SWMBO’s Legacy

For many people SWMBO has been a political giant and her legacy portentous. Yet, her party obtained the worst results in its history in the recent general election. So much for her legacy’s domestic endurance. This development ought to be shocking given Germany’s alleged economic success. Her economic team’s strategy for Germany to remain competitive in a globalizing economy was quite successful; we shall soon see how well it works in a de-globalizing economy. The trade-off of the past two decades was growth stemming from Germany running massive trade and current account surpluses. Germany, like China, also exported disinflation to her trading partners in the Eurozone. These excess savings coming from auto-euros, for lack of a better word, were recycled in generally uneconomic ventures in the periphery by an unimaginative and untalented German financial system until the wake-up call of the EU Sovereign and banking crises put an end to that long-term strategy. Inevitably, this easy money led to bubbles in property development in Ireland and Spain and fiscal deficits in Portugal and Greece. Industrial production disinflation resulted in two last decades of growth in Italy.

SWMBO’s handling of the crisis, informed by her domestic agenda, was an unmitigated social and political disaster which consequences we are still suffering. This has resulted in most member parties of the EU‘s Popular Party turning progressive and reneging from their market friendly and liberal ideals. Her obsession with austerity and lack of flexibility led to the rise of populism which worse face is the phyllo-autocratic Visograd coalition. Finally, her energy policy for Germany, a knee jerk reaction to the Fukushima Nuclear Plant accident, has re-enforced Putin’s grip on central and Eastern Europe. In addition, SWMBO allowed her lack of rapport with President Trump to extend to the US-EU relations and NATO without articulating a clear alternative defence strategy. It is difficult to rank which of these problems will have the largest or longer-lived consequences. Yesterday the EU Commission defused the Green agenda by including nuclear and natural gas plants as sources of green energy. This effectively pushes back the date for meeting zero emissions and should be a bonanza for mini-nukes such as those developed by Bill Gates’s Terra Power. But what does it say about SWMBO’s energy policy legacy?

Brexit was perhaps inevitable. The EU did show Cameron some flexibility as it accepted many of the reforms presented by his Government in the 2016 negotiations. In any event, further political integration does not seem to be a high priority anymore. Yet the loss of the UK’s membership makes the EU weaker politically, financially, and militarily. Conversely, the loss of Hungary would largely go unnoticed and yet Germany cedes on every abhorrent point to the satrap who has become effectively the Magyar dictator. While Brexit may turn out to be very bad for the UK, it marks the end of the EU for most market-oriented liberals like us. Illiberalism is on the rise in the EU, democracy compromised in many countries, and individual rights trampled on with every crisis. This is also SWMBO’s legacy because she turned a blind eye to all these problems as long as governments were well behaved in other areas of interest to Germany.

On the 70th anniversary of D-Day at Ouistreham, in the Calvados region of Normandy, President Hollande welcomed Chancellor Merkel who greeted some of the nonagenarian allied veterans in attendance with a firm handshake and a serious countenance while the band played “In the Mood”. We would love to know what was on her mind that day. She was not there as the leader of the common enemy of 1944, for that common enemy was Nazi Germany, which conveniently disappeared soon after the Allied victory. She was there as the very popular leader of a democratic, re-unified, affluent, industrious, and parsimonious but just in case, non-nuclear and semi-occupied by the US military, Germany. All the leaders of the victorious countries were in attendance, including the Presidents of the United States and Russia. While everybody else waited patiently for Queen Elizabeth’s grand entrance, SWMBO had a long conversation with President Putin staging her good relationship with the leader of the authoritarian movement.

Five years later on the 75th anniversary of D-Day, SWMBO was again a central character in the get together but Putin was a no show. Merkel’s black jacket and dark trousers were in sharp contrast to Queen Elizabeth’s strawberry pink coat. The new President of the United States was a source of concern to many in the stands, for Donald Trump had told his NATO allies that they should step up their defence spending as the US left the Iran nuclear deal, which many believed was a landmark of EU diplomacy. Merkel remarked, “It is no longer such that the United States simply protects us, but Europe must take its destiny in its own hands, that’s the task of the future.” What remains unclear is how exactly Europe will take its destiny into its own hands.

SWMBO has left no Grand Plan behind for new leaders to implement. There are those who believe that the EU needs to cosy-up to Russia to present a counterbalance to the US and China. No wonder the UK has left this EU club. Macron would like an EU military force, but minor problems aside, such as language, who will contribute what and to what end. Sovereign countries have their own foreign policy priorities. Take Spain for example. It has a land border with Morocco, a developing Arab country, which is currently blocking gas supplies into Spain from its neighbour Algeria as these two countries fight over control of the former Spanish Sahara. Not only does that territory still have rich phosphate deposits but also a large offshore gas field. How will Spain’s military priorities ever be in accord with Poland’s?

SWMBO’s political legacy is also confusing. The EU’s Popular Party is no longer a conservative market friendly party. Many of its member parties have moved closer the centre-left. This is perhaps why SWMBO was so comfortable Governing with the Socialists in a Grand Coalition. These “conservatives” are the parties, which often raise taxes, adore big government, as well as protectionism, industrial policies, and anti-globalism. There are still those who cling onto the small Government aspirations of the 1980s. They are sometimes very popular, like Isabel Diaz Ayuso, the President of the Region of Madrid, but their efforts are undermined by their fellow party members. The microcosm of Madrid politics is a good an example of this trend. Ms Ayuso is business friendly, has lowered income taxes, and is one of the few politicians in the EU who believes there was a cost benefit analysis that needed to be made before perpetuating the lock-downs. Conversely, the Mayor of Madrid, who is also unusually the PP’s national spokesperson, is a populist who has just passed the City’s 2022 budget with the support of disaffected communist council members. Not only does not Mr Almeida lower real estate taxes to pre-sovereign and banking crises levels, as these were the taxes the IMF demanded should be raised to balance the public sector accounts temporarily, on the contrary the Mayor is negotiating the implementation of a Mansion tax with his communist allies. This is the state of the EU’s conservatives.

Finally, one would think that SWMBO would be the defender of the Maastricht Treaty’s strictures in defence of the common currency’s values. These are no longer a priority, inflation is rampant, the currency debased by the ECB’s printing press and the periphery countries are all but insolvent were it not for the surprising fact that most of them pay nothing to finance the rollover of their maturing bonds. Her party in tatters, conservatism abandoned, fiscal prudence a thing of the past, the euro debased, further political union derailed, the traditional alliance with the US questioned, the Green Agenda defanged, despots such as Putin, Erdogan or Orban tolerated what exactly is SWMBO’s legacy?

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