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Oktoberfest & Rohrkrepierer

In the 22 August (just one month ago) Letter I wrote:
Another reason, although having long been bearish on the German economy, I believe we may be finding ourselves at the cusp of an upturn as election gridlock may be unraveled with the impending election just weeks away (if the constitutional court gives the go-ahead). Likewise, the structural reforms may go further to giving industry greater leeway in labor and investment practices. Should this happen, then the slumbering, to near-dead EU giant, Germany, might yet again start to make pitter-pat humming noises from thefactory floors.

I think it still too early to tell whether Germany is back on its economic feet. Ditto for Japan. Many are speaking about a re-livened Japan yet I remain cautious on both counts. Let's see some good quarterly GDP reports before jumping to conclusions. Let's see unemployment in Germany improve. Let's see the Euro consumer start to pick up. It's a nice story but I certainly don't believe it wholeheartedly yet. Where's the beef?

The pundits will tell you, there ain't no beef you dummkopf - the politicians blew it. More on this below. Patience, first we need to get some terminology right.

Now, just to get a little of the German out of the way, here is a small lesson:

  • Oktoberfest in Munich, actually happens in September!
  • A "dummkopf", literally, dumb-head, is for those of mentally-challenged intelligence
  • And a "Rohrkrepierer", my favourite, literally means "pipe-creeper"*

* Rohrkrepierer comes from the 19th century military describing the ignition of a cannon whereby the promised explosion (and inevitable destruction of the enemy with the cannon ball) turns out to be a dud, as the cannon ball remains stuck in the cannon, likely due to insufficient packing, i.e. the quick attempt to get off the next shot and promised effect results in a miserable flop for the one firing the shot.

The German elections are now over, Sunday evening around midnight the tally was in. And in no less than 36 hours everybody is screaming and yelling that the German sky is falling and will crash. In keeping with my personal journalistic tradition, I don't like to immediately commentate on such large and emotionally charged events because the reality usually turns out to be rather somewhat different than initially thought and certainly follows the saying that things are never eaten as hot as they are cooked.

In short, it's likely too early to tell how the resultant government will be formed. But first, I want to say something. The one thing that makes a democracy strong is that of diverse opinion and a willingness to confront change. It might not always be easy and might not always be to a pre-imagined timetable. But the diversity in German politics makes for a stronger dialogue as can be said for many countries: Republicans, Democrats in the USA - Tories and Labour in the UK, etc. Neither of those countries to my mind show a strong and varied diversity of ideas or concepts within established party lines. Granted, forming a governing coalition out of 5 parties can be tedious and time consuming, but I would rather have thoughtful and slower reforms than things being rammed down ones throat based on a two-party system where in fact both parties wink and nod to one another at the highest levels - give me the 5-party "chaos" over the 2-party "ram rod" anytime. At least I know diversity is kept and that must be the foundation of any true democracy. When 2-party systems morph into a 1-party bilateral conglomerate, then neither is diversity encouraged nor is democracy safe.

So for all those crowing pundits about how the Germans political scene is fractured, and reforms threatened, I say, back off - get your own reforms and political scene in order before complaining about others. By the way, what the hell is Mr. Barroso (EU President) doing by telling the Germans to get a stable government together as soon as possible - the guy is incompetent and a lame duck. He should act to solidify the crumbling EU political and monetary effort instead of sitting in his glass-domed office in Brussels while throwing stones at others.

This is now an auspicious time on Germany's calendar: we are in the middle of September and we are surrounded by: drunks, political Rohrkrepierer, political drunks and flags of all sorts. Thank god the weather is still fine and beautiful.

The drunks are easy to spot. The political Rohrkrepierer too - Mr. Kirchhof, CDU's theoretical tax "terminator" and shadow finance minister, coming out strong during the campaign, going to shake up the entire tax system - flat tax for all - deemed to be the pet-peeve of Mrs. Merkel, who brought him in, has now crawled away into the darkness - tail between his legs - and stated he shall return to theoretical analysis of the economic state of Germany. THAT is a Rohrkrepierer.

Mrs. Merkel, leader and candidate from the opposition CDU party, having now just eeked out a victory over the sitting Chancellor Schröder and trying to look stoic and in control after blowing a large lead in the run up polls, ought to be hanging on for her political life these days. It may yet be a story of rags to riches to rags for her - the story is currently "in progress". If the still undecided outcome and building of a new coalition should land by Schröder, even though his party came in second place, she would likely be dropped like a sack of fouling potatoes.

Yes, there is an uneasiness to the whole political scene at the moment. Industry was urging that the Black/Yellow coalition (CDU/FDP) should win easily and that the reform blockade would get the signal to move forward. That did not happen, as the CDU lost nearly 10% in the final week of campaigning - dank Kirchhof and a split message to the voting public. But the ruling coalition of Red/Green (SPD/Greens) lost even more votes and are now in no position to rule. The party lines have now become so adamant with respect to their unwillingness to work with the other parties, that people are talking of crisis. May be, may be not. It's far too early to say. The promise of staying in power for the Greens with Black/Yellow may be too tempting to let party ideology get in the way. Hence many are talking of the "Jamaican" coalition.

Afghanistan Belgium Jamaica

But who knows, we could a get an Afghanistan coaltion (Black, Red, Green) or a Belgium coaltion (Black, Yellow, Red) - or whatever.

Yes, German industry and the public at large has been disappointed by this outcome. The currency markets have been disappointed by this market - the Euro has dropped 4 cents in about two weeks - thus catapulting the euro gold prices - now near €380 or up about 10% this month alone.

The promised, and now uncertain, reforms look to continue laming the industrial and consumption sectors until legitimacy and secure foundations are built in the political landscape. Should a grand coalition be the outcome, then as I stated above one month ago, the reforms could be sidelined, or at least extremely slow. If on the other hand, the Greens can be convinced (with carrots of remaining in power) then a Jamaica coalition would likely stand a much better chance of pushing through reforms with the Greens being a junior partner - this is the coalition I predict (even though I hate predictions)

German politics has a long tradition of making do with seemingly unworkable and rather uncosy coalitions. The big question for me remains, and that is whether the political elite have now come to the obvious "end of the line" and realized that the State must change and evolve in a now ever-changing globalized landscape in order to retain its economic and political power. The politicians ask incessantly that the people be flexible and frugal and stoic yet do they have the wherewithal and moral uprightness to make the right decisions when it really matters, when the State is under threat of drifting into ambivalence and mediocrity. Neither the EU nor the global economy can afford to have a weak Germany - have the German politicians really understood this?

It matters NOW for Germany. I remain cautious and continually ask, "Where the beef Mrs. Merkel or Mr. Schröder?" The decisions are now in your hands.

Keep your beer mug held high, better times are always ahead - at least I try to tell myself that every once in a while...when not stumbling over pretty beer drinkers or identifying the next Rohrkrepierer...but they are inevitably in the pipeline,...er, cannon.

Ps. Yes, those Bavarian beauties really do carry 12 litres of beer with 2 hands - bet you can't.


Isn't it just great!

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