Germany Invests in Rail, But Is It Enough?

Cologne Germany train station
Central train station in Cologne, Germany (Unsplash/Kai Pilger)

Germany is investing €86 billion over the next ten years in its aging rail network. The hope is to shift Germans toward less carbon-intensive forms of travel.

The federal government will cover the bulk of the cost, €62 billion. Deutsche Bahn, the state-owned railway company, will pay the remaining €24 billion. The money will be used to update tracks, stations, signal boxes and energy supply systems.

The government also intends to cut fares by 10 percent for trips of 50 kilometers or more in order to incentivize the use of trains for long-distance travel.

With this package, Germany kills two birds with one stone: it modernizes its infrastructure while reducing carbon emissions.

It also demonstrates Germany’s willingness to spend. Read more “Germany Invests in Rail, But Is It Enough?”

Berlin Shows How Not to Do Housing Policy

Berlin Germany
The sun sets on the Saint Nicholas’ Church and town hall of Berlin, Germany, January 26, 2010 (Mika Meskanen)

If you’re trying to control housing costs in your city, don’t look to Berlin for inspiration.

The German capital is due to implement a five-year, across-the-board rent freeze in March. The measure is expected to save around 340,000 tenants money during that period, but it will come at the expense of housing affordability in the long term.

The German Economic Institute in Cologne estimates that Berlin’s policy will reduce the value of some properties by more than 40 percent.

A consequence of that will be underinvestment. The BBU, a trade association of developers in the Berlin and Brandenburg region, says its members expect to reduce investments by €5.5 billion and construction by a quarter.

Germany needs 350,000 new homes each year to keep up with demand. Only 286,000 were built in 2018. If the BBU is to be believed, that number will fall — driving up housing costs across Germany. Read more “Berlin Shows How Not to Do Housing Policy”

Trump’s Presence Will Be Felt When Merkel and Putin Meet

Vladimir Putin Angela Merkel
Russian president Vladimir Putin and German chancellor Angela Merkel attend a conference in Moscow, November 16, 2012 (Bundesregierung)

German chancellor Angela Merkel is traveling to Moscow on Saturday, officially to discuss the conflicts in Libya, Syria and Ukraine, as well as the tension between Iran and the United States, with Vladimir Putin.

Hanging over the meeting will their countries’ deteriorating relations with the United States. Read more “Trump’s Presence Will Be Felt When Merkel and Putin Meet”

Germany’s Surplus Obsession Hurts the Eurozone

Angela Merkel
German chancellor Angela Merkel attends the G7 summit in Biarritz, France, August 25, 2019 (Bundesregierung)

If the German economy does poorly, so will the eurozone’s. A mere .2 percent growth is projected for the first quarter of 2020. This should be a wakeup call to German policymakers.

There are the usual suspects: underdeveloped infrastructure, underinvestment in education, export dependency.

They all stem from Germany’s obsession with surpluses. Revenues generated by exports are not reinjected into the economy. Rather, they sit comfortably in savings accounts. This is the reason for negative interest rates.

Not spending money is one way to get rich. But to grow its economy, or prevent a slowdown, Germany must put its money to work: invest in education, infrastructure and public goods.

Its reluctance to do so affects everyone in the euro area. Germany accounts for nearly 30 percent of the eurozone’s GDP. If Germany spent more at home, it would reduce its current account surplus and increase demand for the products and services of other European nations. Read more “Germany’s Surplus Obsession Hurts the Eurozone”

Nord Stream Sanctions Are No Way to Treat European Allies

American president Donald Trump speaks with German chancellor Angela Merkel at the G20 summit in Hamburg, July 6, 2017
American president Donald Trump speaks with German chancellor Angela Merkel at the G20 summit in Hamburg, July 6, 2017 (Bundesregierung)

Senators in the United States have approved sanctions against companies that are involved in building the Nord Stream 2 pipeline between Russia and Germany.

The sanctions, which President Donald Trump has yet to sign into law, are a last-ditch attempt to halt the pipeline’s construction, which the Americans argue will only increase Europe’s dependence on Russian gas and hurt Ukraine’s position as a transit nation.

