This is what happens when the otherwise very competent, diligent, and hard-nosed bureaucrats at the German Ministry of Finance fail to do their homework. These folks can be very effective, for example in collecting taxes, which is part of what they do. The squeezed taxpayers in Germany can sing a song about that. So the economy swooned in the second quarter, and July was no better. But due to their indefatigable efforts, tax collectors in July extracted 3.3% more in taxes from the people than they did in July a year ago.
That’s how good they are.
But they dropped the ball when it came to the impact of the sanction spiral, where sanctions lead to counter-sanctions, where tragedy in the Ukraine leads to more tragedy, and where propaganda leads to even more propaganda. The good folks at the MOF apparently thought that the sanctions spiral was going to hurt only Russia. Germany would remain unscathed.
If they had read WOLF STREET, they would have known what these sanctions were doing to the export-dependent German economy.
After a spiffy first quarter, optimism was riding high. But then iffy economic data started coming out. In early July, industrial output suddenly dropped, led by manufacturing and construction. Orders dropped too, a sign that this wasn’t some kind of blip. It hurt. The slump was blamed on the winter weather – not that it had been too cold or too late, but that it had been too warm and had caused construction to be moved forward, at the expense of the second quarter. I was amused….. German Miracle Economy Trips, Good Weather Gets Blamed.
Then on July 29, I became more explicit so that the good folks at the MOF would get it. The Association of German Chambers of Commerce and Industry warned that exports to Russia were in free-fall and would plunge 17% for the year, after having already dropped over 5% in 2013. It would amount to a 22% swoon from 2012. Russia is the 13th largest destination for German exports, so it wouldn’t wipe out the economy, but it would hurt. Worries emerged over the 300,000 jobs in Germany that depend on this trade with Russia. The folks at the MOF should have read…. Sanction Spiral Successful: German Exports to Russia Plunge.
Then in early August, more ugly data emerged and unofficial forecasts were being cut back. The powerful engine that was supposed to pull Europe out of its quagmire was stalling as the sanction spiral hit. The “disaster of 2008” was evoked, then hastily denied. Someone at the MOF should have at least glanced at….. Russia Sanctions Exact Their Pound of Flesh – from Germany
Then mid-August, it was revealed that GDP “unexpectedly” – I mean, come on! – dropped 0.2%, worse than feared recently, and much worse than the blue-sky forecasts from earlier this year. The statistical agency still blamed the nice winter weather because investment in construction had been weak in the second quarter, and it also blamed international trade. It said just about verbatim that imports outpaced exports, thus bringing down the trade surplus. But it didn’t blame the debacle on plunging exports to Russia. I mean, I was trying to bring the folks at the MOF up to speed…. Sanctions Are Eating their Lunch: Russian CEO Begs for Bailout, German Economy Swoons.
But now, finally, the Ministry of Finance has gotten the drift.
“The decline in gross domestic product goes beyond the expected counter-effect to the solid weather-based performance in the prior quarter,” it admitted in its monthly report. So it wasn’t just the weather. It finally noticed the deterioration in industrial activity, and not just construction. And so it conceded, “This was probably related to the effect of the sanctions and the negative effects on confidence due to the Ukraine crisis.”
But they still nurtured the hope that “the current economic slowdown” would be “only temporary,” and exports would soon grow modestly again, though the MOF attached some ifs to that hope: “If the Ukraine crisis does not escalate further and no additional serious stages of sanctions are imposed….”
Big IFs.
And it saw more dark clouds – after months of not seeing them. It ascribed part of the lousy quarter to “other geopolitical tensions” and “weaker economic development” in the Eurozone. France, a critically important export destination for Germany, is mired in a zero-growth economy, and its already anemic private sector, which is where much of the German exports go, is being asphyxiated. My dear friends at the MOF, start reading up on this topic, right here on WOLF STREET.
The Eurozone as a whole might never really have left the recession behind. And another major destination for German exports, China, has been weakening. Export-dependent Germany is going to have to navigate some rough waters.
