Connect with us

Europe

German economy faces threat from US tariffs, says Merz

Published

on

Friedrich Merz, the leader of the CDU and prospective chancellor of Germany, stated that Donald Trump’s tariffs and their detrimental impact on the German stock market underscore the necessity for tax cuts and deregulation.

On Monday, Germany’s primary stock index was among the worst-performing in Europe, plummeting by 10% before partially recovering as investors reacted to Trump’s announcement of sweeping import tariffs that appear poised to reshape the global economy.

Merz commented on Monday, “The situation in international stock and bond markets is dramatic and threatens to worsen. It is more critical than ever that Germany regain its competitiveness. This must be central to the coalition negotiations.”

The strength of the German economy lies in its exports of goods such as machinery, chemicals, and vehicles, with the US being a key market. Approximately one in ten German exports are destined for the US.

German exports had already become less competitive in recent years due to rising energy prices and other factors. The imposition of a 20% tariff by the Trump administration is unwelcome news for the industry.

The market shock appears to have injected a new sense of urgency into coalition talks between Merz’s Christian Democrats (CDU) and the Social Democrats (SPD) following the federal elections on February 23.

According to German media reports, coalition discussions were briefly paused on Monday as Merz, outgoing Chancellor Olaf Scholz, and SPD leaders consulted on how to respond to the US measures.

An estimate by the Cologne Institute for Economic Research suggests that the total economic damage to the German economy during Trump’s four-year term could reach up to €200 billion, potentially leading to a 1.5% reduction in GDP levels by 2028.

Deutsche Bank economists noted in a report on Monday, “In the short term, the new government will struggle to cushion the immediate trade shock,” adding that Germany could face a third year of GDP decline in 2025.

Merz, long known as a “fiscal hawk,” had already faced criticism within his party and domestically after approving a constitutional amendment allowing up to €1 trillion in new borrowing, a key demand of the SPD and Greens.

His comments on Monday aimed to reaffirm the CDU’s traditional focus on fiscal and economic discipline in the face of a changing global landscape.

Since the elections, Merz has seen his party’s approval ratings decline as conservative voters increasingly doubt his ability to deliver pro-business reforms and tax cuts. Polls also indicate rising support for the right-wing Alternative for Germany (AfD), which emerged as the second-largest force in parliament in the February vote and now appears to be catching up with the CDU for the first time.

Critics within the party say Merz has failed to deliver on his pre-election promise to “sharply shift the CDU to the right” on key policy areas.

Divisions within the party have become increasingly apparent in recent days after members of the conservative bloc’s youth organization in Cologne wrote a letter to Merz expressing their unease.

The letter stated, “Mr. Merz, we believed in your political leadership. We trusted you and fought for you. But now we ask the question: For what? For a CDU that bows to the left-wing mainstream?”

Much of the criticism against Merz comes from the Young Union (Junge Union), the youth organization of the conservative bloc.

Johannes Winkel, the head of the organization who also sits on the CDU’s executive board, threatened to vote against a coalition agreement with the SPD that does not include “fundamental conservative policies.”

Winkel demanded that immigration be curbed and that economic competitiveness be restored by reducing regulation and bureaucracy.

In an interview with the Süddeutsche Zeitung, the youth organization leader said, “If we enter the coalition without a delayed and promised change of policy, the country will suffer great damage.”

The youth organization in Cologne demanded that Merz fulfill his pre-election promises to reject asylum seekers at the border, reject tax increases, and ensure a “major reduction” in bureaucracy, all of which the SPD has resisted to varying degrees.

The conservative youth organization wrote, “If this course is not corrected immediately, you will not only endanger the CDU’s profile but also destroy the public’s trust and the commitment of its members.”

Europe

Post-Brexit reset falters as France targets UK defense firms

Published

on

Despite a post-Brexit reset, France is attempting to exclude British arms companies from the EU’s defense industry program.

A diplomatic source told The Telegraph that Paris is trying to limit member states wishing to purchase weapons under this program to those manufactured predominantly within the bloc.

The European Defence Industry Programme (EDIP) is being touted by the European Commission as the most significant overhaul of the continent’s industrial base. Under the program, EU funds will be channeled into joint procurement projects and the production of weapons, ammunition, and other military equipment.

The EDIP, which has been in preparation for six months, is part of a broader race to spend €800 billion on defense by the end of the decade.

French diplomats have insisted that this vehicle should only be used to support companies based in the EU, Norway, and Ukraine. This would mean that member states seeking to make purchases under the program would be limited to technologies where at least 85% of their components are produced within the bloc.

This demand means the United Kingdom, which recently signed a major defense and security agreement with Brussels, would be excluded from most projects financed by the EU budget. London would also be barred from joint procurement projects under the EDIP program.

An EU diplomat told The Telegraph, “Just a month ago, we solemnly declared that a new page had been turned in our relations with the United Kingdom and that a new era had begun. But at the first opportunity to put those words into action, we closed the book.”

There are also concerns that France’s hardline stance could lead to potential EU funding cuts for factories producing Patriot surface-to-air missile defense systems because they are based on US technology.

