Draghi the Savior, the last card of the EU

"Italy remains a socio-political volcano, both for Italian elites and the EU. Not only Berlusconi, Monti and Renzi have been burned by it - but not even the magician Draghi will be able to extinguish this fire. (...) From him one expects an institutional coup d'état in the short window of opportunity given by the temporary crisis of populism, a maneuver capable of limiting the foundations of parliamentary democracy," writes the great Austrian intellectual Wilhelm Langthaler. For Langtahler "In Italy a great class struggle is underway, the final act of a tragedy that began with the infamous Tangentopoli", from Makroskop.de a very interesting reflection of the great Austrian intellectual Wilhelm Langthaler.

Prologue: it all started with Maastricht. With the turning point between 1989 and 1991, and with that great transformation of economic policy that would lead to the signing of the Maastricht Treaty. Italy was to be the EU country that, over the years, suffered the most from the political and economic consequences of the treaty.

The collapse of social consensus in the boot is the price Italy had to pay for all this. And already the Berlusconi era could be considered a form of right-wing bourgeois populism that tried to mask this collapse: Italy was under the curatorship of the International Monetary Fund and had lost its fiscal sovereignty.

What all this could mean in concrete terms, Berlusconi had already understood when he hesitated to implement the austerity policy that a little bit all parties were asking of him and thus incurred the wrath of European institutions. The EU, the ECB and "the markets", which were showing their thumbs down to the country by demanding ever higher risk premiums on Italian government bonds, abruptly put an end to his government in 2011 with a sort of constitutional coup. President Giorgio Napolitano, with the support of the EU, in fact, since 2008 was working on the fall of the Berlusconi government and after his almost forced resignation, he put in his place the Eurocrat and banker Mario Monti. His "technical" government further radicalized the neoliberal austerity to which the country had been subjected since the 1990s, until it was followed by the government of the left-wing Blairite Matteo Renzi.

In a sense, Renzi is the missing link, the link between the past and the present. Because what he failed to achieve with his 2016 constitutional referendum, Mario Draghi should now succeed in doing - namely an EU-compliant restructuring of the Republic - to which Renzi paved the way.

After the failure of Renzi's referendum, his star eclipsed as quickly as it was born. Renzi once again would have liked to play his role of Kingmaker, but temporarily there was an interlude of populism grown outside the system, which explains the current feelings of the elites towards Draghi. With a third of the vote, the Five Star in one fell swoop in 2018 became the center of the political system exercising clear opposition to the EU regime. Driven by the pressure of the street, they had managed to get the League out of the right-wing alliance giving birth to what had been called the sovereignist government in Italy.

Once again, the President had intervened in violation of the parliamentary Constitution by dismantling the leadership of the anti-EU government. Instead of Paolo Savona, as expected, Prime Minister Giuseppe Conte had let Sergio Mattarella dictate to him for the Ministry of Economy the name of economist Giovanna Tria, considered a tool in the service of the EU elites. Thus, after the Five Star party had its wings clipped and failed to put in place the progressive social reforms they had promised, the meteoric rise of the right-wing populism of Matteo Salvini's Lega began. After a little over a year, Salvini thought he could overthrow Conte, but in fact paved the way for a social-liberal government, the Conte II - with the participation of Renzi.

The restructuring of institutions

What Renzi recently did to overthrow the second Conte government is of little relevance. There was only one thing the elites were largely in agreement on: no new elections. Already the smell of the old bipolarism was wafting in, whose unwritten law would have provided for another right-wing coalition. But the Quirinal was not playing along, and once again President Mattarella acted as a destroyer of the Constitution, rather than its defender.

The President's constant intervention clarifies what the path is that Renzi already in 2016 would have wanted to take: presidentialism as a response to the crisis of democracy and sovereignty that began at the latest with the financial crisis. For decades, in fact, elites have been grappling with the authoritarian restructuring of institutions. The progressive Constitution of 1948 is a thorn in their side because it makes the technocratic implementation of the neoliberal orientations of the EU difficult. Restructuring seems to be the instrument to make permanent the retreat of Italian democracy.

This path provides a double safeguard: on the one hand, it would keep under control the constant bickering within the elites, and on the other hand, it would keep permanently away from the institutions the latent opposition of the people .

In France, this system has worked reasonably well for at least half a century. Regular explosions of street anger have so far been successfully suppressed by the police, without ever managing to enter the political sphere. But Italy is not France.

Draghi arrives

For some years now the country's elites have had Mario Draghi ready as their ace in the hole. At first they thought of offering him the post of President of the Republic, which is to be renewed in 2022. Now, however, Draghi is needed in another position, because the system of bipolarity seems to have lost all effectiveness, as has happened with Berlusconi's numerous cosmetic surgery operations that have never managed to rejuvenate him. With the Centre-Right in government (a right-wing liberal coalition) the predictable social-political crisis in the post-Coronavirus era would have been difficult to manage. That is why other weapons are needed. What, then, is the function of Draghi's all-party government?

First, right and left-wing populism is in big trouble right now. There is a historic opportunity to reabsorb it. Whether it can be done remains an open question, but if it can be done, this is probably the right time to do it. In any case, populism currently seems to have been decapitated, and the technocratic operation could prove successful if it can be prevented from emerging as a new political articulation, at least for a time.

Second, Draghi's own life and career promise what his supporters hope for: an avowed European, indeed in some respects the proconsul of the EU, the embodiment of a Eurocrat returning home to clean it up and save it. In light of the manifest opposition and rejection of the neoliberal dictates of the EU, the parliamentary and media support Draghi seems to enjoy can be considered more than extraordinary. And this will even allow for a certain popularization of the government in large sections of public opinion - provided that the emergence of a strong opposition can be avoided.

No Monti 2.0 - Draghi's program

In other words, Draghi will face a Herculean task. Will he be able to pull it off? One thing is certain: if when the epidemic has run its course and the Covid-imposed exception is over Draghi should return to the old EU austerity, then his failure is almost certain. It seems that even he knows it, and it seems that even Berlin and Brussels have begun to understand it. A Monti 2.0 therefore seems to be out of the question.

Correspondingly vague is also the program of the Draghi government; it talks about reforming the judicial system, the public administration and the tax system - nothing different from what most Italians already think should be done. The EU workhorse, namely raising the retirement age, remains on the back burner for now, although the Conte government's pension reform, progressive in its approach, will be phased out. Further wage cuts (code word labor market reform) also do not seem to be at the center of the discussion in any way.

Much more significant, however, is Draghi's saga about good and bad debt. The good debt, he says, is the one that will be used to make productive investments. This is a very important announcement. Draghi is putting all his eggs in one basket, namely the subsidies and loans granted as anti-Corona aid, and welcomed by the EU as a milestone or as the so-called "Hamilton moment". But in truth the amount of money Italy can expect to receive is quite small compared to the demand stimulus needed and potentially subject to very harsh and neo-liberal oriented conditionalities that could derail the semi-Keynesian attempt to stimulate the economy.

