The tourist boat ploughs through the fast-flowing Rhine. On either side of us, barges weighed down by tonnes of scrap metal sparkle in the bright autumn sunshine as they cleave upstream towards Cologne. This river has been Germany’s mercantile artery for centuries and the prosperity of cities like Dusseldorf is based on being a massive inland port of this giant European waterway.
Like much of Germany, Dusseldorf has adapted. It has emerged as one of the biggest conference venues in Europe, underpinning the importance of the hospitality industry, and offshoots of this hospitality industry, in keeping modern cities ahead of the pack. Dublin could learn from Dusseldorf in this regard because in the future this type of upscale tourism, driven by festivals and conferences, may well prove to be extremely lucrative for our capital.
Further down river is the Ruhr and access to the Ruhr Valley – the traditional heart of the German economy. This is one of the most densely populated places in Europe with enormous cities mere kilometres from each other. Although the area has been in decline industrially, German manufacturing industry has proven to be one of the most resilient in the world. The Ruhr Valley – unlike post-industrial areas of Britain, which are wastelands – has not only negotiated the decline but has re-invented itself.
It is there, right in the middle of the Ruhr, that the Irish faithful descended for the match yesterday.
Before the match Martin O’Neill urged us to be confident. He was reflecting the new mood, not just in the Irish team, but in the country that we, as a country, are back in the game.
On the basis that our budgetary plans were seen by the Bundestag in Germany before they were seen by the Dail, maybe the fact that I am writing from Germany on budget day is appropriate.
When you stand back, from an economic point of view, the irony is that what happens here in Germany over the coming few months will have more impact on Ireland’s budgetary position than all the posturing of Irish politicians. While the budget is more or less an electioneering document for the next exercise in spectator democracy, the economy in Germany will set the rate of interest at which our debt is priced, the rate of interest for our mortgages, the crucial dollar/euro exchange rate and the attitude of Europe’s elite to our next corporation tax move.
Germany is beginning to show signs of strain. In the past week we have seen every piece of hard data out of the Federal Republic beginning to weaken dramatically and unexpectedly.
German factory orders fell by 5.7pc in September. Industrial production slumped by 4.0pc and export to the rest of the world retrenched by 5.8pc in the past few six week. This is a disaster for a country that bases its prosperity on the willingness of the rest of the world to spend.
And frugality is the flaw in the German model based on fiscal prudence and a current account surplus. Both of these attributes are merely the reflection of Germany not wanting to spend enough. This shortfall in spending has to be made up by the rest of the world, but if the rest of the world stops spending, then the Germans have a problem.
In the past few months, Europe has stopped spending and as Europe is Germany’s biggest trading partner, ultimately the impact on Germany is felt through falling orders for German factories, falling production and falling exports. All this is now happening.
The problem for Europe is that no growth is not just an economic problem; it is a political headache too. As European growth stalls – yet again – the sustainability of the debts of Europe’s periphery governments come back into focus. The ECB wants to save the Euro, so it decides – as it is doing – to print as much money as possible. This angers the Germans who believe that the ECB is risking all its credibility if it prints money.
The Germans are beginning to understand that Mr Draghi, the Italian head of the ECB, is trying to turn the Euro into the Lira behind their backs. But they also know it is too late. They have traded the mighty Deutsche Mark for the Euro and they can’t go back. The Italians and Spanish have a gun to their heads.
All they can do is complain and accept. This is a difficult position for Europe’s premier economy to find itself in.
Germany is following when it should be leading – and there is nothing it can do about it.
Therefore, low Eurozone interest rates are here to stay and they will only rise in the government debt market (including Ireland) if the financial markets believe that Germany will not pay the bill for the rest of Europe.
Up to now the Germans picking up the tab was almost a given, particularly as the economy was so strong. What happens if the economy here weakens as quickly as the latest data from German industry suggests? Will the Germans have the money to bail everyone out? Will they have the stomach?
Ultimately, the answers to these questions will determine the future path of the Irish economy much more than anything announced on the steps of Leinster House.
That’s what happens when you give away sovereignty: national politics becomes practically irrelevant.
At least the Irish football team had its destiny in its own hands last night. In the final minute a flash of brilliance showed Ireland equal to the World Champions.
Maybe its a lesson to the politicians who sit in Dail Eireann.
Subscribe, on the way to Budapest for the first time in 8 years. Interested to see how the place has changed.
That’s what happens when you give away sovereignty”. Same old same old. How much better off we would be if we exited the Euro and rejoined the Pound. We should give it right back to the Brits where it belongs. We need a new tune David.