They’re not wrong, but placing sanctions on allies is no way to go about it, especially when they have no alternative. Read more “Nord Stream Sanctions Are No Way to Treat European Allies”

Breakthrough Unlikely at Normandy Four Meeting

Presidents Vladimir Putin of Russia and Emmanuel Macron of France meet outside the Palace of Versailles, May 29, 2017
Presidents Vladimir Putin of Russia and Emmanuel Macron of France meet outside the Palace of Versailles, May 29, 2017 (Elysée)

For the first time in three years, the “Normandy Four” are due to meet in Paris on Monday.

This negotiation format, consisting of France, Germany, Russia and Ukraine, brought about the Minsk I and Minsk II ceasefire agreements in 2014 and 2015. Even though their implementation was incomplete, the Normandy Four was still seen as a somewhat successful example of multilateral cooperation.

Its usefulness may have expired. Experts doubt the upcoming meeting will accomplish much for the simple reason that neither Russia nor Ukraine is ready to capitulate. Read more “Breakthrough Unlikely at Normandy Four Meeting”

Germany’s Social Democrats Elect Left-Wing Leaders

Norbert Walter-Borjans, then finance minister of North Rhine-Westphalia, addresses the Bundesrat in Berlin, February 20, 2014
Norbert Walter-Borjans, then finance minister of North Rhine-Westphalia, addresses the Bundesrat in Berlin, February 20, 2014 (Bundesrat/Frank Bräuer)

Earlier this month, I argued that lurching to the left would be a risky strategy for Germany’s Social Democratic Party (SPD), but that the alternative — continuing to rule in a grand coalition with the center-right — is too.

A change could scare off centrist voters, who have an alternative in Angela Merkel’s Christian Democrats or Germany’s pragmatic Green party. But the grand coalition has wearied leftists, who have an alternative in the Greens and the far-left Die Linke.

Not making a choice has been worst of all. The SPD has fallen below 15 percent support in recent surveys, behind the Christian Democrats and Greens and neck and neck with the far-right Alternative for Germany. Read more “Germany’s Social Democrats Elect Left-Wing Leaders”

Lurching to the Left Is Risky for Germany’s SPD. So Is the Alternative

German finance minister and Social Democratic Party leader Olaf Scholz attends a debate in parliament in Berlin, July 8, 2018
German finance minister and Social Democratic Party leader Olaf Scholz attends a debate in parliament in Berlin, July 8, 2018 (Deutscher Bundestag/Inga Kjer)

Germany’s Social Democrats (SPD) are increasingly forced into coalitions with the far left. Such pacts haven’t hurt their counterparts in Portugal and Spain, but Germany is a more conservative country with a politics of consensus and arguably less need for redistributive policies.

The risk is that a left-wing strategy will alienate centrist voters. But the alternative — continuing to rule in grand coalitions with the right — is wearying leftists. Read more “Lurching to the Left Is Risky for Germany’s SPD. So Is the Alternative”

Germany Under Pressure to Spend

Angela Merkel Mark Rutte
German chancellor Angela Merkel receives Dutch prime minister Mark Rutte in Berlin, May 16 (Bundesregierung)

In the face of weakening economic growth, outgoing European Central Bank president Mario Draghi has called on the fiscally conservative governments of Germany and the Netherlands to spend more.

The Dutch are heeding his advice with plans for a long-term economic investment fund. Will the Germans follow suit? Read more “Germany Under Pressure to Spend”

Germany Can’t Blame Trump for Its Slowing Economy

Berlin Germany
A bird sits on top of one of the spires of the German Reichstag building in Berlin, December 31, 2005 (Max Braun)

Germany may be heading into a recession. Its economy shrank .1 percent in the second quarter of this year.

Donald Trump’s trade war with China is partly to blame, but it has also exposed Germany’s home-grown vulnerabilities: an overreliance on exports and weak domestic demand. Read more “Germany Can’t Blame Trump for Its Slowing Economy”