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The collapse of the magic formula


There has been a collapse of the formula that provided Germany with prosperity for decades: cheap Russian energy, the always "thirsty" Chinese market, globalization and a strong domestic industry.

The Sino-American (for now only political) tensions over Taiwan, on the occasion of Nancy Pelosi's provocative visit to this island nation, raised the temperature in the already heated atmosphere on the Old Continent, additionally and dangerously. And caused an almost panicky fear, with the epicenter in Germany, of a new powder keg. Obviously with a reason: no European country is so economically, almost existentially and fatefully, tied to China. Half of the total European exports to this country (48,5 percent) come from Germany. Four times more than from France, which, by the way, ranks second on China's list of European trade partners.

Namely, Germany jumped on the Chinese train of rapid development in a timely manner. And she profited the most. Especially its heart of economic power: the automobile industry. Today, Volkswagen, with a factory near Shanghai, sells forty percent of its cars in China. Daimler sold 2019 Mercedes there in 700.000. Twice as much as in the USA, until then the largest and most profitable luxury sedan market. That's how the magic German formula for success came together: cheap Russian energy, a huge Chinese market, globalization and a strong domestic industry. A model that for decades provided competitiveness, prosperity and well-being to the strongest economy of the Old Continent.

Now, all of that has suddenly been called into question. The war in Ukraine, along with the viral pandemic, according to the famous economist Gabriel Feldermayr, marked the definitive end of the "magnificent thirty years of globalization".

Tectonic earthquakes

In this chaotic hour, the only thing is certain and certain: from the dramatic, tectonic upheavals and changes that are happening right now, with uncertain outcomes and unpredictable consequences, and according to the assessment of German geopolitical experts, it is clear that a new relationship of political forces is emerging on the planetary plane. And, what especially scares them, the emergence of new economic blocs, which, they warn, could be fatal precisely for the profiteers of globalization such as Germany. On one side, in those estimates and projections, could be the EU and the USA, and on the other, China, Russia and India.

The aforementioned German formula for success, which launched the economy of this country to the very top of the world, and made it an export champion, "produced" two contradictory facts: 1. a huge trade surplus (Germany exports incomparably more than it imports, to the detriment of its partners) and 2. .extreme dependence on Russia and China. And the statement that, urgently, we need to get rid of that dangerous addiction.

However, it is easier to say and politically proclaim than to implement without dramatic consequences. The Institute for World Economy from Kiel recently made a computer simulation and concluded: if the EU were to leave the international supply chain and stop (mission impossible) imports from China, it would cost the members of the European family hundreds of billions of euros annually. If the EU were to unilaterally and gamblely engage in such protectionist cuts, its gross product would be lower every year, according to the reference value from 2019, by (around) 580 billion euros. With the inevitable countermeasures of the partners, the loss would grow to (astronomical) 870 billion. Even without that, the situation is already dramatic. The EU is threatened with recession. The German economy is stagnating. Economic growth stalled during the spring. Inflation has not been so (explosively) high for decades. The Bundesbank report for July is more gloomy than the June estimates.

What will happen in the end, and how bad and difficult a situation the panicked Germans will have to face, no one can reliably say. The answer to that question, says Komercbank chief economist Jörg Kremer, lies "in the hands of the master of the Kremlin" Vladimir Putin. If the gas taps are turned off, a "deep and long-term recession" will inevitably follow. The head of the largest chemical concern in the world, Germany's BASF, Martin Brudermiller, responding to the question of a journalist from the "Frankfurter Allgemeine Zeitung" - whether Germany is "financing Putin's war" by importing Russian oil and gas - retorted sharply: until now, deliveries of Russian gas have been the basis competitiveness of our industry, stopping these imports would destroy our well-being, such energy supply is the main element of Germany's economic power.

The model that provided economic prosperity to Germany and well-being to its citizens for decades is experiencing a collapse. Undeniably, the current ruling group in Berlin has a share in this. The "Traffic light coalition", composed of three parties with different political and ideological orientations - social democrats, liberals and greens - did not have the strength and courage to, in the Russophobia that turned into hysteria due to the war in Ukraine, choose for their own national, especially economic, interests .

