The German Economy Is Grinding To A Halt. To The Delight Of The Eurocrats Who Hope They Can Now Dictate Policy
Martin McCauley writes from Frankfurt: Horrors of horrors. The German central bank, the Bundesbank, has just produced some shocking stats. It forecasts that growth for 2013 will only be 0.4 per cent, instead of 1.6 per cent of Gross Domestic Product. Believe it or not, this is lower than the 1.2 per cent forecast for Britain by the Office for Budget Responsibility.
But before everyone starts celebrating, a cautionary word. Forecasting, in the immortal words of Sir Mervyn King, the outgoing Governor of the Bank of England, is a ‘mug’s game’. Despite this cold douche, let’s assume that the financial statisticians are correct. The European Central Bank (ECB), headed by the ever smiling and ever optimistic Mario Draghi, was obliged the other day to lower its growth forecasts for the whole Eurozone. So what does it all mean for the masses?
Remember, the Bundesbank was and still is against the euro. It reckons that Germany would be better off with the Deutsche Mark. So do three out of every four Germans. The word is that the ECB will lower interest rates in a desperate attempt to stimulate some more economic activity.
Germany is the engine of growth in the European Union. If it slows down, the whole EU slows down. Chancellor George Osborne, in his autumn budget statement, blamed external factors for stalling economic recovery. Here is more bad news for him. The chances of the EU pulling Britain out of recession are receding by the day. So folks in Britain, tighten your belts, because things are going to get a lot worse.
Next year is election year in Germany. Angela Merkel’s party is leading the main opposition Social Democrats (SPD) by a country mile in the opinion polls. That could all change. If the economy stutters to a virtual halt her message will be: stay with me, I’m the only one who can steer Germany back to prosperity. Voters may buy this, thinking that it’s better to stay with her than risk the untried social democrats at the helm. But then they might not.
Germany’s slowdown is bad news also for Greece, Portugal, Spain and other lame ducks in the Eurozone. Berlin will be in no mood to transfer wealth to these profligates.
Whom does the virtual standstill of the EU economy benefit most? Yes, you’ve guessed it: the Eurocrats in Brussels. They will argue more vociferously for a centralised monetary and fiscal policy for the whole Union. There is a proposal on the table to make the ECB responsible for regulating banks and overseeing fiscal policy. The Germans have poured cold water on this proposal, arguing that the ECB is not competent to regulate all the banks in the EU. Berlin wants each country to regulate its own banks. This is much more sensible. The ECB has enough on its plate just ensuring that those countries which have received bailouts keep to the stringent rules imposed on them.
As the EU economic outlook worsens, more states will be coming with a begging bowl to Brussels. That will be an opportunity to force a fiscal union down their throats. Budgets will be coordinated in Frankfurt. Gradually taxation, welfare spending, defence spending, educational and cultural investment will all gravitate to the same level. The bankers in Frankfurt will tell you how much nationally you can spend on educating a child.
Welcome to the brave new world devised by the bankers and Eurocrats. Time to jump ship and fashion a better future for Britain outside the EU.