German reliability has been in limbo for some time. The German locomotive slowly emerged from its lethargy during the Great Pandemic, caught fire with the outbreak of the war in Ukraine and was definitively derailed due to the high cost of its energy. Highly dependent on Russian gas, they have bankrupted businesses and households, paralyzing entire industries and transforming their traditional economic power into episodes of recession and their historic price control into inflationary spirals.
Faced with this crossroads caused by two exceptional events, the health crisis with its social confinements and its productive hibernations and the war triggered by its energy supplier at the very borders of the EU, Olaf Scholz threw in the towel. The Chancellor then addressed complex economic scenarios such as disruptions in value chains or an escalation of inflation and rate increases not seen since the turn of the millennium.
The social democratic leader opened the storm by cutting off the liberal leader from his tripartite – that of the head of Finance, Christian Lindner -. black sheep of the traffic light coalition that the Greens have completed. Scholz decided, with the leader of the opposition, Friedrich Merz, to convene in December a motion of confidence doomed to failure, although essential to carry out urgent and consensual social initiatives. In exchange, he gave an electoral advance of 11 months, with a fixed date: February 23.
Merz, leader of the eternal CDU/CSU alliance at the top of the polls with 30% and who supported the Christian Democrats Helmut Kohl (1982-98) and Angela Merkel (2005-21) in the chancellery for 16 years, does not was quick to blame its rival the SPD, which is entering the third pre-campaign, two points short of the 18% that polls give to the neo-Nazis of the AfD, with the Greens in fourth position (11% ) and the Sahra Wagenknecht Alliance (8%), the most recent division of left-wing dissidents, is the last party represented in the Bundestag.
“I will be the guarantee of new leadership in Europe and for Europe” in which Germany “will cease to be a lethargic middle power and become an active world power,” Merz said.
In agreement with the German collective unconscious which considers the appointment with the ballot box as an examination to remove the label of European economic disease and revive its once brilliant industry. He heir Merkel’s position within the CDU proclaimed herself as the only candidate capable of mitigating the collateral damage that the new Trump 2.0 version will cause to global geopolitics, European and German productive structures and their businesses, as well as to their competitive burden with the two global superpowers.
Wuthering Heights on the great European power
Scholz’s audacity in calling elections does not hide the certainty of part of this diagnosis. The chancellor, who called for unity and a rejection of the political tension that has reigned in the United States over the past decade, assured that the breakdown of the government “was inevitable” due to Lindner’s rejection of new financial support for Ukraine from the federal debt.
A few weeks ago, he avoided the affront from his minister for his refusal to accept the Eurobonds that Mario Draghi advised to launch as guarantees for “geostrategic projects” which would restore lost competitiveness to the European internal market. In principle – declared the former president of the ECB in his report commissioned by the German Christian Democrat Ursula von der Leyen -, stimulate the arms industry, build an anti-missile shield in the open skies of the community and create a European army, a scenario that becomes more plausible with the return of Trump.
The German social-democrat leader will have difficulty dealing with his future American counterpart. Scholz effusively congratulated Joe Biden when he withdrew from the presidential race – “he accomplished a lot for his country, for Europe, for the world” – one of those phrases that Trump identifies as lapidaries to attack their enemies, internal or external. Merkel, the president whom the Republican leader most criticized during his first term, has already suffered from this.
But now, Elon Musk has joined the crusade against the chancellor: “He’s crazy,” wrote the richest man on the planet and Trump’s economic guru about Scholz on his X network, a post seen by more than 42 million people. times. times the electoral support of the SPD in the last federal elections.
With or without Scholz, will Germany be able to define the transatlantic response that a new, more aggressive Trump administration will demand from Europe? With the reissue of another Grand Coalition between the CDU and the SPD like the one that placed it in 2021 as number two of Merkel? But this time it is led by Merz and, just in case, he will keep his promise to exclude any government pact with the AfD.
