GERMANY: Debt Brake & more – 25th Apr 2024

Hallo from BA! This is the Rorshok Germany Update from the 25th of April twenty twenty-four. A quick summary of what's going down in Germany.

To kick off this week’s episode, Christian Lindner, the minister of finance, spoke at the Semafor World Economic Forum in Washington last Thursday the 8th. There he had to defend his fiscal policy of strictly sticking with the debt brake, because, in the past years even the International Monetary Fund, or IMF, has grown increasingly skeptical of Germany’s low public investment rates.

Since the nineteen nineties the country hasn’t made any new investments into public infrastructure, including roads, bridges, school, public transportation among others, and as a result, the state’s assets are dwindling. Not to mention the future and current investments needed due to climate change. All of these are reasons why the IMF and other agencies have a critical view of Lindner’s unwavering support for the debt brake, which stops the state from any meaningful investment or public spending.

Despite the desperate and effective defense Christian Lindner is putting up in support of the debt brake, a change to its system seems increasingly likely. Several prime ministers of German states, all belonging to the conservative Christian Democratic Party, or CDU, among them the Mayor of Berlin, the PMs of Schleswig-Holstein, Saxony-Anhalt, and Hessia, have publicly announced their support for a reform of the debt brake.

As the Convention of State Prime Ministers holds legislative power in Germany, its sign-off is required for many laws but it can also start its own law initiatives. So there might be a proposal in favor of a reform of the debt brake. The national CDU is still very much against a reform, but its support is needed in national parliament as the debt brake is part of the constitution and only a two-thirds majority could make any changes to it.

Staying with Christian Lindner and his Free Liberal Party, or FDP, on Sunday the 21st, the party leadership approved a twelve-point plan for the future of the German economy. The list immediately led to friction within the government coalition as most of the points were almost the opposite of what the other two parties wanted. For example, the list included rigorous cuts in social welfare and retirement payments, an end to publicly funded renewable energy, and the solidarity surcharge.

The solidarity surcharge is a tax construct that is intended to distribute wealth from the richer to the poorer states.

Moving on, Germany’s highest court is currently debating a fundamental question of democracy: Who can be elected? Or rather, who of the elected can join parliament? The Left party and the Christian Social Union, or CSU (which only operates in Bavaria), are most affected by a recent change in the election law and went to court. Germany’s ballots have two votes: The direct one (first) and the percentual one (second). The first vote is given directly to a candidate and the winner in a district is decided with a simple majority. The second one is given to a party, and each party gets its share of the total percentage of parliamentary seats. This means that there’s always a party that gets more seats in parliament through direct votes than they would have according to the percentage they achieved with the second vote. In order to level out the percentages between all parties again, all the other parties get an equivalent amount of seats.

The problem here is that the German parliament grows with every election cycle, and it is the biggest of all democratic nations around the globe with almost 750 seats.

To stop this growth, the current government decided on a new election law last year, which favors the percentage votes over the direct votes. That means that parties will now only get their seats by percentage, even if they would previously have gained more seats with direct votes.

The CSU and the Left Party have sued against these changes.

In other court news: The German crew of the rescue boat Iuventa was acquitted on Friday the 19th in Sicily after seven years of trial. The crew members had participated in many rescue missions in the Mediterranean, coming to the aid of refugee boats in distress. However, the Italian government charged them with human trafficking. Now, finally, a verdict has come down, clearing the crew of all charges.

The trial took a surprising turn when in late February this year the newly appointed prosecutor admitted to severe illegal activities (such as unlawful wiretaps on both the crew members and journalists) of their predecessors and that the crew should have never been charged in the first place.

The head investigator of the Cum Ex scheme resigned. Cum Ex, and other related schemes, are ways in which banks and the super-rich are able to steal money from the state. They do that by double-charging a tax refund on bond sales. A common example of how it works would be: Imagine you bring back a bottle to the supermarket and get back the deposit. Now, you copy the deposit receipt and cash in on the deposit twice. The thing is, we are not talking about just twenty-five cents, but rather about billions of Euros that the state pays out unnecessarily each year.

As of now, the involvement of chancellor Olaf Scholz, is unclear. And it will probably remain unclear for the foreseeable future as Anne Brorhilker, the head investigator, just resigned from her post. She had been leading the investigation since twenty twelve but now announced that she would continue her fight against financial crimes in an NGO.

German President Frank-Walter Steinmeier has visited Turkey and honored the service Turkish immigrants have done for Germany.

First on his political agenda wasn’t President Erdogan, but rather Istanbul’s mayor Imamoglu, the most prominent figure of the opposition. Eventually he did meet with Erdogan on Wednesday the 17th to discuss German-Turkish relations. Frank-Walter Steinmeier doesn’t hold any legislative or executive power, so state visits are always of a symbolic nature.

Moving on, on Monday the 22nd, the police arrested two German men and one German woman for allegedly spying for China. The trio had founded a start-up and were going to start research cooperation with universities. Their idea was to gain access to military technology and funnel it back to China. Apparently, they have already successfully gained access to a high-energy engine for warships.

Another man was also arrested for allegedly spying for China but this time, he was an employee of the lead candidate of the right extremist Alternative for Germany party, or AFD, for the upcoming EU Parliamentary elections. The man is accused of having funneled secret information from the EU Parliament back to China.

Speaking of lead candidates of the AFD, Björn Höcke made the first statement in his court case. Höcke is the head of the AFD in Thuringia and the lead candidate for the upcoming state elections. He is charged with having repeatedly used SS phrases at election rallies and party conventions. Two years ago, he was accused of using the phrase “everything for Germany,” an SS slogan, in a speech. He said that he didn’t know this was an SS slogan. It’s unlikely he will have to go to jail, and thus will probably be allowed to keep his candidacy.

And to close this edition, a new study published on Tuesday, the 23rd, shows that the German youth is as insecure, worried, and unhappy as ever before. Most of the participants stated that stress, tiredness, and helplessness were the biggest factors, with only 22% saying that they experienced none of the unpleasant emotions mentioned in the study.

And that’s it for this week! Thanks for joining us!

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