It is doubtful that the operation will work, as there are many question marks. The social crisis is enormous and political calm is maintained only because of the exceptionalism dictated by the Coronavirus. In order to have a political impact, demand-strengthening measures will have to come quickly and massively, at least by the next election. But this is exactly what the EU cannot and must not afford to do, because the de facto constitution of the EU treaties is at stake.

History has also taught us - not least in France under Mitterrand - that the stimulation of domestic demand to be effective must be accompanied by protectionism. This would mean an economic policy that is not only impossible within the Eurozone and the single market with its doctrine of free trade, but that Draghi should also prevent. Draghi's mission is therefore virtually impossible unless the impulses come from the global economy.

Why Draghi is the last card of the EU

Italy remains a socio-political volcano, both for Italian elites and the EU. Not only did Berlusconi, Monti and Renzi get burned by it - but not even the wizard Draghi will be able to put out this fire.

Rather, Draghi is expected to do something else. From him one expects an institutional coup d'état in the brief window of opportunity given by the temporary crisis of populism, a maneuver capable of limiting the foundations of parliamentary democracy. In its place, they would like to set up a Bonapartist system with the help of which socio-political claims can be structurally suppressed even more effectively than in the past.

In Italy a great class struggle is underway, the final act of a tragedy that began with the infamous Tangentopoli, i.e. the explosion of the system of corruption, abuse of office and illegal financing of the parties of the First Republic in the early 1990s. For the EU, Draghi is the ace in the hole, while the defenders of democratic sovereignty currently seem to be more acephalous than ever.

But a wardrobe full of European-made institutional straitjackets is also provoking counter-movements and an anti-establishment radicalization. A kind of "gilets gialli à la italienne" may already be in the air. Resistance to closures, especially in the South with their strong social component, has already offered a taste of this. Unlike in France, popular opposition can no longer be kept away from political institutions, as the example of the 5 Stelle has already shown.

Today, the political representation of the growing number of social marginalized is orphaned, but this will not last. If Draghi fails, the crisis of the neoliberal regime would intensify, not only in Italy, but throughout the EU.

Poland overcomes Italy

For the first time in the history of German foreign trade, in 2020 Poland surpassed Italy in both exports and imports with Germany, relegating the Belpaese to sixth position, behind the Poles. Even the French continue to lose ground and in 2020 they will have another gigantic trade deficit with the Germans, how much longer will the French be able to go on with numbers like that? A non-trivial question, on the answer to which depends the sustainability of the single currency. Data from Destatis.de

The People's Republic of China was again Germany's most important trading partner in 2020 for the fifth year in a row. As reported by the Federal Statistical Office (Destatis), according to preliminary data, goods worth 212.1 billion euros were exchanged between the two countries in 2020. Despite the crisis caused by the Coronavirus, the volume of foreign trade with China still increased by 3.0% compared to 2019. It is followed in second place among the most important trading partners by the Netherlands with a total turnover from foreign trade of 172.8 billion euros (-8.7%) and the USA with 171.6 billion euros (-9.7%).

Main trading partners of Germany in 2020

Germany's top 10 trading partners by imports and exports

As of 2015, China remains the largest importer

The importance of China for German imports is growing steadily: in 1980, China was ranked 35th in the list of importing countries, in 1990 it was already 14th. Since 2015, the People's Republic of China has been the state from which most German imports arrive. In 2020, goods worth 116.3 billion euros were imported from China. Imports also increased by 5.6% compared to 2019. The Netherlands (with 88.5 billion euros) and the United States (with 67.8 billion euros) were the second and third largest import countries in 2020. The crisis caused by the Coronavirus, however, led to significant declines: imports from the Netherlands compared to 2019 decreased by 9.6% while those from the United States decreased by 5.0%.

Top 10 trading partners by sum of imports and exports and top 10 German trade surpluses

The United States still remains the most important customer for German exports

The majority of German exports also went to the United States in 2020, as has been the case since 2015, even though exports of goods to America decreased by 12.5% compared to 2019 to EUR 103.8 billion. The People's Republic of China is in second place in the ranking of importing countries with 95.9 billion euros (-0.1%) while France is in third place with 91.1 billion euros (-14.6%).

Germany had the largest trade surpluses in 2020 with the United States (36.1 billion euros), France (34.4 billion euros) and the United Kingdom (32.2 billion euros). In contrast, the 2020 foreign trade balance with the Republic of China showed a trade deficit: overall, the value of goods imported from China exceeded the value of goods exported by €20.4 billion.

How much has the German government saved as a result of zero interest rates?

If in the popular press Mario Draghi becomes Draghila, the truth is that data in hand, thanks to the unlimited liquidity of the central bank and the risk-free status of German bunds, the federal government has saved over 200 billion euros in interest expenses on government bonds over the last decade. Savings that most likely translated into lower taxes and a generous pay increase for civil servants. Handelsblatt.de writes

It is always the same ritual: every year, when Olaf Scholz's (SPD) man in charge of the public budget, State Secretary Werner Gatzer (SPD), presents the next federal budget, he is asked how much more he could save on interest expenditure. And each time, Gatzer states that we are already at the "end of the line". There really is nothing left to save. And every time the public budget is mentioned, politicians feel they are being played for a fool.

And 2020 is a perfect example of how that works. In 2016, in fact, the federal government in its financial planning for 2020 assumed an interest expenditure of 21.9 billion euros. In the end, however, just €6.5 billion was spent, so much less than had been planned. And this has been going on for years. Since the outbreak of the financial crisis, interest rates have fallen to rock bottom and stayed there. Many savers are on the verge of despair because they are no longer earning interest on their savings. But there is also a big winner: the state.

In fact, since the financial crisis of 2008, thanks to low interest rates, the federal government in total has saved €210.8 billion in undisbursed interest expense compared to what was originally budgeted. This is the result of a response by the Ministry of Finance to a parliamentary question from the Greens available to Handelsblatt.

In its financial planning for the years 2008 to 2020, in fact, the federal government originally planned to have to spend a total of 533.9 billion euros on debt interest payments. "The sum of the amounts carried forward to the end of the budget years in the years 2008 to 2020" in the end amounted instead to only 323.1 billion euros, according to the answer to the question from the Federal Ministry of Finance. A difference of almost 211 billion euros.

With the newly issued government bonds, the federal government even earned 6.9 billion euros last year. Instead of charging interest, in fact, when the state went into debt with them, investors had to pay the German government additional money.

Germany as a safe haven

The reason for this nonsense is because investors around the world are looking for safe investments. Regulatory requirements are forcing insurance companies, for example, to invest their money in securities that are considered safe. And German debt securities are considered particularly safe. The fact that the government hardly has to pay any interest on debt anymore, and in some cases can even earn money when it has to issue new debt, is playing a decisive role in the German debt debate.