Investors seem to aspire to this due to the 1.7% increase in the DAX index upon the announcement of the election call and the climate of industrial and economic mistrust. At least, in the short term. Volkswagen, one of its automotive icons, is moving forward with the closure of three of its headquarters in the country, something unprecedented. Energy prices remain abnormally expensive. The difficult program of structural reforms continues without taking off and manufacturing anemia suggests a second consecutive year of recession. Nothing new in a production model which needs to reinvent itself and which has entered a vicious circle, with GDP in decline since the start of the post-Covid economic cycle.
German investor sentiment once again sounded the alarm with its ZEW Institute indicator, which deteriorated drastically in November, falling from the level of 13.1 to 7.4, while the analyst consensus predicted an increase of a tenth. While the German Bund, symbol of the stability of the euro, “has lost its luster”, warns Marcus Ashworth in his column. Bloomberg. Given the low prospects of an increase in their debt, which still stands at a respectable 62% of GDP, and a systemic reassessment of their payment obligations arising from a “confluence of factors”.
Ashworth cites, among other things, the still high energy bill, the drop in exports to China in its manufacturing sector, key to its international economic model and, above all, the threat of increased customs duties on European products by the Trump administration. . The economist leaves no doubt about this last risk: “Bad news is coming from the United States for German businessmen” who have not raised their heads since the invasion of Ukraine almost three years ago, in during which, in addition to having to establish commercial and energy resilience, mechanisms, have suffered internal productive shocks. Over this period, German assets barely increased by 3%, compared to an average growth of 16% in the shares of industrialized powers.
German reconversion in a non-competitive internal market
German corporate strategies began to explore a transatlantic horizon with hurricane-force winds. The United States is Berlin’s first partner, whose coffers received 160 billion dollars in sales to its main customer, from whom it imported 77 billion worth of goods. Only China, Mexico and Vietnam have larger bilateral surpluses. In the near future, the impact of tariffs, whether 10 or 20 percent – a level that has not yet been specified by Trump’s trade team – “could force Germany to [y la UE] “We must apply social and commercial shields,” warns Martin Ademmer, analyst at Bloomberg Economics, who says he has confidence in “Germany’s ability to react to unforeseen events.”
The IFO institute estimates the drop in German exports to the United States at 15%, with customs duties of 20%. Although the data provider fDI Intelligence also affects the significant decline of investors. Biden’s IRA law increased German capital to $16 billion in 2023, almost double that of the previous year, and a far cry from the $6 billion deployed by German companies in China. An inertia that will be difficult to maintain, judging by Trump’s message: “I want German automobile brands to become American companies and to build their factories in the United States.” Last year, 900,000 vehicles made in Germany They entered the US market, accounting for half of their total foreign sales.
For Aslak Berg, analyst at the Center for European Reform (CER), Germany is essential in articulating any European response to European reform. tsunami new Trump-era advertising; despite its urgent reconversion, similar, albeit behind closed doors, to the recommendations of Draghi and Enrico Letta to restore the productivity and competitiveness of the EU. For example, to make Washington understand that Europe does not want decoupling -fragmentation- with China, as with the United States, but only a controlled de-escalation of risks (reduce risks) in “the relocations necessary to ensure the supply of manufactured products and raw materials”. Or to try to follow the pulse of the Trade and Technology Council (TTC) on digital security and AI that was done under the Biden administration.
Carsten Brzeski, chief economist at ING, says the elections in the United States and Germany will mark “exceptional changes” that will have repercussions in Europe, with geostrategic changes that, at times, “will be experimental, despite their importance, and sometimes, structural” Brussels therefore needs a Germany that “protects” it. Faced with Washington’s “attempts to weaken and fragment” the EU, as warned by Hal Brands, Henry Kissinger Professor of World Affairs, for whom Berlin “must defend the liberal and democratic order” of Europe , described to Trump. its threatening transatlantic tension” and prevent the EU from transforming itself with its version 2.0, written in Foreign policy.
And this can convince him, at least, of some of the risks that “his aggressive and isolationist program” entails in the monetary, economic and technological fields or in the climate fight or global security, underlines Peter Walkenhorst, analyst at the Bertelsmann Stiftung.
