“Dexit” Is the New Brexit
Deutschland Exit, Dexit, is the New Brexit Discussion.
Germany’s far-right AfD party vowed to campaign for an end to coronavirus restrictions, a tougher line on migration and an exit from the EU as it finalised its election manifesto on Sunday.
The AfD had on Saturday voted to include a call for Germany to leave the European Union in its manifesto, as well as vowing to demand an end to coronavirus measures, complaining of a “politics of fear”.
Persistence of Euroscepticism
I saw that article a week ago and initially dismissed it as AfD only has 10-15% support.
Dexit is headed nowhere, for now.
Yet, Eurointelligence takes Rising Euroscepticism very seriously.
Germans have lost confidence in the European Commission. Only 21% of Germans say that they have a either a lot or some degree of confidence in the Commission, down from 30% in 2019. This is in contrast to 50% who would say the same about the German government.
8% say that Germany has benefited from the EU’s vaccine purchases, while 46% said no. But what is really striking is creeping euroscepticism. 39% wants repatriation of competences from the EU to member states. Only 12% want more competences for the EU. 63% think the EU is excessively bureaucratic, and 58% believe that Germany has to pay for over-indebted eurozone countries.
We believe the AfD Dexit campaign is more dangerous than it appears. The AfD’s internal division might overshadow everything. But the party has the potential to attract protest votes from disgruntled CDU voters, especially in the east. And it is the only party willing to fish in the pool of anti-EU sentiment. The Allensbach numbers don’t suggest that Germans are in their majority in favour of leaving the EU. But they do tell us that euroscepticism is large and persistent.
We keep reminding ourselves that this is how Brexit started.
I disagree with the political wishes of Eurointelligence, but they give a very good perspective on what’s really going on.
Other than politicians and the Green party who is it that really believes in “More Europe”?
Addendum: Who Benefitted from the Euro and Who Pays Now?
One of my readers, PecuniaNonOlet, commented “I thought Germany was the biggest beneficiary of the EU.”
That is (or was) an accurate assessment. The response from TexasTime65 was perfect.
“They were the biggest beneficiaries. But now they are potentially the biggest losers because all the other countries owe them a lot of money and have no real way to pay any of it back unless Germany becomes a net importer of goods and services (which is politically a no-go in Germany),” replied TT.
Trade Statements by German Finance Minister “Utter Lunacy”
I have commented on this many times before.
For example please consider my September 13, 2016 article Michael Pettis Calls Surplus Trade Statements by German Finance Minister “Utter Lunacy”
At that time the six largest deficit countries owe a collective 797.3 billion euros to the four creditor countries, primarily Germany.
It’s been a while since I reported on Target2 (what countries owe each other).
Spain, Italy, Greece, and the ECB now owe Germany over a trillion euros!
Tiny Luxembourg is a creditor to the tune of 267 billion euros.
How can that be paid back?
It can’t. Target2 is one of the fundamental flaws of the Eurozone.
Euro What If?
Let’s go one further and ask “What if the UK had moved to the Euro?”
Undoubtedly, the UK like Germany and to a lesser extent the Netherlands would have been a huge creditor country.
It would have been stuck, like Germany is now for bailing out the EU “club-Med” states.
Eventually there would have been pressure on the UK along those lines if it stayed in the EU but on the pound.
This is yet another excellent reason the UK was wise to Brexit.
Mish
Perfect synopsis “They were the biggest beneficiaries. But now they are potentially the biggest losers because all the other countries owe them a LOT of money and have no real way to pay any of it back unless Germany becomes a net importer of goods and services (which is politically a no-go in Germany).”
TT do you read Pettis or what I have said previously or did you come up with that on your own.?
When they have a functioning EU wide bond market German Bunds lose their crown.
Mish, I follow Pettis after being introduced to him via your blog years ago.
I’m essentially quoting a synopsis of his many articles on this subject over the past decade or so. After reading and understanding the math in his work it’s easy to see it play out over and over again.
Britain was merely the first to leave. Once other countries see that the sky doesn’t fall some of them will be next (best case would be Germany leaving).
From a median and mean wealth per habitant point of view Germany is not that rich compared to it’s neighbors principally because home ownership in Germany is much lower at around 50%. Germans rent and therefore not profiting from the world-wide real estate boom. They do not see themselves as being rich and they see themselves as being taken advantage of by Southern European countries so it’s normal to see a “Germany First” movement gaining strength. Compare some numbers:
I spent some time a year or two ago trying to educate myself about the real fundamental differences that drive home ownership here vs.various EU countries, where renting is the norm.
Who was it who just said “Show me the incentive and I’ll show you the outcome”? That’s what it amounts to, no doubt. In the US, the government subsidizes home ownership, while in many parts of Europe the government policies favor renting.
It’s interesting that the UK has roughly the same level of home ownership as the US, even though WWII left them with a huge need for subsidized housing after the war….which is a factor often sited by those trying to explain high rentership in Germany and Austria.
I’d love to hear from anybody why this is….
Charlie Munger
Same with France as UK…..around 65% ownership, fairly stable for many years now.
How does France incentivize home ownership?
I don’t know about France Eddie, but you don’t need to incentivise it in the UK. Most people believe renting is a waste of money, they’d rather pay interest instead of rent. “An Englishman’s home is his castle” is a well known phrase. I think it was in the 80’s that tenants of Council Houses were given the opportunity to buy them and they were snapped up leaving a massive shortage of social housing. There’s generally a shortage of new housing, and building land, so barring selling due to unemployment, house prices generally rise.
I’d heard, but not sure, that in Europe more value is attached to mobility, particularly amongst the young, hence the lesser home ownership?