For a long time, in fact, the "Schwarze Null", i.e. a balanced federal budget, was considered acceptable by a large political majority. And the balanced budget anchored in the Basic Law was considered sacrosanct. Because of the Coronavirus, however, the "Schwarze Null" is now a thing of the past, but the balanced budget in the constitution is also increasingly under fire, recently even the head of the Chancellery, Helge Braun (CDU), suggested its relaxation.

The SPD, the Greens and the Linke, but also many economists, are calling for the low-interest-rate phase to be used to create more debt and to use 500 billion euros for an investment plan.

According to Sven-Christian Kindler, of the Greens, real interest rates in major industrialized countries, including Germany, have been falling steadily since the 1980s. "The Union's alarmism about the danger of rising interest rates serves only to justify their ideological stance against debt, and has nothing to do with economic reality. Those who in such a situation intend to give up borrowing money to finance the cost of the crisis and investments are acting against all economic rationality".

The argument is as follows: when interest rates are low and debt costs nothing, it would be foolish not to take advantage of it. Germany needs to make some major public investments, investments in climate protection, digitization, education and affordable housing. "That's why now is the right time to launch a large €500 billion investment fund to be spent over ten years," Kindler said. For this, the balanced budget should be reformed.

However, the Union does not want to move away from a balanced budget. There are also economists who warn against accepting low interest rates as if they were a gift from God. If interest rates were to rise again, Germany's interest expenditure would quickly rise again, they argue. In 2008, for example, the federal government spent 40 billion euros just to pay interest - and at that time the debt level was lower than it is today.

This is why the CDU/CSU do not want to move too far away from a balanced budget. Financial policy could therefore become a central point of contention during the upcoming election campaign.

Good luck, Mario!

"Let's not delude ourselves, with this Germany it is not possible to make Europe. How could the Italian prime minister manage to do what the ECB president has failed to do, namely launch a calm and rational discussion on economic policy... in which the Germans finally understand that they will not get away with their same old neoliberal and monetarist platitudes and mercantilist ambitions. All those who still have their heads screwed on straight can only cheer for Mario Draghi,' writes the great German economist Heiner Flassbeck. For Flassbeck, Mario Draghi's political potential in Europe is enormous, but the resistance he will encounter along the way will also be very strong, especially in the north of the continent. Heiner Flassbeck writes about this on Makroskop.de

Poor man, I thought immediately when I heard that Mario Draghi had accepted the mandate as Prime Minister to form the new Italian government. But on reflection, I then realised that Mario, whom I have known for more than 20 years, and who may well be poor from my point of view - and perhaps from his too - probably represents a unique opportunity for Italy instead.

What country can say that it has a prime minister who has not only received broad support from the parties represented in Parliament, from right to left, but who has also amassed a unique experience both domestically and internationally. Mario Draghi has been part of (and taken responsibility for) all the main bodies dealing with the global economy, Europe and the Italian economy since the early 1990s. He took the most important position in terms of economic policy within the eurozone at a time when the Monetary Union (EMU) was on the verge of collapse, giving it a foothold at a crucial moment.

None of this, of course, can guarantee that she will be able to participate in the intrigues and conspiracies typical of politics, and successfully complete this task as well. But the potential of his political ambition is enormous, given his vast experience and knowledge on crucial issues. And in any case it is much greater than that of any other politician who has been allowed to take the helm in Rome, at least in the last 30 years.

Italy and monetary union

Anyone who has had anything to do with Italy, beyond the usual widespread prejudices - especially in Germany - will be well aware that the Italian question, the Italian problem, let us say, is a problem essentially linked to Italy's entry into monetary union. Because of Italy's special starting position, which I have described in detail in the thematic issue of MAKROSKOP - "Debt and expiation", since the beginning of the euro, the country has always been on the defensive. The simplest reason is that Italy and the other eurozone members were dying to give up their "monetary sovereignty" (which they never really had) and were ready to swallow a number of very fat (German) toads to do so.

The hope that, thanks to a large European currency area, they would be able to have an economic policy that, as in the United States, would be geared above all to the domestic needs of a large and relatively closed economy and consequently put domestic demand and employment at the centre of the central bank's efforts, was not at all unfounded at first. In the end, however, the Bundesbank, which had always focused on price stabilisation, had been replaced by an institution that, to be sure, in the literal interpretation of the treaties (and of course at vehement German insistence) was even more devoted to containing inflation as its sole central objective. But anyone who seriously considered European 'solutions' at the time was well aware that in this Europe the food could not be 'eaten as hot as it was cooked'.

Even among the signatories of the Maastricht Treaty, no one could have imagined that soon after the start of monetary union the largest country would start to 'Dutchify' itself, i.e. to live at the expense of its neighbours, as the Netherlands had already done 'with some success' in the 1980s with its policy of wage dumping. That this was done by a red-green German government, of all people, a government that stumbled on this 'way out' because of its complete economic incompetence, was a coincidence. But the fact that it blocked the economic development of the whole of Europe in this way can be considered a truly unique experience in Europe.

Germany, among other things, despite its rather superficial successes, ruined forever its own successful economic system, which since the 1970s had become the anchor of all European monetary alliances, as it effectively made it impossible for the country to achieve a high level of employment without a current account surplus.

For Italy, this process was undoubtedly fatal, because by signing the Maastricht Treaty it put on a fiscal suit that would have been bearable only if Italy had been a great export success and/or if growth had been driven by business investment in an overall flourishing Europe. However, Germany's conduct has blocked the first and second path, because its policy of wage dumping has effectively blocked the export route for other countries in the monetary union and at the same time stifled its own domestic and European demand. All the other countries in the monetary union, in fact, had to follow this senseless model in order not to sink irreparably in their export markets.

Mario Draghi's room for manoeuvre and his biggest opponent

Mario Draghi knows this, and for this reason alone he is fundamentally different from virtually all other European politicians. He knows that he needs an expansionary fiscal policy (without European conditionality) to pull the Italian economy out of the deep depression it is in. And he knows that there needs to be a change in the competitive balance in Europe, especially if Italy and France are to have any hope of success in the long run. He also knows that his every step will be under scrutiny and that at any moment a storm could break out in the north of the continent that would sweep him away politically as well.

Draghi's great advantage is his deep knowledge of institutions. He will not fight on the wrong front. After all, given his long experience on countless committees, he knows that his most important opponent is not in Brussels but in Berlin. Above all, this is where he differs from the naive left and right who sit in their little rooms and write and blather on about neo-liberal Europe and the European Commission, without ever having seen a European or international institution up close and the real balance of power within them.

Draghi's greatest adversary will be the "hard core of the CDU/CSU", which already has in mind the reimposition of the old debt rules for the post-crisis period and is thinking of tough conditions to be imposed on anyone who wants to borrow even a single euro from Brussels.

