As a brief reminder, German public support for an exit from nuclear power started with the US Three Mile Island ‘incident’ in 1979, and escalated sharply after Chernobyl. It was Schroeder’s SPD/Green coalition which passed the original ‘Atomgesetz’ in 2002, limiting the lifespan of a nuclear plant to 32 years, and banning any new plants which, without a precise date being set, implied the last nuclear plant would close in 2022. The CDU/FDP coalition formed after the 2009 elections pushed the closure timetable back by eight to fourteen years, but performed a sharp volte-face in the wake of the Fukushima nuclear disaster, and in 2011 a law was passed which immediately shut eight nuclear plants, and limited the lifespan of the remaining nine to 2022. It is worth noting that this law was passed with huge cross-party support (more than 80%) in the Bundestag, with only Die Linke objecting, because they wanted a quicker exit. The ‘Energiewende’ has a broader reach, which in broad terms aims a) to reduce greenhouse gas (GHG) emissions by 80–95% by 2050 (relative to 1990) and b) to source 60% of output from renewable energy by the same date.
The record shows that while Germany has achieved a 27.7% reduction in GHG emissions by 2017 (relative to 1990), the last few years have seen little change, and the 40% reduction target set for 2020 now looks to be the stuff of pipedreams. One might ascribe that failure to overly ambitious targets. But the reality is considerably worse, as the Federal Audit Office has been highlighting since 2016. In its latest report, it noted that government expenditure on the ‘Energiewende’ had been in “blatant disproportion to the hitherto poor yield”. It added that over the past 5 years “at least EUR 160 Bln have been spent”, and that “if the costs of energy system transformation continue to rise and its targets continue to be missed, there is a risk of a loss of confidence in the ability of government action.” Perhaps most notably, above all in the context of the well documented and as yet incomplete Berlin Brandenburg Airport (scheduled to open in 2011, now perhaps in 2020, at more than triple the original ERU 2.0 Bln cost projection) and the Stuttgart 21 railway (widely agreed to be totally superfluous) projects, it notes that the wastage of resources to implement the Energiewende was “unprecedented”, and that the Federal Government, incidentally, “does not have an overall grasp of the costs or any transparency in this respect.” While Merkel and her ministers may not be directly responsible for the spectacular planning failures in Berlin and Stuttgart (these are but two of rather many such projects), or indeed all of the wasted expenditure on the Energiewende, no effort has been made by any of the Merkel governments to tackle what are blatant and crass structural failings. To be sure, this is certainly not a singularly German phenomenon, but for successive German
governments to demand reforms and budget cuts in other EU and Eurozone countries to address similar issues is hypocritical, to say the least. It also underlines that a radical reform of public spending approval processes is acutely needed, and serves as a reminder that German efficiency is far more patchy than is commonly believed.
I started my career in financial markets in Frankfurt in 1985, and even then it was widely agreed that (West) Germany had far too many banks, and that its financial system was in dire need of major reform. I would observe that this observation holds true today, but that in the meantime Dresdner Bank was subsumed into Commerzbank, which, along with Deutsche Bank ranks highly on any list of major banks that investors do not perceive to be on anything like a stable footing. A perhaps more embarrassing statistic for the German financial regulator BaFin, and of specific interest to those in the commodity trading world, is that one quarter of all the loans to the global shipping sector sit on the balance sheets of German banks, which may fit with Germany’s status as one of the world’s top exporters, but echoes numerous regulatory failures of the past from the Herstatt Bank through BfG to IKB in 2007. The fact that Germany’s ‘bad bank’ FMS Wertmanagement (set up to deal with legacy ‘bad assets’ in the wakes of the Global Financial Crisis) will require a capital injection in the next 12 months to deal with legacy asset problems is a further reminder that Germany’s banks are on the opposite end of the ‘admiration’ spectrum to its manufacturers.
So much for Merkel’s legacy, the final word pertains to the seemingly obvious balkanisation of German politics. It is probably fair to say that Germany’s body politic will need to acclimatize itself to the idea of minimum three party coalitions, though this may prove to be transitory in the longer run, given that the slump in the fortunes of the Volksparteien (people’s parties, i.e. CDU/CSU and SPD) may well be arrested once the grand coalition era has been broken. It should be added that nearly forty years on from being founded, the Green party should probably be considered to be a mainstream party, and that in the short-term they will be the kingmakers for the next coalition government.
Marc Ostwald E:
marc.ostwald@admisi.com T: +44(0) 20 7716 8534
6 | ADMISI - The Ghost In The Machine | November/December 2018
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