President Donald Trump pressured allies at the NATO summit Wednesday to double the military spending target to 4% of gross domestic product, while bashing Germany for its military spending and support for a major gas deal with Russia.
.. Mr. Trump began his visit by accusing Germany of being “captive to Russia” because of its support for Nord Stream 2, an offshore pipeline that would bring gas directly from Russia via the Baltic Sea.
Speaking in a meeting with NATO Secretary-General Jens Stoltenberg, Mr. Trump called Germany’s support for the project “very sad,” and said, “We’re supposed to be guarding against Russia, and Germany goes out and pays billions and billions of dollars a year to Russia.”
.. Senate Minority Leader Chuck Schumer (D, N.Y.) and House Minority Leader Nancy Pelosi (D., Calif.) said, “President Trump’s brazen insults and denigration of one of America’s most steadfast allies, Germany, is an embarrassment.”
.. He has met frequent criticism in Washington for appearing overly friendly toward Mr. Putin, including when he congratulated the Russian leader on his election victory earlier this year despite being advised by national security officials not to do so.
.. Germany is the biggest importer of natural gas from Russia in the EU, accounting for more than 20% of the purchases in 2017 by the 28-member bloc, according to the EU’s statistics agency Eurostat. Russian imports made up about 40% of Germany’s annual gas purchases for the past two years.
Can Germany Survive Its World Cup Defeat?
My neighbor Peter told me that losing to South Korea has implications for the nation’s soul.
.. Peter suggested that there were implications for the nation’s soul itself, with the team’s exit from the tournament reflecting a wider sense of unease. Chancellor Angela Merkel is right now fighting for her political survival at home, where she’s facing pressure to be tougher on immigrants and refugees, both within her own party and from the right-wing Alternative for Germany party... I wrote in this newsletter about how the far right views the ethnically diverse national team... She was worried that the team’s defeat would play into the far right’s self-pitying, us-versus-them worldview. “I just hope that some of those flags disappear now,” she said, “and the nationalism right along with them.”.. four years ago, German television had broadcast a live stream of the national team’s plane on its way to the World Cup in Brazil. Everyone had been more optimistic then, in football and in life. It would have been good for Germany if the team had gone through to the next round, he said, “because the atmosphere in the country is not that nice, and sometimes sports can help.”
Can the Euro Be Saved?
Across the eurozone, political leaders are entering a state of paralysis: citizens want to remain in the EU, but they also want an end to austerity and the return of prosperity. So long as Germany tells them they can’t have both, there can be only one outcome: more pain, more suffering, more unemployment, and even slower growth.
.. The backlash in Italy is another predictable (and predicted) episode in the long saga of a poorly designed currency arrangement, in which the dominant power, Germany, impedes the necessary reforms and insists on policies that exacerbate the inherent problems, using rhetoric seemingly intended to inflame passions... Italy has been performing poorly since the euro’s launch. Its real (inflation-adjusted) GDP in 2016 was the same as it was in 2001... From 2008 to 2016, its real GDP increased by just 3% in total... the euro was a system almost designed to fail. It took away governments’ main adjustment mechanisms (interest and exchange rates); and, rather than creating new institutions to help countries cope with the diverse situations in which they find themselves, it imposed new strictures – often based on discredited economic and political theories.. The euro was supposed to bring shared prosperity, which would enhance solidarity and advance the goal of European integration. In fact, it has done just the opposite, slowing growth and sowing discord... Emmanuel Macron, in two speeches, at the Sorbonne last September, and when he received the Charlemagne Prize for European Unity in May, has articulated a clear vision for Europe’s future. But German Chancellor Angela Merkel has effectively thrown cold water on his proposals, suggesting, for example, risibly small amounts of money for investment in areas that urgently need it... In my book, I emphasized the urgent need for a common deposit insurance scheme, to prevent runs against banking systems in weak countries... The central problem in a currency area is how to correct exchange-rate misalignments like the one now affecting Italy. Germany’s answer is to put the burden on the weak countries already suffering from high unemployment and low growth rates... The alternative is to shift more of the burden of adjustment on the strong countries, with higher wages and stronger demand supported by government investment programs... Matteo Salvini, the party’s leader and an experienced politician, might actually carry out the kinds of threats that neophytes elsewhere were afraid to implement. Italy is large enough, with enough good and creative economists, to manage a de facto departure – establishing in effect a flexible dual currency that could help restore prosperity... Whatever the outcome, the eurozone will be left in tatters... It doesn’t have to come to this. Germany and other countries in northern Europe can save the euro by showing more humanity and more flexibility. But, having watched the first acts of this play so many times, I am not counting on them to change the plot.
Just the Fear of a Trade War Is Straining the Global Economy
The Trump administration portrays its confrontational stance as a means of forcing multinational companies to bring factory production back to American shores. Mr. Trump has described trade wars as “easy to win” while vowing to rebalance the United States’ trade deficits with major economies like China and Germany.
Mr. Trump’s offensive may yet prove to be a negotiating tactic that threatens economic pain to force deals, rather than a move to a full-blown trade war. Americans appear to be better insulated than most from the consequences of trade hostilities. As a large economy in relatively strong shape, the United States can find domestic buyers for its goods and services when export opportunities shrink.
.. Before most trade measures fully take effect, businesses are already grappling with the consequences — threats to their supplies, uncertainty over the terms of trade and gnawing fear about what comes next.
.. Christine Lagarde, warned this past week about trade conflicts. “It would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe and Germany.”.. The Trump administration’s decision to reinstate sanctions on Iran has lifted oil prices, adding pressure to importers worldwide... Europe’s economy is weakening, with Germany — the continent’s largest economy — especially vulnerable... Across Europe, steel makers fret about an indirect consequence of Mr. Trump’s tariffs — cheap Chinese steel previously destined for the United States, now redirected to their continent... Mr. Trump portrays trade hostilities as a necessary corrective to the United States’ trade deficits with other nations. But economists and business leaders note that many imports are components that are used to manufacture goods at American factories... Electrolux, the Swedish manufacturer of household appliances, recently postponed plans to upgrade a stove factory in Tennessee, citing uncertainties created by the tariffs... Under Nafta, Mexico has grown into the world’s largest importer of American apples. But sales are down because the price has gone up by nearly one-fifth in the past week alone... Chinese pork producers have turned their sights to Brazil and Argentina, the only countries that now produce enough soybeans to offer a potential alternative to the American supply.