Draghi also knows all too well, having spent much time in Frankfurt, that the sentiment in Germany among the ECB's declared opponents (including the Federal Constitutional Court with its absurd ruling on the proportionality of European monetary policy), directed at anything resembling fair treatment of European countries by the ECB, will be particularly problematic for Italy. Italy may always find itself in the position of having to rely on direct or indirect support from the ECB, given the utterly irrational mood of the 'markets'. Consequently, it will have to be very careful when discussing the ultimately inevitable question of whether and how the ECB's mandate can be adapted to modern times, even after the Coronavirus.

Draghi needs friends

Anyone facing a strong opponent will need strong friends. The new Italian Prime Minister will not succeed in his undertaking if he fails to do what all those in the monetary union who have tried to change anything so far have failed to do. He needs a strong coalition of countries that are ready to openly and openly challenge the domination and narrow-mindedness of Germany. In the last few days we can see how the Bavarian President, the Federal Health Minister and the Federal Minister of the Interior refuse to accept any warning from Brussels on the subject of open borders, and how the German President of the Commission, instead of banging his fists on the table, prefers to remain nobly silent.

Let's not delude ourselves, Europe cannot be made with this Germany. How could the Italian prime minister manage to do what the ECB president failed to do, namely launch a calm and rational discussion on economic policy in this great and self-referential Europe? A discussion in which the Germans realise from the outset that they will not get away with their old neoliberal and monetarist platitudes and mercantilist ambitions. All those who still have their heads screwed on straight can only cheer for Mario Draghi. For my part, I can only wish him with all my heart good luck!

From quality competition to wage dumping

"Today, real technological progress is mainly taking place in the USA and China. The export-based German economy, on the other hand, has so far only managed to keep its head above water thanks to wage moderation and low taxation. In the short term (and in intra-European competition) this price competition based on wage dumping may still work, but in the long term (and globally) it will hardly work,' writes the great German intellectual Andreas Nölke, who in Makroskop offers a very interesting rereflection on the main disease that has afflicted the German economy for at least two decades, namely exportism, i.e. the deep dependence on exports. Andreas Nölke from Makroskop.de

Those who defend Germany's trade surpluses often argue that it is not our fault that the world is so interested in our wonderful products. The world loves German cars and machines.

Now this might even be true in some cases, if we look at our exports in the area of top mechanical engineering or luxury cars. But if you take a more systematic look at the development of German exports, you will see that an increasing proportion of these exports are sold essentially because they are 'cheap'.

In principle, the purchase of a product is always about both aspects: quality and price. In the case of German exports, however, there is a rather problematic shift towards the second aspect. A large number of empirical studies are already available on this topic.

From quality competition to dumping

Over the past five decades, the German economy has developed from an export-intensive but relatively balanced economy into an extremely export-dependent economy. It is striking that the 'pathological' intensification of German export orientation has not been accompanied by major technological innovations, but increasingly by a drive towards price competition. Export success, however, should not be seen as a sign of industrial strength, but of weakness - even if this weakness is only that of our European neighbours ('too expensive').

Arndt Sorge and Wolfgang Streeck, for example, referring to their concept of "diversified quality production", typical of German industry, note that this in terms of fundamental characteristics is still partly intact, such as product differentiation, although it is now fundamentally no longer based on the "beneficial constraints" of high wages and the innovations that go with them, but is increasingly based on cost advantages.

After an initial slump around 1980, since the mid-1990s the German industry has interrupted its long-term trend of upgrading to higher quality, and has since then increasingly relied on price advantages. Lucio Baccaro has quantitatively mapped this development by calculating the relationship between export and import prices. At the latest since 1995, this ratio - as an indicator of upgrading - has not increased, in stark contrast to the development observed in previous decades. The argument that German exports have become more price competitive since the mid-1990s is also confirmed by the Bundesbank, irrespective of the indicators chosen.

The relevance of export prices becomes particularly clear when comparing with Italy, a traditionally very competitive competitor in key sectors of German exports, among them car and machinery production. In the meantime, however, Germany has clearly outperformed Italy in terms of export performance, although, according to a study by the International Monetary Fund, about half of this success is attributable to an increase in German productivity - partly due to wage moderation in Germany.

The OECD reports that, especially in the first decade of the millennium, there has been a clear tendency for the German economy to achieve its export successes no longer through the quality of its products, but increasingly through price restraint, in contrast to earlier phases in which it was mainly innovations - measured, for example, by the number of patent applications - that ensured such successes.

A detailed analysis of 'international trade in research-intensive goods' also shows that Germany's comparative advantages remain predominantly and relatively stable in 'high-value technologies' (motor vehicles, mechanical engineering), but not in current 'cutting-edge technologies', with some exceptions in medical technology, measurement and control. China, on the other hand, has significantly expanded its market shares in both segments, especially in cutting-edge technologies.

And even in high-end automotive technology and components, export success is increasingly based on price competition rather than quality competition, according to this study. After all, Germany does not only produce luxury vehicles for which - as status symbols - price is of relatively little importance. Baccaro and Benassi come to similar conclusions, measuring an increased price sensitivity of German exports in the automotive and mechanical engineering sectors in the years since 1990, in contrast to previous decades.

These findings are further confirmed by a recent study by Sebastian Dullien, Heike Joebges and Gabriel Palazzo. The study highlights the importance of price competitiveness for German exports, including exports of 'high-tech' goods. This cost competitiveness was significantly improved in the early 1980s on the one hand and later on between 1995 and 2012, i.e. after the 2 major crises of the German economy.

The end of the stalemate

These observations, however, do not bode well for the long-term development of the German economy. For some time now, the German economy has ceased to be at the cutting edge of technological progress, for example in biotechnology or the digital economy. It is innovative in some areas, but only in the incremental development of technological innovations whose basic features are already decades old, especially in chemistry, mechanical engineering and the automobile industry, which is based on combustion engines.

Today, real technological progress is mainly taking place in the USA and China. The export-led German economy, on the other hand, has so far only managed to keep its head above water thanks to wage moderation and a low tax burden. In the short term (and in intra-European competition) this price competition based on wage dumping may still work, but in the long term (and globally) it will hardly work.

In other words: having saved jobs through wage moderation and austerity in recent economic crises may have helped to stabilise this model. In the meantime, however, this strategy seems to have come to an end.

In the long run, an economy with high labour costs, such as Germany's, can only survive if much more is invested in research, technology and the skills of the workforce - and if economic growth and jobs depend not only on uncertain developments in foreign export markets, but also, in a complementary way, on stable domestic demand.

In this context, it would be a very big mistake to react to the 2021 recession caused by the Coronavirus by continuing to push the export model based on cost compression, e.g. through austerity and collective wage moderation. This would only further intensify an already pronounced inequality.

For exports to play a crucial role, but within a more balanced economic structure, it would be helpful if these exports were made through quality products and not just through competition based on ever lower prices. The latter is incompatible with the necessary stimulation of domestic demand through wage increases and public spending. Even in the long run, you cannot win against low-wage countries.

