German inflation has reached its highest since the 1970s and the German Government cannot sell its own bonds! These unheard of post second world war crises for Germany show the effects of the West’s two decade war against Russia via Ukraine and Ukraine’s 8 year war against Russians who live in East and Southern Ukraine.
The conflict led to the sanctions on Russia, the theft of Russian foreign currency reserves held outside Russia, the boycott of Russian gas and the refusal to return turbines for the gas pipelines from Russia to Europe. Because the West refused to guarantee the return of turbines and a gas trade agreement Russia cut supplies.
Germany just committed to subsidising consumer and industrial gas prices to the tune of Euros 200bn until 2024 – which is seen as a threat to other EU countries which simply cannot match such largesse and whose industries and consumers will be competitively disadvantaged. (This is not the first time Germany has gone it alone in a crisis, using far greater resources to combat COVID lockdown costs and the EU debt crisis than other EU partners could afford thus gaining a competitive advantage)
But such a programme of subsidy must be funded by the German State and for the first time the Government – in trying to raise the money through bond sales – finds it cannot sell all those bonds. Recent auctions have been “very, very, very bad”, said Michael Leister, head of rates strategy at Commerzbank. He even called it a “buyers’ strike”.
A sale of Euros 1.78bn of bonds was less than half the Euros 4bn on sale so that the Government had to keep 55% of the issue on its books. This has been building for some time and in the last 12 months, bid-to-offer ratios at auctions of 2-, 7- and 15-year notes have also hit new lows. The 10 year bond yield has risen 10 times to over 2% since August (in other words their value has fallen by 10% – causing a capital loss to those holding them).
What happened to British gilt yields and the crisis in pension funds which led to the resignation of both the UK Chancellor and the Prime Minister was always going to be repeated in Europe. These are the first signs. Central banks are raising interest rates just as recession looms and government debt rises. The German Parliament has voted to suspend the constitutional brake on debt. This and a failure to sell its debt threatens inflation in a country famous for its monetary discipline and historical fear of destructive inflation.
Ironically Germany has been hit the worst because its “economic miracle” industrial base is dependent on low energy costs and export of its machine tools, steel, cars, chemicals and much else which is so energy dependent.
We have already shown a little of the crisis facing German corporations. http://freenations.net/britain-bounces-back-eu-in-crisis-usa-attacks-europe/ but now Germans are seeing the daily effect on old established companies:
Germany, before the Ukraine intervention by Russia, (the actual war of course started in 2014) got over half of its gas from Russia, half of its hard coal for steel production and one third of its crude oil. Russia was also the 5th largest buyer of German exports outside the EU. Germany spent 49.5bn euros (£43.25bn) on imports between January and August, according to the Reuters compared to 17.1bn euros during the same period in 2021.
No wonder the IMF predicts Germany will have the steepest GDP decline in the G7 in 2023 (-0.3%)
The biggest chemical company in the world the German BASF has said its European sites must be “permanently cut” to a smaller size because of high energy costs, low growth and “over regulation” – the latter of course from the EU!
BASF is looking to expand in China and the USA (where gas costs are a fraction of Europe’s thanks to Washington’s war on Russia!)
In a worrying comment for the German Government the CEO Martin Brudermueller said that the Euro 200 bn energy subsidy “….can’t make up for the deficits over years to come”
No wonder the company has just opened a new site Zhanjiang in China which will be the third largest BASF site in the world. The site will have electricity from renewable resources and targets to achieve 100 percent by 2025. A long way from the European gas market! Other German companies looking to invest abroad include`:
🔸 Zeiss Group acquired land in China to construct a large factory.
🔸 BMW moved its mini-electromobile manufacturing line to China.
🔸Volkswagen announced an investment project in China to the tune of 16.8 billion dollars.
AMID INDUSTRIAL CRISIS GERMANY FACES WAR REPARATIONS
As if the business and financial crises were not enough Germany also faces simultaneous claims for $1.6 trillion in second world war reparations from Greece and Poland!
Greece has demanded $300 bn (rejected by Chancellor Scholz) and Poland $1.3 trillion. The latter is to cover the following – published by Poland’s Foreign Office:
▪️ Compensation for material and non-material losses of 6,220,609,000,000 zlotys (about $1.3 trillion)
▪️Compensation for the victims of aggression and German occupation and their family members for the damage and harm caused to them”;
▪️Systemic actions of the Federal Republic of Germany leading to the return of cultural property stolen from Poland located on German territory”,
▪️Return of assets and liabilities of Polish state banks and credit institutions stolen by the German state in 1939-1945”.
An experienced lawyer in this filed of compensation and reparations claims is Dr Jonathan Levy who comments for me:
The problem here is that Poland is the successor to the Polish communist state which while getting short changed did get West Prussia and Silesia while giving up Western Ukraine. And then expelled all Prussians and Germans from its territory. Bottom line unless Germany wants to appease Poland, there really is not legal argument in Poland’s favor.
It is a great irony that, just as NATO and the EU, with Germany a principal driver, penetrate Ukraine to attack Russia, those who suffered from the same move 80 years ago should demand reparations! Ironic too that the biggest demands come from Poland, the most bellicose anti Russian actor today.
And how disgraceful that the Anglo Saxon world should now appear on the side of those who have within the EU and in Ukraine encouraged, armed and trained openly fascist modern forces against our old war time allies.