In terms of the banks lending too much, I like to use the analogy of a man going to a pub and ordering and drinking 10 pints in 3 hours who then ends up in hospital, who is to blame? – the man being so wreckless or the owner of the pub who wanted to sell as much pints as possible in order to maximise profits?. I believe both sides are to blame, having said that the ECB should have been the economic experts for each eurozone country. I think it was David who said the ECB is/was one of… Read more »
Don’t compare Ireland in economics with Germany. And especially not Southern Germany. Ireland has chosen a different path. Ireland has chosen neo-liberalism, Ponzi based consumption as the societal goal. Ireland needs to be compared with somewhere like Illinois, with all the economic activity concentrated in city, lots of control concentrated in a pliable bureaucracy, rampant nepotism, enormous pretence, and a corrupt clique in charge. Or maybe even Greece with a tight clique subservient to the needs of the imperial power centre in Brussels. The Germans will figure a way out of the current morass. They completely underestimated the disasters that… Read more »
Why is it that property prices in Ireland in particular are going up so ridiculous again while world stock market is in a panic again? The peak of property prices in Ireland was late 2007 – the time when world stock market got into a panic with a grand finale in 2008.
The euro has exposed the delusions, in contemporary times of many people in Europe.
The Belgians, and French are up next. In fact Belgium is a country living on borrowed money well into borrowed time. The ECB might well bankrupt itself trying to save both.
Then the Dutch, the Austrians, and the Finns.
Then the Germans.
David
It’s a recurring theme; you’re right, in a way, but something about how you explain it…jars. Not quite sure why.
der sparsame michel wird für sein eisernes sparen auch noch beschimpft, von denen, die ihr geld nicht zusammenhalten können /..dolche vita……
“Politics is the entertainment division of the military industrial complex.” Frank Zappa
…on top of which the banking elites of Germany coerced the Irish government into passing the buck of their criminal banks over lending into Irish economy cost the sick, the old and the next generation with their insane desire to become the world’d superpower.
http://www.independent.ie/business/irish/irish-were-bullied-and-treated-outrageously-during-crisis-legrain-30250226.html
+1
“German mercantilist model is ruinous for Germany and deadly for Europe”
is what this article puts forward and having read it, I agree, which is a bit unsettling to say the least.
http://www.independent.ie/business/world/german-mercantilist-model-is-ruinous-for-germany-and-deadly-for-europe-30651089.html
For those of you who wonder how an old digger like me sitting here in Perth, WA, keeps up to date with the Irish print media and all the “going’s on” around the emerald isle, here is a link I bet most of you never knew existed and yet I have been using it for year’s.
http://www.egt.ie/misc/nuachtain.html
Hi, “In the past week we have seen every piece of hard data out of the Federal Republic beginning to weaken dramatically and unexpectedly” Unexpectedly to who? The shit pile of debt is too big as it is. “This is a disaster for a country that bases its prosperity on the willingness of the rest of the world to spend” It doesn’t. It bases it’s prosperity on it’s own belief in manufacturing, frugality, savings and thrift. “And frugality is the flaw in the German model based on fiscal prudence and a current account surplus. Both of these attributes are merely… Read more »
The questions for you Michael are
1. What do you do when you have not got enough accumulated savings to fund the growth that you require?
2.Do the likes of the Germans fund growth and improve their quality of live at a faster rate than the rest of Europe and finally
3. How is economic convergence take place in Europe when investment is skewed in favor of the have’s as opposed to the have not’s?
The questions for you Michael are
1. What do you do when you have not got enough accumulated savings to fund the growth that you require?
2.Do the likes of the Germans fund growth and improve their quality of live at a faster rate than the rest of Europe and finally
3. How is economic convergence to take place in Europe when investment is skewed in favor of the have’s as opposed to the have not’s?
OOps I appear to be posting in stereo, time for bed me thinks…
“That’s what happens when you give away sovereignty: national politics becomes practically irrelevant.” http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/10/16_The_World_Is_Now_Set_Up_For_The_Mother_Of_All_Collapses.html Swiss people may be waking up to the reality that only by retaining control of their money system will they retain their sovereignty. “But on a more uplifting note, Switzerland is voting on a partly gold backed currency on November 30. If this goes through it will have major consequences for the gold market. The Swiss are already prepared to launch their campaign next week. IMPORTANT – On November 30, Switzerland has the unique opportunity to lead the world back to sound money and sounder economies.… Read more »