The higher quality of products - or their higher positioning as status objects - would on the other hand also allow higher prices to be extracted and would thus be compatible with the need to raise wages and thus rebalance the German economy. There is also a need for more investment in research and development by companies, which in turn will serve to increase domestic demand. Higher wages thus act as "beneficial constraints" (Wolfgang Streeck), and force companies to do their good, i.e. to make investments.

In Germany, the conditions for high-quality, high-price exports are still in place.

Turning the economy around with a high-wage strategy is not feasible with every export structure. When wages and prices rise, countries with a price-elastic export structure, such as those linked to basic textiles, are faced with a sharp drop in their exports, as buyers can easily switch to other suppliers.

It is also not so easy for a country to move from simple goods to more advanced goods and higher levels of technology. There are also considerable obstacles, which in particular in the long run may hinder a recovery of the southern European economies, as Jakob Kapeller, Claudius Gräbner and Philipp Heimberger show. The German economy, on the other hand, still occupies a leading position in an internal EU comparison with regard to the concept of 'economic complexity', an important indicator of a country's technological capacity, a concept developed by a group of researchers at Harvard University.

Germany still has a relatively good basis for successfully rebalancing its economy in a European comparison. Admittedly, we have seen that the share of price-elastic German exports has increased in recent decades - a very problematic development. But if we compare Germany's relative position with that of the other classic industrialised countries both within the EU (France, Italy, Spain) and outside (UK, Japan, USA), we will see that Germany maintains a relatively higher share of its exports in sophisticated and less price-sensitive goods than these countries, according to a study carried out by the Lower Saxony Economic Research Institute.

For Germany - like the blind man among the blind, so to speak - in international comparison, it should be even easier to maintain a high level of exports even in the face of reduced price competitiveness due to higher wages, unlike in Italy, for example, where in recent decades there have been considerable losses in market share caused by more price-sensitive goods, such as textiles and furniture, as a result of the rise of China.

According to the International Monetary Fund data cited above, there is no other country in the world whose profile of exported goods in recent decades has resembled that of China more than Italy. Italy has thus been the country that has suffered most from the 'Chinese economic miracle' in recent decades.

The same fate could also befall Germany in the near future - given the 'improvement' in China's export portfolio. It is still not too late to try to defend the competitive advantage through greater investment in research, development and the training of highly qualified and well-paid workers.

But this rebalancing will be a painful adjustment for significant parts of German industry. This is particularly true for those companies that have invested less and less in innovation and productivity in recent decades and have instead increasingly relied on wage moderation and an undervalued currency. In many cases, without the active support of the state, this will not be possible, especially in the area of technological development policy.

How the German press supported the formation of the Draghi government

The German press that counts is accompanying the formation of the Draghi government with a certain optimism and discreet media support. According to German commentators, in fact, the new government will have to save Italy from financial bankruptcy and in this way defend the geostrategic interests of the dominant power within the eurozone. The always well-informed German Foreign Policy writes

...and quickly'.

The German mainstream media are accompanying the formation of a new government in Italy with a certain optimism, in some cases even giving detailed instructions for action. Former ECB president Mario Draghi, with the prospect of becoming the new Prime Minister, will have to govern an economy in a miserable state, reports Der Spiegel for example: "record debt, no growth, declining wealth, declining demographics." [1] Draghi is faced with "two main tasks": speeding up the vaccination campaign and "spending wisely" the EU anti-crisis funds amounting to more than 200 billion euros, which will start flowing in from the summer. And this must be done in the framework of a programme that meets EU requirements - "and quickly". Italy went through "a very bad decade and a half" that began with the introduction of the euro, during which the country "became poorer". In Germany, on the other hand, 'the gross domestic product per inhabitant has increased by about one eighth', according to a commentary that refrains from mentioning the fatal role played by Germany's huge trade surplus with the southern states of the eurozone. Italy is now threatened with nothing less than "ruin", and could turn into a "European Argentina", writes Manager Magazine [2]. But this is not an inexorable fate; Draghi will be called upon to use the EU billions in a "skilful and productive way", to stimulate private investment and to launch a "necessary renewal programme" to stimulate a "change of mood".

Following the example of the EU

Draghi, however, as future prime minister has a "great advantage", reports the commentary: political opponents in Italy can be silenced by pointing to the need to comply with the "requirements indicated by Brussels" and necessary for obtaining the crisis funds. If Italy wants to receive the more than EUR 200 billion in the fund, the country will necessarily have to 'adapt to the guidelines indicated by the EU'. The new head of government will be able to use this 'leverage' in the foreseeable power struggles. Whoever opposes Draghi risks not receiving the anti-crisis fund money from Brussels and having "a rude awakening from a rather precarious state of limbo," writes Manager Magazin. Other commentators, however, note that Italy suffers from a huge "backlog of unmade reforms" that Draghi will have to quickly clear up as prime minister, writes the FAZ [3]. The southern European country needs to invest in education and future-oriented technologies; moreover, structural reforms "in the judiciary, in public administration, and in politics" that Draghi must implement as "Italy's saviour" are still pending, writes Deutschlandfunk [4]. The former head of the central bank will have to face a "Herculean task"; the EU funds against the crisis represent a "historic opportunity" that must be seized. The German conservative media are also calling for the "raising of the retirement age" and the "removal of obstacles to growth"; these measures are to be implemented as part of a "major" reform package, writes Die Welt [5]. The former head of the central bank is now faced with a "Herculean task"; the EU's anti-crisis funds represent a "historic opportunity" that must be seized.

The stakes are high, also for Germany

At the same time, there are also some cautious voices in the conservative media. If the former head of the ECB were to be at the helm of Italy in the future and find himself at the "head of a government of technocrats", he would not only shape the third largest economy in the eurozone, but to some extent also "the entire European Union", writes Die Welt; and this would mean a lot at stake for Germany too. 6] Indeed, Draghi, as head of the ECB since 2012 with his expansive monetary policy has defended the euro "at all costs", saving the eurozone and "saving Italy from collapse". But this has also had "negative and serious consequences": the ECB's extensive purchases of government bonds at the height of the eurozone crisis led to "a slowdown in the zeal to make the necessary reforms in the most indebted countries - especially Italy". In the "creditor countries", especially Germany, savers paid a "high price" because of the ECB's zero interest policy. Draghi once again finds himself in an important position at a decisive stage, while the EU is once again in "crisis mode" and for the first time taking on "a large-scale common debt". The former central banker will therefore "once again be right there, where the most important decisions for the future of Europe are taken", in the role of Italian prime minister.

"Excellent relations in all capitals".

All this raises the question, they say in right-wing conservative circles, whether "the 750 billion euros of the fund will be enough" to cope with the current eurozone crisis. There have already been calls from 'many quarters' for the introduction of a 'permanent transfer system' to counteract the huge imbalances in the currency union, which are essentially the result of German trade surpluses. Discussions are also under way on the EU's stability pact, which will now have to be 'softened' because public debt in the currency area has risen to more than 100 % of GDP in the course of the fight against the pandemic. In Italy, "it is even expected to rise from 130 to over 150 %", writes Die Welt [7]. Since the German government in southern Europe due to its course of austerity during the euro crisis is "regarded as the great dictator of austerity", Draghi's "excellent relations with the capitals and the EU Commission, as well as ECB President Christine Lagarde", could prove to be "valuable capital" in future conflicts.