But that didn’t stop official hope. The government is sticking to its forecast that the economy would grow by 1.8%, despite the crummy second quarter, despite the continuing lousy conditions, and despite the sanctions that have just begun in earnest to sink their teeth into the German export machine.
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Really. All you can do is have another drink and chuckle…
You should send Schaeuble an invoice dude.
“Consultancy Advisory” services !!!
Already have. Check’s in the
mailPost, he said.It s ok Wolf I understand “mail” .
I m retired now but I used to run my city s Highway Patrol in the States before retiring to a cottage in the Cotswolds UK — used previously as the footman s quarters in the grounds of a large property owned by some toff called Dave Cameron …
I inserted the German word “Post” so that Schäuble could understand it too :-)
Interesting property story. Is Dave ever stopping by to say hi?
No . Never see Dave as he s surrounded by security guys even when he goes to take a leak behind the nearest tree.
Used to see ” ‘ Bekah” a lot though pre her trial (cannot of course mention surname but I m sure you know who I mean ) as they live nearby also.
When she ran a newspaper empire kept coming round to offer “favours” in exchange for four digit cell unlock numbers of the famous but I always declined .
“Big Red” is not my cup if (totty) tea . I prefer our Californian blondes!!
It s ok . I ve just self -moderated.
Rather like when the banksters allowed the sheeple punters to self -certify their annual income for mortgage loan clearance ….
hahahahahaha…. I sympathize. Back in the day I explained to the CEO of a financial advisory corporation there would be a housing collapse due to fraudulent credit derivatives; i.e. mixing subprime mortgages with AAA. His response? “What’s a credit derivative?” Even after I explained it to him he still didn’t understand the enormity of the problem ….and he’s racking up some big bucks “advising” his clients. Cracks me up.
“most ignorance is vincible ignorance. We don’t know because we don’t want do know: Huxley
So are ‘they’ wilfully ignorant or do they know what they do and do it anyway for some idea of serving the greater good (aka themselves)?
Who is “they”? The oligarchs? I assume they are comprised essentially of self-aggrandizing psychopaths. The super rich; especially when they’re born into generational wealth, are not living in the same world as working people. When money has no real meaning you have to look somewhere else for … motivation. Not “needing” anything can be quite debilitating and you may need to experience it to understand it. I believe many of the oligarchs; for instance David Rockefeller with nothing to do [other then compete with the Rothschild’s] was bored out of his mind and mistook himself for God.
I believe the situation with the people, the human condition [vs subhuman psychopaths], is a bit different. People are busy living their lives, making a living, caring for their families and essentially want to be left alone to do that. There is little time for deep research and acquiring the skill it takes to accomplish it. Underneath that however, is emotional tolerance; the unconscious mind is a determining factor. When people’s illusions are challenged and those illusions are the very foundation of all their perceptions of life itself, I think a big red flag goes up and they refuse to believe what they know on a deeper level, they cannot cope with. Calling this “willful denial” may be unfair; i.e. I don’t believe it is a choice to refuse to face facts, rather it may be a knowing inability to cope with reality. This will not save them of course but it seems quite understandable to me.
Pena que a chanceler tenha se rendido aos mandos de alguns , sabemos quem se beneficiará com a queda das exportações da Alemanha , primeiro deve-se ter em mente a manutenção dos empregos depois a queixas de outros paises . O motor europeu é a Alemanha e isso incomoda , portanto ela tem que desacelerar para que aquela economia do outro lado do atlantico engate uma marcha . querem a prova ? procurem saber quantas empresas de comodites na américa latina pertencen a acionistas dos eeuu . Boa sorte Alemanha e abra os olhos senhora Canciller .
Translation according to google:
Pity that the Chancellor has surrendered to the commanders of some, we know who will benefit from the fall in exports from Germany, you should first keep in mind the maintenance of jobs after the claims of other countries. The European engine is Germany and it bothers so she has to slow down so that economy on the other side of the Atlantic hitch a march. want proof? look how many companies in latin america COMODITES pertencen the shareholders of eeuu. Good luck Germany and open your eyes lady Canciller.