Altmaier to write her manifesto for the September 2017 election. A member of the CDU's liberal wing, Altmaier is known for being a scholar on German history, especially Bismarck, and a workaholic. Here he is mentioned as a bridge maker for the CDU to the Greens Party and was part of a group of CDU and Green Party politicians who met at an Italian restaurant in Bonn. As the moderates are now dominant in the Greens Party, a CDU coalition with the Greens could be shaped by Altmaier if the election results move in that direction. ...

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The new faces in the Biden administration on economic policy are Janet Yellen, as head of the central bank, the Federal Reserve, and Cecilia Rouse, a Princeton labor economist, as head of the Council of Economic Advisors. In this report WSJ looks at the economic policies of the new administration after Mr. Trump rejected globalization and international trade agreements that were not in America's interest or that hurt American workers.  Informal conversations with experts suggest WSJ says, that globalization is now suspect as a way that benefitted China and other countries including Germany, and hurt the U.S. France, Britain and other countries in Europe that were not strong exporters. This hurt their industries which were eroded by imports resulting in the three decades long destruction of communities across these countries that depended on manufacturing. It has also hurt countries like India that let their markets be dominated by Chinese imports, with a reversal of policy in 2020 with self reliant economy under "Atman Nirbhar" policy as the new goal. Mr. Trump's tactic in this trade war was to fight back to regain America's position in manufacturing with tariffs on imports. The trade deficit had to come down with China just as it had done with Japan decades earlier. This was starting to happen. One problem in bringing down the imports was the increase in the value of the dollar, as Janet Yellen has noted. The new policies will look at what the effective policy will be while keeping this goal in mind.  Both Yellen and Ms. Rouse have spent years studying labor markets and Ms. Rouse is quoted here as saying: " With open trade there are winners and losers. The losers are really losing, and we need to take care of them and take on more nuanced models of international trade as a result." Other experts from the earlier Democratic administrations such as Prof. Frankel at Harvard say that there needs to be increased focus on American workers left behind by trade, technology and unequal education, with more spending on preschool, infrastructure and health. All this suggests that there will be a continuation of U.S. policy in challenging Chinese use of globalization to advance its interests, chastening Americans on the use of the very word globalization which can mean different things to different people based on how they can gain advantage. The word may even be entirely dropped in favor of what the policies are and what they do for the American worker, American communities including small towns, and the American people, spelling each of these out every time supply chains and the global economy is mentioned. The new administration will get an opportunity to show that it too can come up with new ideas and action plan to strengthen American manufacturing and jobs. It will also have to show substantial results as people have lost patience with Democrats and Republicans on the lack of progress in rebuilding America's leadership role in the world economy, and in defending American workers and factories. Clinton, Obama and Bush all offered false promises on trade with China ignoring the damage this had done to American leadership in the world economy. Clinton with support for China's entry into the World Trade Organization, Bush with foreign wars and costly diversions and regulatory failures with banks that led to the 2009 deep recession hurting Americans, and Obama with the lack of will and interest in America's leadership role in the world as the dominant nation in manufacturing,   ...

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Germany's economy has shown strong growth of 3.6% in 2010. Germany has benefitted from globalization, both on the demand side and the supply side. The euro provided additional demand from countries like Spain and Greece. And German machinery and automobile manufacturers see rising demand from China. Germany also has lower priced labor in Eastern European countries. The Mittelstand, the smaller companies making all types of machinery, are a strong part of the economy. And the Hartz reforms under former chancellor Schroder, have helped reform the labor market. Also German unions have been fairly restrained during this period of reforms. German schemes for retaining workers during the downturn helps retain core skills and supports a quick rebound. All this is helping make Germany look atttractive as a model to follow in the European Union. There are weaknesses in the lack of strong domestic spending, which means Germany is too dependent on demand in China and other countries. The other weakness is reduced productivity in the services sector....