Tuesday, November 21, 2017

Thoughts from Galicia: 21.11.17

Spanish life is not always likeable but it is compellingly loveable.

- Christopher Howse: A Pilgrim in Spain. 

If you've arrived here because of an interest in Galicia or Pontevedra, see my web page here.

Cataluña
  • So, Barcelona did lose out - to Amsterdm - in the contest for the post-Brexit location of the EU's Medicine's agency. Who knows how the final decision was affected by the recent events there but the Spanish government will surely claim that it was a lot.
  • But Sr P et al keep us smiling
  • As for December, the latest poll suggests a very high voter turnout of 82% and confirms the likelhood that the (divided) secessionist parties will have a majority.
Spain
  • So, I guess it's not a surprise that Madird is talking up the Commission to look at changes and the possiblity that Cataluña can have back the concession on tax collections that the PP government took back from it a few years ago. Better late than never, I guess
Portugal
  • Today finds me in the charming seaside town of Ericeira, which probably doesn't seem quite so tranquil during the summer months. Especially as it's a surfing centre. I have many fotos but these 2 are pretty representative of the place:-



Germany: Europe
  • According to one commentator: The “leader of Europe” is likely to be entirely inward focused in coming months/years - at a time when the European union will be facing a host of new issues regarding closer union, banking union, reform of the ESM, bailout and QE policies. There will also be new potential crisis points – Italian elections next year - Greece bailout, renewed immigration crisis or a blow-up with Trump. And these are just the known unknowns. This has profound implications for the so-called French/German axis as it slides towards Paris. We are not going to see a new German government “waste time” on issues like closer EU union, European Banking Union, or critical finance issues like reforming the ESM or new approaches on QE and Bailout funds. 
  • Here's another view:- The collapse of coalition talks kills off any lingering hopes of a Franco-German ‘Grand Bargain’, intended to relaunch the eurozone on viable foundations with a fully-fledged fiscal union. French president Emmanuel Macron will emerge by default as the de facto leader of the EU for a while as Germany grapples with its internal crisis. Yet this is unlikely to do him any good. He will emerge by default as the de facto leader of the EU for a while as Germany grapples with its internal crisis. Yet this is unlikely to do him any good.
  • And, at the end of this post is Ambrose Evan Ptitchard's take on the surprise developments in Germany and their impact.
  • Finally, here's Don Quijones on the subject.
The UK

  • What does the German development mean for the Bexit negotiations? A. No one knows. But a certain Mr Tilford says that months of introspection in Germany spell trouble for Brexit talks. Germany is absolutely crucial in brokering a deal between the other member states. A disengaged leadership caught up in internal wrangling is not going to be focused on knocking heads together.  There is  view that Germany is the real problem for Britain in the great showdown over Brexit since the whole structure of the single market, the euro, and the EU regulatory regime, has worked so well to its advantage. Europeanist moral rhetoric is all too often a mask for German power. The country has the greatest strategic stake in preserving the EU status quo.
Galicia:

  • I wonder if this Papal appeal will have any impact in Galicia. I rather think not.

THE ARTICLE

Germany pays the political price for leaving its poor behind

The last time Germany proved unable to form a government was under the Weimar Republic. We will not see a repeat of the Thirties this time, but the failure of coalition talks after two months of deadlock is no trivial matter either.

The country faces a constitutional crisis. There is no clear-cut legal mechanism for snap elections. A fresh vote is unlikely to resolve the impasse in any case since the fragmentation of the Bundestag may well be even greater. 

Opinion polls suggest that minor parties in various states of populist or ideological revolt – above all the hard-Right Alternative fur Deutschland – will make further gains. "It is an unprecedented situation in the history of the Federal Republic," said president Frank-Walter Steinmeier.  

With hindsight the election in September is taking on much greater significance than widely thought at the time: it marked the end of Germany’s post-war order, the happy era of moderation and the dominance two great incumbent volksparteien.

This rupture is a direct result of the economic and political model pursued by the German elites for the last fifteen years, known to critics on Left and Right as hyper-globalisation.