"Anti-German rhetoric"

A significant problem, however, is that the cabinet of technocrats under Draghi could depend on the support of ultra-right parties. Some components of the Democratic Party (PD), in fact, have so far refused to support a government that would also involve members of the right-wing and racist Lega Nord party. [8] Without the Five Stars, who emerged as the big winners from the March 2018 parliamentary elections and still remain the strongest group in Parliament, the numbers for Draghi could be tight, it is said. It is also true that in the meantime the Five Star Movement has also reportedly signalled its willingness to work with Draghi. Until recently, however, the movement's leading figure, the former TV comedian Beppe Grillo, regarded the former central banker as a "servant of high finance", writes the FAZ [9]. Moreover, the forces around Grillo, of all those in parliament, had strongly opposed German attempts to influence Italy's fiscal, economic and financial policy. In April 2020, for example, members of the Five Star Movement had threatened to break with the coalition if the then government led by Prime Minister Giuseppe Conte accepted a loan package put together by Brussels and Berlin and based on money from the European Stability Mechanism (ESM) [10]. The ESM, largely shaped by former German finance minister Wolfgang Schäuble, is seen as a tool to interfere in the internal affairs of potential loan recipients, as it can be used to impose strict conditions by entering through the back door, so to speak. Critics in Italy see it as the tool of a repressive system that has already sunk Greece's economy in the years of the financial crisis since 2010. An influential German newspaper, the FAZ, recently dismissed criticism of the ESM in the Italian parliament as "a great moment of anti-European and anti-German rhetoric" [11].

1] Henrik Müller: Italiens schleichender Niedergang. spiegel.de 07.02.2021.
[2] Henrik Müller: Ich - oder der Untergang. manager-magazin.de 07.02.2021.
[3] Nikolas Busse: Was Draghis Mission wäre. faz.net 04.02.2021.
[4] Elisabeth Pongratz: Der Retter Italiens? deutschlandfunk.de 03.02.2021.
[5], [6], [7] Dorothea Siems: Italien retten, die EU prägen - "Super-Draghi" ist zurück im Zentrum der Macht. welt.de 04.02.2021.
[8] Fünf-Sterne-Bewegung und Lega signalisieren Unterstützung für Draghi. spiegel.de 07.02.2021.
[9] Matthias Rüb: Draghi gewinnt Grillo und die Fünf Sterne. faz.net 07.02.2021.
[10] Jörg Seisselberg: Italien sagt Nein zu 39 Milliarden der EU. tagesschau.de 14.04.2020
[11] Tobias Piller: "Die Deutschen klauen auch noch unser Familiensilber". faz.net 10.12.2020.

Why the EU and Germany are losing the geopolitical battle for control of southeast Europe

The EU's debacle over vaccines also corresponds to a serious geopolitical defeat of Brussels and Berlin in South-Eastern Europe, a defeat that leaves more and more space to China, now the main economic power in the area. In the palaces of European power there is much concern, the always well-informed German Foreign Policy tells us the latest developments

17+1

Since the format was launched in 2012, cooperation with China under the '17+1' has brought significant economic benefits to the twelve EU Member States and five non-EU countries in Eastern and South-Eastern Europe that participate in it. For example, the volume of trade between these countries and the People's Republic has increased by an average of 8% per year since then. Last year, bilateral trade increased by 8.4 % to a total volume of $103.45 billion, despite the Coronavirus crisis, which in other areas caused the economy to collapse. There are varying figures on Chinese direct investments in the region; according to the Berlin-based think tank Merics (Mercator Institute for China Studies), between 2010 and 2019 they would amount to EUR 8.6 billion in the twelve EU states participating in the "17+1" [1] alone. There are also funded projects and disbursed loans worth several billion euros. Significant Chinese investments have also been made in Greece and Hungary, among others. In Greece, since it was taken over by the China Ocean Shipping Company (COSCO), the port of Piraeus has risen from 17th to 4th place among European container ports; it is now the largest European container port on the Mediterranean. [2] In Hungary, Chinese companies are working in particular on the section of the high-speed railway line between Budapest and Belgrade.

"The third most important country"

The five non-EU states of South-Eastern Europe (Bosnia and Herzegovina, Serbia, Montenegro, North Macedonia, Albania) are cooperating particularly closely with China within the framework of the "17+1". Serbia, for example, has become the recipient of significant Chinese investment; in 2016, Hesteel Group, one of the largest steel producers worldwide, bought the long-standing Smederevo steel mill, one of the largest companies in Serbia. The steel mill, previously owned by U.S. Steel, had fallen into crisis by accumulating heavy losses, and was therefore sold by the American group. Already at the beginning of 2019, news reports said that Hesteel was not only bringing the plant out of crisis, but turning it into the most profitable steel mill in Europe. [3] There has undoubtedly been much controversy surrounding Hesteel's presence in Smederevo: for some time now, local residents have been protesting against the environmental damage caused by the steel plant. The protests are currently being used by Green MP Reinhard Bütikofer and his Inter-Parliamentary Alliance on China (IPAC) to stir up anti-Beijing sentiment. 4] The People's Republic is however expanding its influence in Serbia and neighbouring non-EU states; a recent study by the European Council on Foreign Relations (ECFR) concluded that Beijing has "become the most important third country" in that region. 5] The European Council on Foreign Relations (ECFR) is currently working on this issue together with the European Commission.

Pressure from Brussels and Washington

At the same time, the EU states within the '17+1' are facing massive pressure from Brussels, but also from Washington, to scale down their cooperation with Beijing and abandon the format of independent cooperation. Berlin and Brussels, however, reiterate that the EU should not be divided - an argument that is rejected by the "17+1" group, who instead point out that the most powerful Western European states, especially Germany, for their part already cooperate independently with China; for example, former Polish Foreign Minister Radosław Sikorski recently said: "The Western Europeans already have long-standing trade relations with China, and they do not allow us Central European countries to participate in these relations". If the '17+1' format were to be abandoned, then 'the rest of the EU' would also have to stop going it alone. But this would affect Germany in particular. The pressure from Brussels and Washington is also directed against individual Chinese projects in Eastern and South-Eastern Europe. Croatia, for example, recently had to cancel the tender for the country's only deep-water port because Chinese companies had a good chance of winning the contract. In Romania, on the other hand, the government decided to exclude companies from the People's Republic from building roads and railway links. 7] Chinese participation in the construction of a tunnel from Helsinki to the Estonian capital Tallinn was also strongly opposed. [8]

The Three Seas Initiative

In the struggle for influence over Eastern and South-Eastern Europe, the major Western powers remain divided. Berlin regards the region as its exclusive sphere of influence, and has tried to align the entire EU - but with little success so far - within a cohesive bloc in terms of foreign policy as well, thus seeking to maintain its primary influence over the five non-EU states of South-Eastern Europe. Washington, on the other hand, has in recent years sought to strengthen its influence in the east and southeast of the EU through the 'Three Seas Initiative' - at Germany's expense. The initiative dates back to a Washington offensive that originated during the Obama administration; launched in 2015 by Polish President Andrzej Duda and the then Croatian President Kolinda Grabar-Kitarović, the initiative was formally founded during a summit on 25-26 August 2016 in Dubrovnik, Croatia [9]. Among other things, the aim was also to improve connections between the participating countries through the construction of infrastructure. Like China's '17+1' cooperation efforts, the so-called 'Three Seas Initiative' is based on the fact that over the past 30 years, the east and south-east of Europe have been largely neglected by the richer countries of Western Europe, especially Germany, as these countries were focused on pursuing their own economic interests. This offered outside powers the possibility of securing influence in the region through economic cooperation.

