We've often said hereabouts that Germany is never to be underestimated for the things it does strongly. That, of course, includes vigorously digging deep holes for itself: Es irrt der Mensch so lang er strebt - and there's no striver like a German who's got religion. Prior to Ukraine Germany was already embroiled in a nonsensical 'energy transition' policy - Energiewende - that we've written about here several times. Formerly I took a simple & cynical view on this: they can probably afford it; and it's better to watch them do the experimentation on moonbeams from cucumbers etc, than do it ourselves.
Since Putin kicked off in 2022, they've bizarrely doubled down on what was at the time an embryonic policy, namely to become a hydrogen economy. The (natural) gas sector in Germany had been privately working on this for a while, using its own funds (always a good sign) , wishing to have a lifeboat for its vast sunk-cost infrastructure against the scenario of natgas falling as far out of favour as have nukes, lignite and hard coal in their turn. Quite fairly, the entire German state doesn't favour UK-style deindustrialisation as an alternative approach to 'green'. In some kind of arm-waving fantasy, hydrogen seemed to be the answer - first 'blue' H2, swiftly to be followed by 'green' H2, and getting started with imports (another fantasy; but a lot of countries from Australia to Saudi keep saying they'll be big exporters any year now).
Being Germans with a Policy, they've now zoomed past the sensible 'private experiment' stage and have erected a complex system of targets and subsidy structures for hydrogen projects, both upstream and downstream. (I have tried to get to grips with it in all its byzantine complexity, but it's not easy - and indeed may not represent anything you can understand rationally at all.) Every German firm that might conceivably participate in the putative H-economy is dabbling in this, all hoping someone else will jump first. Along the whole length of the putative H2 supply chain, every single major scheme that was more-or-less on the starting blocks at the start of this year has either foundered already or suffered major setbacks.
A key player in the German economy - until a couple of days ago - was Federal Minister of Finance Christian Lindner. I have a very good friend who knows the man, and tells me Lindner was a lone voice of sanity in a cabinet of lunatics. Lindner's overarching view is that his fellow countryman have too much in the Manic Enthusiasm department, and little instinct on the matter of value for money. These two things he saw coalescing to baleful effect in the hydrogen policy.
What now? Ploughing on regardless would be very German, but maybe even they are beginning to see it for the nonsense it is. Perhaps everyone hangs on until after COP29, and then the ructions really begin. However much we might mock, we'll all feel the impact if the bicycle topples over.
Es irrt der Mensch so lang er strebt. Yes, Goethe had it right: and as he also suggested, they just can't stop striving ...
ND
9 comments:
Germany calling............Lindner wrote an 18-page paper attacking the failures of his coalition partners and saying many things he should’ve said years ago. In this document, he demands comprehensive de-bureaucratisation to unburden businesses. He demands tax reductions, including the phase-out of our odious “solidarity surcharge.” In a direct swipe at the SPD, he calls for a comprehensive reining in of entitlement spending, and in a claw to the face of the Greens, he requires an end to Green industrial subsidies and a reconsideration of our plans to achieve carbon neutrality five years ahead of the EU schedule. If all that sounds relatively milquetoast to you, you do not understand how extreme German politics have become. This is not a simple economic policy paper. It reads more like a manifesto – an attack on the entire policy of the traffic light if not an outright ultimatum.
Lindner’s paper reminds many of a similar moment in 1982, when Germany was likewise mired in an economic downturn and the FDP were also ruling in a coalition with the SPD under Chancellor Helmut Schmidt. Back then, the FDP Economics Minister presented the SPD with a manifesto demanding comprehensive liberalising reforms, and their revolt ultimately brought down Schmidt’s government.
This time, however, there is one important difference: Lindner’s manifesto was not supposed to be public. It was an internal document that somebody leaked to the press. Lindner claims that he gave copies only to the Green Economics Minister Robert Habeck and to Chancellor Olaf Scholz. Now that we have all read it, though, Lindner and his yellow FDP are in a very awkward position: These demands are plainly crafted to be maximally unpalatable for the Greens and the SPD, and there is no way the other coalition partners can agree to any of this. Lindner will thus have to accept the public humiliation and continue to support the ruinous policies that he is now on record as bitterly opposing, or he and his FDP will have to leave the coalition, in which case the government is done and we will probably have new elections in March.
