Notes From Underground: Angie, Where Will It Lead Us From Here?

Germany chose a new CDU party leader to replace Angela Merkel. Membership chose Merkel’s hand-picked choice Annegret Kramp-Karrenbauer, also known as AKK. This is a very poor choice as it reflects a continuation of the status quo at a time that the traditional German ruling parties are struggling to maintain voter support. These are turbulent times for Germany, Europe and the world and Chancellor Merkel has proven to be too staid to deal with a world threatened by a populist upheaval.

Had Friedrich Merz, the chief opponent to AKK, prevailed it would’ve pushed the CDU further right, but it may have slowed the move to the ultra-right AfD. Many will say that AKK was the correct choice because many CDU voters were leaning toward electing officials from the Green Party so a centrist was needed to move the CDU forward. The proof will be in the next round of elections in 2019 to the European Parliament.

In my opinion the coming battle between Italy and Brussels/ECB will be a real test for Germany. The electorate has been financially repressed by the ECB’s negative interest rate policy and the threat to the German banking system to a default by Italian banks will provide Chancellor Merkel with a test of her leadership skills.

While the mainstream media is gushing over the CDU choice of AKK, I offer up this quote from an article published November 2 in Foreign Affairs by Professor Yascha Mounk:

“Angela Merkel would have made an excellent leader in ordinary times. The abiding irony of her record is that she happened to take power at the one moment in Germany’s postwar history when the country-and the world-desperately needed its chancellor to pursue a bold vision. This makes it all the more worrying that Merkel has effectively sidelined the most talented and visionary members of her party in recent years.Indeed,her heir apparent, AKK, shares many of her weaknesses without having the benefits of her strengths. And so the greatest danger now facing Germany is not,as many commentators have suggested…. Rather it is that her hand-chosen successor will commit the same inadvertent sin for which Merkel’s own tenure will be remembered: at a time when Germany desperately needs to face up to the serious crises it has ignored for the last twelve years. It is likely to keep pretending that politics as usual amounts to a strategy for defending the embattled values of liberal democracy.”

Long-time readers of NOTES are familiar my heavy criticism of Chancellor Merkel. In 2011 I was highly critical of her being bested by the weak French President Nicholas Sarkozy as he prevailed in the battle for ECB President. The French were terrified of German Axel Weber running the EU monetary policy, even though a hard money leader would’ve given the Germans more confidence in whatever policy was adopted. Sarkozy was able to secure the appointment of the Italian Mario Draghi, which secured an aggressive regime of monetary stimulus. The problem was that an aggressive ECB forced Merkel and Finance Minister Wolfgang Schaeuble to pursue an EU program of fiscal austerity to gain support in the Bundestag. The lasting effect of fiscal austerity has resulted in prolonged recessions in Italy, Spain and Greece.

Had Axel Weber run the ECB the Germans may have been in favor of a dual attack on economic malaise. I argued that in real-time and maintain it today, in the face of various counterfactuals. So be it. But BUNDS closed Friday at 25 basis points as the political situation heats up in Rome and Paris. Germany is the haven asset in Europe, which puts ever more pressure on German savers: Two percent inflation with a negative yield of 60 basis points on the TWO-YEAR SCHATZ. Angela, it’s your move. Benign neglect won’t be a satisfactory response.

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7 Responses to “Notes From Underground: Angie, Where Will It Lead Us From Here?”

  1. Richard H Papp Says:

    Angie has been leading the DAX to lower prices along with French
    Equities. A quick look shows both averages below their 200 WEEK Mv. Av.
    Let’s hope the S&P hangs in there or do we watch as “Tears Go By”
    to lower prices!

    • yraharris Says:

      Papp–thanks for being so Faithfull–or as Leonard Cohen would sing So Long Marrianne–you have been a great add to this blog.I am waiting for Green AB to provide input from Germany

  2. Eugene Chumak Says:

    Excellent description of Merkel’s leading from behind. That’s a new type of leadership tried and tested broadly around the world, also in USA. But failed everywhere it was tried – just like socialism

  3. JMH Says:

    Merkel’s key talent always was to gain and defend her own power. She has sold out Germany’s future on the altar of her own ego. Because instead of seriously working to cure the root of serious problems, she took the easy road – most importantly by installing Draghi (on whom she knew she could rely on to paper over all crisis with liquidity, treaties and the law be damned).
    By avoiding difficult but necessary decisions she managed to leave the brainwashed (by the ‘gleichgeschalteten’ mainstream media) masses in the illusion that all is well, because they got to keep their often low-salary jobs in an economy doped by artificially low interest rates and currency.
    Germans have no idea (yet) what is inescapably waiting for them when the piper has to be paid for this folly cum cowardice by their ‘leaders’:
    At some point the latter won’t be able anymore to hide the fact that German taxpayers will be financing the living standards of the ‘PIIGS’ unless, or better until, the Eurozone disintegrates. And even then they’ll have to accept that trillions of TARGET and other PIIG debts will have to be written off.
    My evaluation of Merkel doesn’t even consider her unilateral and desastrous open border policy for all economic migrants.

    Since Draghis memorable ‘whatever it takes’ I predict that it’s just a matter of time that Merkel will be judged differently, i.e. harshly.

  4. kevinwaspi Says:

    “Indeed,her heir apparent, AKK, shares many of her weaknesses without having the benefits of her strengths.”
    I believe the financially, socially, and democratically oppressed are still trying to identify Angela’s “strengths”.

  5. GreenAB Says:

    I disagree with the negative view of Angela Merkel.

    Five years in a row without new debt, record low unemployment and debt-GDP that is falling below 60% this year.

    All of that while integrating 1.5m refugees. Show me a country that did as well as Germany.

    The AfD is a problem, yes. But compared to other countries they are nothing (15% in polls, far away from participating in any government). One has to accept the sad fact, that a certain percentage of people in my country just doesn´t like migrants. No matter how unfounded their fears are.

    In the past i used to be critical of the choice of Draghi too. And who knows how it´ll be play out eventually. But let´s be honest: who would´ve thought 10 years ago that Europe (and our financial system) still holds together?

    The potenial problems are growing (Italy, right wing populism in general), but SO FAR Merkel´s austerity coupled with Draghi´s dovishness has gotten us quite far. So i have to give credit where credit is due.

    Merz (German chief of BLACKROCK) would have taken the CDU to the right. But I´m not even sure he would have contained the AfD since many of their voters are the working poor – a group Merz (an opponent of the minimum wage) would have done nothing for.

    So let´s see how AKK will do. We´ll get the European election in spring and crucial elections in three eastern states in Germany by September 2019. AKK/Merkel´s fate hangs with the results of the CDU in these contests…

    • yraharris Says:

      Green AB–as always your point of view is well received and highly respected.We have had great discourse for so many years and your input is valued.I think Merkel would do herself some good by being a voice of reason on Brexit–it is timme for Juncker to leave the scene.It is not in Germany’s interest for a hard brexit—The Deutsche Bank situation also needs watching as it is still the most levered bank in the developed world and is the crown jewel of the German financial system

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