China as a supplier of vaccines

Even in the fight against the Covid-19 pandemic, the situation has not changed much. Already in spring 2020, the EU had practically cut off support to the five non-EU countries in South-Eastern Europe, banning the export of protective medical equipment. China then intervened, at least partially, by providing Serbia with the necessary aid. Berlin and Brussels then reacted to this move by accusing Beijing of engaging in "disguised diplomacy". 10] The development was similar with regard to vaccines against Covid-19. Although the EU pompously announced its intention to supply the world with its vaccines, in reality it was not even able to supply the necessary doses of vaccine to its member states. For the second time, China came to Serbia's aid and provided the country with one million doses of vaccine, which meant that Serbia was able to carry out eight vaccinations per hundred inhabitants and is now in third place in Europe after Great Britain (18.86 vaccinations per hundred inhabitants) and Malta (8.89) (Germany: 3.91 vaccinations per hundred inhabitants). Recently, Hungary became the first EU country to order vaccines from China as well, and the first part of five million doses, enough to immunise about a quarter of its population, is expected to arrive this month. At yesterday's "17+1" summit, Chinese President Xi Jinping promised further shipments. [12]

[1] Grzegorz Stec: Central and Eastern Europe and Joint European China Policy: Threat or Opportunity? merics.org 01.10.2020.
[2] Beth Maundrill: Piraeus becomes top Mediterranean port. porttechnology.org 21.05.2020.
[3] Vedran Obućina: Incredible rise of Serbian steel industry. obserwatorfinansowy.pl 19.03.2019.
[4] MEPs concerned over increasing Chinese influence in Serbia. emerging-europe.com 20.01.2021. Zur IPAC s. auch Der grüne Kalte Krieg.
[5] Vladimir Shopov: Decade of Patience: How China Became a Power in the Western Balkans. ECFR Policy Brief. February 2021.
[6] Grzegorz Stec: Central and Eastern Europe and Joint European China Policy: Threat or Opportunity? merics.org 01.10.2020.
[7] Andreas Mihm: Chinas Charme-Offensive im Osten. Frankfurter Allgemeine Zeitung 08.02.2021.
[8] Mette Larsen: Chinese-backed Finnish venture of world's longest undersea rail tunnel back on agenda. scandasia.com 27.01.2021.
[9] S. dazu Osteuropas geostrategische Drift.
[10] S. dazu Die "Politik der Großzügigkeit".
[11] S. dazu Das Impfdesaster der EU.
[12] China bietet Osteuropa Impfstoff an. n-tv.de 09.02.2021.

Why the CDU bigwigs now want to sink the balanced budget

After years and years of austerity imposed on the Euro-weak of southern Europe and after having had the balanced budget introduced into the Italian Constitution, now that Germany is in a deep economic and social crisis and just a few months before the elections, the CDU bigwigs realise that to avoid an electoral drubbing they have to change their tune and narrative: contrordine subjects, the balanced budget is a crazy shit! Gabor Steingart on Focus.de comments on the proposal of Merkel's right-hand man, Helge Braun, who in the past few days explained in Handelsblatt that the time has come to go beyond the balanced budget. From Focus.de

In every film production, a double is used for the most dangerous and action scenes. For Angela Merkel, this role is played by her office manager at the Chancellery. Helge Braun is brave and loyal. And like no other he knows the script dictated by the leading actress by heart. He enjoys taking the shots intended for her and grabs the splinters that would otherwise fly close to the Chancellor's ears.

And this time in "Handelsblatt" he has come out in favour of a new debt-financed social policy, which means nothing more than a departure from the traditional fiscal policy of the bourgeois parties.

Braun proposes to finance the welfare state systematically and until 2023, not only with contributions, but also with tax revenues. This will make it possible to avoid increasing social security contributions for employees and employers.

This permanent subsidy of the welfare state from the state coffers will have consequences for fiscal policy, as reported by our stand-in. The former physician-assistant, who wrote his doctoral thesis on "heart palpitations during an operation", writes in fact in "Handelsblatt":

"The balanced budget (Schuldenbremse) in the coming years cannot be met, even in the case of extremely strict budgetary discipline. “

"Deviation from this debt rule should under no circumstances be legitimised by individual decisions within the meaning of Article 115 of the Basic Law."

"Therefore in Germany it would make sense to combine a strategy for economic recovery with an amendment to the Basic Law that provides a reliable path for making new debt on a limited basis, at least in the coming years."

As a reminder, the current rule is that the federal government can only raise new debt to a very limited extent, i.e. up to a maximum of 0.35% of GDP. This debt limit was already included in the Basic Law in 2009 and can only be lifted temporarily and in emergency situations - such as during a pandemic.

Helge Braun and the debt brake: CDU and CSU outraged by proposal

There is also great indignation within the party about the proposal to dismantle the Schuldenmbremse. The new CDU leader Armin Laschet, in fact, expressed a clear rejection of Braun: the Union has always been the party of sound public finances, said the Prime Minister of North Rhine-Westphalia during the online meeting of the CDU/CSU parliamentary group, participants report. And addressing Braun:

"If the members of the government should find it necessary to change the Basic Law, they should first of all coordinate with the party and the parliamentary group "

The leader of the Union's parliamentary group Ralph Brinkhaus classified Braun's proposal as an "expression of a personal opinion".

"This is not my position, it is not the position of our politicians who are experts on economics and the budget, and it is not even a position capable of gaining a majority in the CDU/CSU parliamentary group. “

The reaction of the media also indicates how much with his proposal Braun is shaking the Union from the foundations. A Union that still in 2019 was advertising itself on Twitter with the following sentence:

In the Neue Zürcher Zeitung, economic correspondent from Berlin René Höltschi notes:

"From an economic point of view, your proposal is an absurd idea."

Ulf Poschardt, editor-in-chief in Die Welt, notes:

"The fact that the minister at the Chancellery without prior consultation could have thrown this topic into the political space is unthinkable. And this makes it increasingly clear that the Chancellor is moving further and further away from the political centre and to the left."