“It is better not to govern at all than to govern badly,” said Christian Lindner,  leader of the pro-market Free Democrats (FDP), after cutting off the talks. His real game is to tap into simmering discontent over immigration, calculating that Chancellor Angela Merkel’s Christian Democrats have left him an open goal.

“Germany is turning to soft nationalism. People on low incomes are voting against authority because the consensus on equality and justice has broken down. It is the same pattern across Europe,” said Ashoka Mody, a former bail-out chief for the International Monetary Fund in Europe.

Mr Mody said the bottom half of German society has not seen any increase in real incomes in a generation. The Hartz IV reforms in 2003 and 2004 made it easier to fire workers, leading to wage compression as companies threatened to move plants to Eastern Europe.  

The reforms pushed seven million people into part-time ‘mini-jobs’ paying €450 (£399) a month. It lead to corrosive "pauperisation". This remains the case even though the economy is humming and surging exports have pushed the current account surplus to 8.5pc of GDP. 

The electoral landscape is a cry of protest by those left behind. The Marxist Linke party is running at 10pc in the polls. AfD and the FDP are between them on 25pc with competing kulturkampf platforms, with the Bavarian Social Christians shifting in their direction to cover the Right flank.

The economy has certainly been firing on all cylinders this year. Growth was 0.8pc last quarter. The momentum will carry Germany through the next year whether or not it has a government, but this does not in itself alleviate the deeper crisis for the post-Rhineland model.

The Bundesbank says the current boom is unsustainable. The economy is in the grip of cyclical overheating due to ultra-loose monetary policy. Behind this screen is the curse of stagnant productivity (as in Britain), lowering the future economic speed limit. Trend growth rates are heading for 0.75pc a year by 2021.

One’s perception of the Wirtschaftswunder depends on where one sits. Marcel Fratzscher, head of the German Economic Institute (DIW), writes in Die Deutschland Illusion that Germany’s growth since 2000 has lagged East Asia, Scandinavia, and the Anglo-Saxon states. It has fallen far below the country’s own past standards.

“It only looks like a boom in comparison to the dire performance of the southern eurozone,” said Simon Tilford from the Centre for European Reform.

“Germany’s real weakness has been the lack of public investment. They have been running down their public sector stock even though they could borrow at negative rates,” he said. The austerity doctrine and the quest for balanced budget above all else has left deep structural problems. The country has neglected digital infrastructure. It has the lowest ratio of high-speed broadband in the OECD club.

The collapse of coalition talks kills off any lingering hopes of a Franco-German ‘Grand Bargain’, intended to relaunch the eurozone on viable foundations with a fully-fledged fiscal union. French president Emmanuel Macron will emerge by default as the de facto leader of the EU for a while as Germany grapples with its internal crisis. Yet this is unlikely to do him any good.

“There may be a eurozone finance minister as a fig-leaf appointment. The likelihood of a substantive pooling of resources is zero,” said Mr Tilford. Monetary union will face the next global downturn with the old unresolved pathologies and no real buffers against an asymmetric shock. 

Mr Tilford said months of introspection in Germany spell trouble for Brexit talks. “Germany is absolutely crucial in brokering a deal between the other member states. A disengaged leadership caught up in internal wrangling is not going to be focused on knocking heads together,” he said.

Florian Hense from Berenberg Bank said there is a unified view across Germany that the cohesion of the EU single market is sacrosanct and cannot be compromised, even if it means disregarding the interests of German car makers. “It makes no difference which government is in power,” he said.  

There is a view that Germany is the real problem for Britain in the great showdown over Brexit since the whole structure of the single market, the euro, and the EU regulatory regime, has worked so well to its advantage. Europeanist moral rhetoric is all too often a mask for German power. The country has the greatest strategic stake in preserving the EU status quo.

“They always talk about European interests when they really mean German interests,” said Gisela Stuart, head of Change Britain and herself Bavarian-born.

It was Germany and France that took the toughest line before the last EU summit in October, overruling Brexit negotiator Michel Barnier when he called for compromise.  “The commission is more technically pragmatic and in an odd way it may be easier to reach a deal if left to them,” she said.

Stranger things have happened.

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