Unlike Schmidt before him, our present Chancellor Scholz will ignore the provocation, and Lindner will bend the knee. New elections, whether they come early or as scheduled, will just chase the FDP out of the Bundestag entirely. Either way, whether it happens in the spring or the autumn, we will get a new coalition. The Christian Democrats will form a government, and probably they will need both the Social Democrats and the Greens for a majority. The party of Angela Merkel that put us on this cliffward path will take charge, in other words, with an assist from the two parties that have spent the past three years helping us over the precipice. Everything will continue as before, with perhaps a few more symbolic deportations of dangerous migrant criminals to Afghanistan and a few less wind turbines.
The internal political decay will continue. The pale and desolate ghosts who rule us now will be succeeded by still paler and more desolate ones. The AfD will accrue ever more popular support. We will have to hear all over again, and at greater length, about how the real problem is with the extreme right. Don’t mistake me, this is not all pessimism. There will be a correction, sooner or later, but the later it is, the more drastic and unpredictable it will be......
You'll remember we were all told that Kaiser Bill lost WWI because of the doomed Schlieffen plan to invade France through Belgium. I looked it up recently and found the suggestion that the German High Command blamed Schlieffen because he was conveniently dead. It wuz von Moltke and the boys who were responsible.
Whatever: the best army in the world made the most enormous strategic cockup. And now the same is true of the best economy in Europe. History rhyming?
Currently reading “ Kaput: The End of the German Miracle” by Wolfgang Münchau. Makes related points to the post above — and expands on the many (but interrelated) reasons for this and other debacles.
Also puts to bed the oft-repeated “it’s just being cut off from cheap Russian gas” hand waving we sometimes see. The loss of access to Russian gas is the least of Germany’s problems.
It's fun to watch the boxheads set light to their economy whilst ours is burning around our ears.
"The loss of access to Russian gas is the least of Germany’s problems."
What are the larger ones, then?
(I saw a chart, I think at Guidos, showing our insane electricity costs just when HMG is betting the house on "electric everything". Think we have the most costly electricity in the developed world, by far. How did we get here?)
Well, Münchau spent over 200 pages detailing it, but in summary:
1) Cronyism, corporatism and the associated pork-barrel politics this brings whereby favoured -- but uncompetitive -- industries get supported to the detriment of disruptive but leaner and more profitable new entrants.
2) Dismal capital formation due to a moribund and corrupt (see 1 above) banking sector which even enables fraud e.g. Cum-Ex and Wirecard in addition to malinvestment in sub-prime securities
3) Underinvestment (as a result of 1) and 2) above) in digital infrastructure
4) Mind-numbing bureaucracy hindering start-ups and even SMEs without the right connections to get things done
5) Propping up legacy businesses such as ICE passenger cars when, whatever we might thing of the matter, the writing is on the wall for due to regulation and ICE phase-out
6) Can I mention the mercantilism? Mercantilism works great. Until it doesn't -- if the economic model wasn't containing the seeds of it's own undoing, which it does, then Trump will be having none of it.
I could go on. And I'm only up to pg. 50.
"the writing is on the wall for due to regulation "
So you're saying it's national suicide... here the manufacturers of oil boilers like Worcester Bosch are preparing for redundancies for the same reason.
Anonymous said...
"The loss of access to Russian gas is the least of Germany’s problems."
What are the larger ones, then?
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Again, Eugyppius, a German Substacker, will guide you. The "coalition" of three parties which detest each other the larger one, and, as here, a population losing all faith in all politicians
Well worth subscribing. Most articles are free, he writes better prose than most English, and is very very funny.
https://www.eugyppius.com/
Having read the blog, his main reason seems to be Green policies and the abandonment of nuclear power, both of which we are also in thrall to (Blair scrapped new build nuclear in 1998, as I never tire of pointing out).
The big difference imho is that such policies in the UK are just making the rubble jump, we destroyed our industrial base in the Thatcher/Blair years. whereas they still have big energy companies, chemicals, steel, shipbuilding. etc
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