This decision comes at a time when NATO’s European allies and Canada have been warned that they need to increase their air defense systems by 400% to counter a potential Russian attack.

“It seems self-defeating not to invest in the only available air defense system just because it’s American-made,” the diplomat added.

French President Emmanuel Macron has been insistent that EU defense plans should be used to strengthen the continent’s own industry rather than allowing funds to be invested in foreign companies. Many EU countries, such as the Netherlands, Romania, and Greece, base their defense strategies on purchasing American systems like the Patriot air defense batteries.

To address these concerns, discussions are underway to allow technology transfers from defense companies outside the EU to those within the bloc. However, insiders suggest this mechanism will get bogged down in bureaucracy, making it practically impossible to secure funding.

Continue Reading

Europe

Poland considers partial border controls with Germany

Published

on

In response to Berlin’s repatriation of migrants who have crossed the border “illegally,” Polish Prime Minister Donald Tusk announced that it is “very probable” Poland will implement “partial controls” at its border with Germany.

Speaking in parliament yesterday before a vote of confidence in his government, Tusk also stated that the Polish government is seeking support from other European Union countries to restrict or end visa-free travel for Georgian citizens, whom it holds responsible for a wave of crime.

Under normal circumstances, no controls are conducted at the border between Poland and Germany, as both countries are part of Europe’s Schengen free-travel area. However, in 2023, Germany reintroduced controls on its side of the border to prevent the illegal entry of migrants.

This move drew criticism from Poland due to the additional burden placed on people crossing the border and Germany’s repatriation of thousands of migrants without the right of entry.

Poland’s main opposition party, the national-conservative Law and Justice (PiS), staged protests against Germany’s repatriation of migrants. The party accuses the Tusk government of being too lenient on this issue, although such repatriations also occurred when PiS was in power.

Speaking in parliament on Wednesday, Tusk stated that they had informed Chancellor Friedrich Merz’s new government that “on the Polish side, we will control very critically and very thoroughly any attempts to send any migrants to Poland.”

According to Polsat News, Tusk said, “I have informed not only the Germans but also other neighboring countries that if the situation and pressure at the border escalate, I will not hesitate to make the decision to introduce temporary controls.”

“It is very likely that such partial controls will be introduced at the German border this summer,” Tusk said, without providing details on what these would entail or exactly when they would be implemented.

Tusk acknowledged that such measures would create difficulties for Poles living near the border, especially those who reside on one side and work on the other, and he stated that the government would do its best to minimize their hardship.

In March of this year, Tusk announced that Poland would cease to comply with the EU’s Dublin Regulation, which permits the return of asylum seekers to the member state where they first applied for protection. However, his government has yet to take action in this regard.

In his speech to parliament on Wednesday, Tusk also announced that he is working to “form the necessary majority” among EU member states to limit or even completely suspend visa-free travel for Georgian citizens to the EU.

According to Radio Zet, the prime minister said, “One-third of Georgians want to share our values… But I am in favor of restricting visa-free travel with countries that do not meet the standards.”

Earlier this year, the Tusk government took strong measures against what it claimed was an increase in “imported crime,” particularly crimes committed by migrants from Georgia.

Continue Reading

Europe

Brussels prepares to sanction two Chinese banks over Russia ties

Published

on

The European Union plans to add two Chinese banks to its sanctions list due to their commercial ties with Russia.

According to information from Bloomberg, based on European Commission documents, this step is being considered as part of the EU’s 18th sanctions package against Russia. The European Commission presented the 18th sanctions package on Tuesday. Sources indicate that two regional banks operating in Chinese provinces bordering Russia are expected to be blacklisted.

These regional banks became a key channel for payments between Russia and China after the US tightened its financial sanctions late last year, threatening secondary measures against all credit institutions transacting with Russia.

Following Russian President Vladimir Putin’s visit to Beijing in May of last year, a payment network was established, involving at least six regional Chinese banks.

According to the European Commission document, these banks are accused of providing crypto services that help Russia evade sanctions, in addition to facilitating payments and export financing. Under the sanctions regime, the banks in question will be completely cut off from the European Union’s financial system.

As part of the EU’s 18th sanctions package, more than 30 individuals and legal entities are also planned to be added to the list.

Furthermore, there are discussions about removing another 22 Russian banks from the SWIFT system and blacklisting 77 tankers belonging to the “shadow fleet.” These measures aim to further restrict Russia’s financial and logistical capabilities.

The European Commission is proposing a ban on restarting the Nord Stream natural gas pipeline and a reduction of the price cap on Russian oil from $60 to $45 per barrel. According to the announced plan, shipments above this price will be excluded from European insurance coverage, and European tanker companies will be prohibited from transporting such oil. These steps are expected to further reduce Russia’s energy revenues.

In a statement yesterday, German Chancellor Friedrich Merz indicated that the new sanctions package will likely be approved next week. Merz stated, “Russia poses a security threat on both sides of the Atlantic,” adding that the US Congress is also working on new measures.

Continue Reading

MOST READ

Turkey