Washington's dictate

According to Washington's dictates of unquestioning solidarity, in the West's formally undeclared war with Russia "to the last (unfortunate) Ukrainian", Germany made the greatest sacrifice: Chancellor Olaf Scholz renounced the new "Eastern policy", for which he received applause in the election arena, liberals and the green of their "holy places". First, rigorous austerity: they accepted, even with gritted teeth, enormous, extraordinary expenditures, one hundred billion euros for armaments. These others, environmentalists, their green agendas: turning to banned coal and nuclear...

From an economic (but also political) point of view, the biggest victim, in the energy situation, which was dramatic even before the war in Ukraine, was the handing over of the newly completed "Nord Stream 2", which was supposed to provide billions of cubic meters of cheap Russian gas that is existentially necessary for industry and households. Now every drop through the remaining (older) "North Stream 1" is awaited with almost panic fear.

The leaders who advocated, and fought, investing enormous diplomatic efforts and energy, for the construction and survival of the "northern currents", which, at the bottom of the Baltic Sea, bypassing others, directly connected Russian and German soil, are now on political and media crucifixion. From Gerhard Schroeder, during whose time the agreement was signed (immediate agreement with Vladimir Putin) on the construction of "Nord Stream 1", to Angela Merkel, who "manfully" resisted the pressures and threats from Washington in the dramatic finale of "Nord Stream 2".

During her farewell visit to the White House, the former chancellor managed to persuade President Biden not to "release into circulation" the sanctions that had already been passed in Congress and that would seal the fate of the large energy project. In vain. What the American administration did not succeed in, and all groups, from Bush Jr., Barack Obama, Donald Trump to Biden, were against the German energy agreements with the Russians, was done by her successor. Social democrat Olaf Scholz, whose party, by the way, invested the largest political capital in a large energy venture, which made the German economy so powerful and booming. He "closed" the faucets of "Nord Stream 2" himself, and now, at the top of his voice, he is crying: Putin is blackmailing us with unpredictable gas deliveries.

Sins "Putin's man"

Gerhard Schröder is experiencing a real political and media crucifixion. He was declared "Putin's man" a long time ago, due to his friendship, not only political, with the Russian president from the time he was on the chancellor's throne. They celebrated birthdays together. I remember idyllic pictures from snow-covered Moscow, with the chancellor and one of his many wives (the current one is his fourth or fifth) in a sleigh, with the (then still) married couple Putin.

Schroeder's main sin, which is now evaluated and "valorized" his entire political, especially chancellor, career: immediately after stepping down from power, he accepted a lucrative position in the management of the Russian oil company "Rosneft". It was planned that at the beginning of the summer he would be the first foreigner in one of the leading positions of the giant "Gazprom". The war in Ukraine prevented him from doing so. They are expelling him from the membership of the administration of sports associations, threatening him with taking away his honorary titles, canceling the privileges and privileges he has, by law, as a former chancellor. The procedure to remove him from the membership of the Social Democratic Party, which he was at the head of for a time, was initiated. There are few who recall the fact that in large part helped him enter a second term as chancellor: he refused to align himself with George W. Bush's war banner in the Iraq war, and the citizens rewarded his bravery. We remember Gerhard Schroeder, however, as an aggressor: Germany, under his leadership, participated in the NATO bombing of the Federal Republic of Yugoslavia in 1999.

By the way, the dissolution of the political legacy of the once very popular Angela Merkel and a critical review of her long, sixteen-year rule is underway. From today's point of view and the atmosphere created by the war in Ukraine, its foreign policy, in the main points, is suddenly assessed as failed and wrong: it brought the country into a complete and dangerous dependence on Russia and China. Getting rid of that dependence - the imperative of the current government in Berlin - seems at this hour to be an (almost) impossible mission even for those who believe in the vitality and adaptability of the German economy. Namely, it is difficult to find a new model that would replace the magic formula of German success: cheap Russian energy sources and the unstoppable Chinese market. In a world in which there is no longer, and will never be, cheap gas, in which a new cold war is already raging and a frontal collision threatens, with inevitably fatal consequences, between the United States of America and China (which, however, we believe will not happen this time!) , the key German (primarily economic) partners of Berlin, the chances of creating a new German economic miracle are really small.