The one time I was in England, we rode the early train up to Newcastle-on-Tyne from London and then rode around all day in a rental car in the Hadrian’s Wall sheep country. with all those Roman ruins…my British DNA didn’t want me to leave…..I felt a feeling of loss that I have a hard time explaining, even though we left 9 or 10 generations ago now.
I saw several small holdings that I thought were not priced too terribly compared to rural property here……if one didn’t have the exchange difference, anyway. I always look at property, no matter where I go. hehehe.
I have been there up in the north part too and had the same feeling. The Border Country gave me that feeling.
We can’t deduct mortgage interest here. I believe it’s cultural. The French as with many peoples have a totally rational fear of not having a roof over their heads. Often when they say they want to buy real estate they call it buying some “pierre” or my investments are in “pierre” which means stone. It has a feeling of permanence. Even the house are hardly ever made of wood. They are of cinder block or stone. It’s also hard for a bank to kick you out because of non payment. It’s also hard to kick out a renter or squatter for non payment either.
Germany as I understand it has policies that encourage renting over ownership by keeping rents reasonable through laws and by having public companies manage the housing stockpile. Being in Germany of course means that publicly-run companies do do a good job. Apartments there are nice, clean and in repair. There is also some cultural influences from the last war where they had the experience of having their houses turn into ashes. Paris rents are 45% more expensive than Berlin or Munich for example. It’s even worse compared to London.
Greeks who own their homes are asset rich and cash-flow poor where Germans are cash-flow rich and asset poor.
The Euro, being an enforced fixed exchange rate requires a mechanism to transfer funds from the surplus countries to the others. Germany will have to pay or the Euro eventually fails. Eventually voters will realise and something will have to give in my opinion. Maybe we’re seeing the beginning of this shift in opinion.
Dexit and several other ‘exits’ would indeed be an option….. if it wasn t for the honey smeared, cheap debt, Euro trap….cheap debt is like heroin for smack addicts wanting more and more of it…with the ECB fulfilling its role as a pusher of last resort … The Euro is here to stay and as a consequence so is the EU, no matter what a unfunctional, worthless institute it is !….Ever tried to make eggs again out of scrambled eggs ?…
I’m not so sure about that. I agree that the politicians won’t give up on the idea, but if things don’t change for the better revolution will force a collapse in my view.
Never say never. Every EU member has kept their respective central banks alive “just in case” and every one of them has contingency plans which include issuing new money if necessary. A breakup would be messy to say the least but it can be done.
The PIGS and even France and Belgium would have to pay very high interest rates (again), to (re)finance their debt ! Germany, The Netherlands,and a few other fiscally sound nations would ‘enjoy’ far too expensive currencies, dramatically hampering exports….
Every member state kept their central bank, but those who are part of Euro gave up their monetary sovereignty. There can be a case where a member state exits, but keeps the Euro. If an exit happens, it will be one of the economically more viable countries or one that cannot bear the constant harassment from the Brussels nut-cakes.
Well no doubt the U.K. is standing tall with their decision. They took a gamble and it paid off, Same like the U.S.
Well, I don’t know about standing tall but a vote today would easily be won by people wishing to leave. The EUs bureaucracy and inability to agree on anything has really come to the fore. It’s become clear that their efforts to defend their protectionism are more important than their people’s welfare. In Germany it seems as if some people have also seen through it and will use their vote to have their say. Something the EU would try to stop if they could.
The UK is way better off after Brexit. Sovereignty? The EU regulates in virtually every area. EU Directives are required to be ‘harmonised’ (written into local law at the country level) by every EU member. The European Court of Justice is the court that ultimately resolves any disputes between the EU and a member country. Post-Brexit, the UK will decide UK laws and the UK courts will resolve disputes without interference from the EU.
The EU does not allow its members to have their own policies on immigration that conflict with EU policy. This is a direct limitation on the sovereignty of EU member states.
Unlike pre-Brexit, the UK can now make its own trade agreements with other countries, and they have flourished in that space. https://reason.com/2021/01/21/after-brexit-good-news-for-free-trade-in-the-u-k/
The EU’s incompetence is clearly demonstrated by its COVID vaccination program. The UK, no longer handcuffed by the EU’s ridiculous bureaucracy, has vaccinated far more of its population than the EU.
“Yes but most people do not care”
This is not true, no matter how often you say it. I get that you can’t even comprehend why people yearn to be free and the sacrifices they are willing to make to get there. Your answer to the question ‘why Brexit?’ is the same as your answer to those who disagree with you in the U.S.: They are stupid people, racists, who just don’t have the superior understanding of the world that Quanta possesses.
This thinking is a little simplistic IMHO. But I have no problem with you expressing your opinion.
The root issue is really always the problem of a common currency but no common debt. The bureaucracy is horrible, of course.
If Germany were to exit the EU, it’s all over…it could even be the start of a world wide credit lock-up that would make Jerome Powell jump out of a Fed window.
How much is the decline in German confidence in the E.U. temporaral and tied to Berlin’s decision to allow Brussel’s to negotiate on its behalf for Covid vaccines?
But that just goes to the heart of the problem with the EU. The EU is nothing more than a bureaucratic nightmare that can’t shoot straight because all the member countries want to aim at different targets. There is no doubt that Germany benefited enormously from the initial adoption of the Euro but that came at the long term expense of the Southern European countries who are now paying the price in spades. The alternative – dissolve the EU and strive for free trade across all of Europe. It is also time to ban the current EU endorsed subsidies that encourage inefficient farming practices and industries.
A lot I would say. The process was a classical example of bureaucratic incompetence and it was laid bare for all to see. Unfortunately, under EU rules the actual contractual terms with the pharmaceutical companies remain secret despite calls by EC parliamentarians.
And, the alternative is…???
Deutschmarks and border controls again