In the "Frankfurter Allgemeine Zeitung", economic editor Manfred Schäfer writes:

"Armin Laschet, as the new chairman, is trying to unite the party and contain Merz. The crossfire from the Chancellery office does not help much. “

On "Handelsblatt" the head of the political section Thomas Sigmund comments as follows:

"Armin Laschet has only been president of the CDU for a week, the Chancellor is showing him who is the cook and who is the waiter. “

The deputy editorial director of the parliamentary office of the "SZ" Cerstin Gammelin, on the other hand, sees the change in strategy as a rapprochement with the Greens:

"The Greens want in any case to add to the rule on austerity already in the constitution, a new rule on investments, in order to avoid having, also in the future, bridges, administrations and schools destroyed because of excessive savings. Add to this the constraints of the pandemic. It was easy enough to see that not everything would remain as it was. And who knows, maybe the debate will eventually serve to bring the Greens closer to the Union than they thought possible."

In conclusion: the stand-in did a great job. Shrapnel flew everywhere, but the leading lady was unharmed.

German logistics conquering the world (with government money)

During the pandemic, the large German logistics companies received tens of billions of euros in public aid guaranteed by the Berlin government, which officially claimed to have done so in order to reduce the impact of redundancies on employment. German Foreign Policy in its latest article, however, puts forward the hypothesis that behind this choice of the Berlin government there is the desire to protect an important instrument of geopolitical projection, namely the large transport companies by sea, air and land. For GFP, this would be nothing new, given that even in the days of the Reich, the logistics sector was perfectly integrated into the expansionist projects of the time. The always well-informed German Foreign Policy writes

The large German companies in the international logistics sector were able to count between 19 and 22 billion euros in the form of capital inflows from the public purse during the Coronavirus crisis. Insofar as these subsidies were aimed at limiting job cuts, the aid mainly remained in the German operating part, while employees in foreign subsidiaries, e.g. in Austria or Belgium, lost many more jobs in percentage terms, as for example in the case of Lufthansa. 1] Lufthansa received capital injections of between 9 and 11 billion euros, Deutsche Bahn AG and indirectly DB Schenker received 5 billion ("equity assistance"). DHL (Deutsche Post AG) is also going through the crisis by taking advantage of the coronavirus-related aid. The group is supplying a dozen EU countries with pandemic vaccines and announced on 12 January that it will expand its fleet with eight Boeing 777F cargo planes: the price per unit will reportedly be around $200 million. [2] TUI, a company regarded in Germany as an inoffensive holiday specialist, has obtained public subsidies and credit lines amounting to over €4 billion until December 2020, which grew further (by 25%) earlier this year with the government's participation in the Berlin "Economic Stabilisation Fund" (WSF) .[3]

"Constantly on the ground"

But neither TUI (the world's largest tourist company), nor Lufthansa, nor DHL can be considered as large, harmless holiday companies or mere mail carriers. Their civilian use masks the possibility of state intervention and the fact that they are always kept on standby: in peacetime, they extend their activities over a logistics network that coordinates the movement of goods locally and follows them all the way up the value chain - an important source of information for geoscience, raw materials research and industrial espionage. In times of crisis and foreign conflicts, this network (together with the carriers) is ready for its reconversion. TUI, Lufthansa, DHL and DB Schenker are firmly integrated. There is a "communion of intent" [4] linking the large German logistics groups and a specialised department for control and direction at the Berlin Ministry of Transport, a department set up with a transit function to the emergency and military authorities of the Federal Republic. Their "field employees are therefore constantly on the spot and maintain contact" with the German logistics companies; the reference is to the state emergency service for "tension and defence cases" at the "Federal Office for Goods Transport" (BAG). (BAG).

"'Systemic relevance'.

Coloured cruise ships could then be turned into military hospitals for foreign missions (this is where TUI comes in), and mail planes could become troop carriers (DHL). The railway network would be used for rapid transfer in 'defence operations', while the railways would be 'assigned' tasks of 'cross-border transport [!] for the armed forces' (also significant for the Schenker railway division). [5] What promises to protect civil society in the crisis caused by the Coronavirus ("systemic relevance"), the law [6] circumscribes to the military: logistical reserve for "emergency" and war.

Geopolitical network

Where the structural alignment between the state apparatus and the expansive interests of geo-logistics can lead is shown by the crimes committed by major German logistics companies in the days of the Nazi "Reich". Today's logistics companies in the Federal Republic owe their birth to these criminal enterprises, e.g. Kühne + Nagel in Hamburg has the same name as the large shipping company that can be said to have had "a certain contiguity with mass extermination" [7] and with thousands of lootings perpetrated in the neighbouring states occupied by Germany, e.g. in France. Kühne + Nagel is one of the current companies to have benefited most from the Coronavirus and to have obtained contracts from the German state. 8] This legacy is even more evident in the case of Schenker, a company now part of the state-owned DB group, with the same name as Schenker & Co, a company with a prominent role in the crimes committed during the anti-Semitic and anti-Slavic extermination policy. A policy that arose as part of the geopolitical network of expansionist interests of German foreign policy that emerged before the war.

Silent legacy

What the heirs of these crimes have in common, including the REWE group's DER (Deutsches Reisebüro), is their constant refusal to reveal their origins publicly and completely. By keeping silent about the legacy they carry with them, they want to escape the material justice they owe the victims and the lessons of German history - to what extent this is true, after all, is exemplified by DB Schenker's past.

[1] Die Lufthansa-Hilfen verzerren den Wettbewerb. capital.de 09.12.2020.
[2] Deutsche Post AG erhöht Ergebnisprognose für 2022 nach vorläufigen Zahlen 2020. Veröffentlichung einer Insiderinformation nach Artikel 17 der Verordniung (EU) Nr.596/2014 vom 12.01.2021.
[3] Drittes Milliarden-Hilfspaket für Tui - Staat könnte zum Großaktionär werden. Handelsblatt 02.12.2020.
[4] Bundesamt für Güterverkehr (BAG) sorgt für Bewegung. eurotransport.de/artikel/zivile-notfallvorsorge 20.01.2021.
[5] Allgemeine Verwaltungsvorschriften zu § 17 des Verkehrssicherstellungsgesetzes (VSG) i.d.F. vom 29.06. 1998.
[6] Vgl. Verkehrsleistungsgesetz (VerkLG) i.d.F. vom 12.12.2019.
[7] Henning Bleyl: Lasten der Vergangenheit. taz.de 31.03.2015.
[8] Kühne + Nagel übernimmt Logistik des Moderna-Impfstoffs. Handelsblatt 07.01.2021. Corona und Brexit: Der Logistiker Kühne + Nagel antizipiert neue Chancen. Neue Zürcher Zeitung 20.10.2020. Einen Staatsauftrag zur Lieferung von Corona-Impfstoffen vergab das Land Nordrhein-Westfahlen (NRW).