Kurt Schumacher, the former leader of the Social Democrats (SPD), once said:
Good politics begin with observing reality.
By extension, bad politics begin with denying reality.
Which brings us to Olaf Scholz. Why does the current chancellor ignore the interests of the economy? Well, it is not so much that he ignores the German economy’s interests as that he denies its issues.
Olaf Scholz © dpaFor Scholz, the media are professional exaggerators; the Federation of German Industries are professional complainers; and small and medium-sized businesses are lobbyists acting in their own interests.
Bureaucratic overheads and tax burdens, high electricity prices, a shortage of skilled workers and skyrocketing prices for raw materials do not concern Olaf Scholz. He has successfully built a wall of denial around himself. Constructed of ready-made clichés, this barrier makes the head of government seem impervious to criticism:
Theo Koll in a summer interview with Chancellor Scholz. © dpa“We shouldn’t throw the baby out with the bathwater," he lectured Theo Koll in the ZDF summer interview when Koll pointed out the stagnation of the German economy.
I firmly believe that we are still a prosperous export nation and will do everything to keep it that way.
Eine Infografik mit dem Titel: Expensive Electricity in Germany
Industrial electricity prices (including electricity tax) in Germany, in cents per kilowatt hour
Just this Monday, at the Hanover Trade Fair, he again doubled down on his inability to accept adverse realities:
"The mood and situation are not always in sync,” he told his audience:
Let's make Germany a vital business location and not badmouth it.
When the Federation of German Industries (BDI) president Siegfried Russwurm said that he considers the years under the current government as lost years for Germany, Scholz simply responded with the opposite:
If you ask me, Mr. Russwurm, these were two turnaround years.
The BDI and Chancellor Scholz "live in parallel worlds," said the Süddeutsche Zeitung.
Olaf Scholz and BDI boss Siegfried Russwurm at the BDI future conference (2023). © dpaLike many chancellors before him, Scholz has honed the art of self-praise into a discipline. This seems particularly bizarre in the face of a shrinking economy — the five leading economic institutes forecast growth of 0.1 percent for 2024.
For Chancellor Scholz, the shrinking economy is not an issue. He said earlier this week at the Banking Day:
Yes, times are hard. Germany is not immune to this either. But we are navigating through it well.
And further explained:
The export weakness I spoke about is because some countries are not growing. That has nothing to do with us as an export country.
Eine Infografik mit dem Titel: Economic Growth: Germany Lags Behind
Percentage change in GDP over the previous year in selected countries and regions.
The chancellor builds his world precisely the way he wants it. In an interview last summer, he boasted about the grid expansion of renewable energy:
We have made unbelievable progress in this area and have changed many laws. As you can see, the numbers are now logically picking up.
The Federal Audit Office concluded that Germany’s plan to expand the grid is seven years and 6,000 kilometers behind schedule.
Eine Infografik mit dem Titel: Grid Expansion Targets Missed by a Long Shot
Planned grid expansion and actual grid expansion, in kilometers
Nevertheless Scholz claimed:
We must not overlook the fact that the most modern direct investments are taking place in Germany, and the largest direct investments in the history of Europe are taking place in Magdeburg.
Eine Infografik mit dem Titel: Germany: Decline in Innovation
Innovation rate, i.e., the share of companies that introduced at least one innovation in one year, as a percentage of all companies
The truth is that investors are leaving the country. According to IW Cologne, foreign companies invested only €22 billion in Germany in 2023, the lowest level in ten years. The state subsidized the sizeable direct investment in Magdeburg by ten billion euros.
Eine Infografik mit dem Titel: Germany: Capital is Flowing Out
Direct investment inflows and net outflows, in billion euros
The Chancellor not only disregards the departure of numerous German companies overseas and the hesitance of foreign investors in Germany but also spins these realities into a narrative of success for his economic policies:
That annoys me. In every economics course, students learn that an economy's success is measured by the number of companies that invest abroad. I occasionally hear and read that this is supposedly a bad thing. It's actually very good.
When it comes to Germany’s immigration policy, the Chancellor is overly optimistic, naive and out of touch with reality:
What we have done so far works quite well.
He ignores the fact that hardly any skilled workers make it to Germany and that illegal immigration, which he promised to curb, has been on the rise again for three years (in 2023, it was even 40 percent higher than in the previous year).
Scholz makes lots of empty promises — whether it’s his climate targets, the 400,000 new housing units he wanted to build per year or deportations ("We finally have to deport on a large scale.") He not only misses these targets but also refuses to acknowledge the shortcomings of his unfulfilled promises as errors.
Olaf Scholz © imagoConclusion: Chancellor Scholz has fallen into the ball pit of his own illusions.
Sahra Wagenknecht was aboard the Pioneer One and spoke about her plans for her newly founded party: Alliance Sahra Wagenknecht (BSW).
Yesterday, Economics Minister Robert Habeck presented his new economic forecast.
Record Art Auction: An Austrian painting goes for €30 million!
One-Woman-Show: It's been about seven months since it was officially announced that politician Sahra Wagenknecht founded her own party: the "Bündnis Sahra Wagenknecht" (BSW). With this move, she not only dealt a blow to her former party, “The Left” (Die Linke) but also demonstrated her determination to go it alone, free of party constraints.
But who is Sahra Wagenknecht? Last night, I spoke with her aboard the Pioneer One in front of about 120 guests. We tried to draw a self-portrait together.
One of the tasks of the party leadership is to look for partners to take on governmental responsibility. But with whom would the BSW even consider a coalition, or perhaps more aptly, with whom would it not?
The Greens are unequivocally ruled out, according to Wagenknecht:
I would rule out any alliance with the Greens. I think it would be a terrible prospect. The Greens have become one of the worst parties.
And what about the AfD? Would that be equally frightening? She said:
The AfD is a party increasingly radicalizing in a certain direction. Of course, we cannot form a coalition with them. In my opinion, decency forbids it.
Does this also apply to Thuringia?
Sahra Wagenknecht and Gabor Steingart in front of the Pioneer One © Anne HufnaglNo, Thuringia is Höcke, and you cannot form a coalition with Höcke; I think it is out of the question.
To truly understand the political views of Sahra Wagenknecht, one must address her stance on Russia and Putin. I asked her what she sees in Vladimir Putin and who he is to her:
Click here to listen to today’s episode of the Pioneer Podcast.Of course, he is an autocratic ruler, but he has also led Russia out of deep humiliation. I don't think we see this ambivalence from the outside. But it also explains why, in my opinion, and according to independent studies, he has this support for his country. Because the Western policy towards Russia since the end of the Cold War has been a policy that first humiliated Russia as a country.
For Wagenknecht, the scenario of Putin attacking other countries is not realistic. She says:
I don't know what Putin's desires are. I see quite realistically that an army that fails to conquer Kyiv will hardly be able to invade Poland, let alone stand in front of the Brandenburg Gate tomorrow.
You can hear excerpts of the conversation on the Pioneer Podcast, and the whole conversation in German will be aired as a podcast on Saturday.
Yesterday, Economics Minister Robert Habeck presented Germany's latest economic growth forecast.
His outlook is optimistic: Instead of the previously assumed GDP growth of 0.2 percent, Habeck now expects 0.3 percent.
His assertion is supported by the latest indicators: The IFO business climate index has risen for three months in a row and is currently at its highest level in almost a year. Production is gradually picking up; in February, the industrial, construction and energy sectors combined increased output by 2.1 percent month-on-month. This marks the most robust growth since January 2023, when the monthly increase reached 2.9 percent.
But there's still work to be done: The government believes the German economy could grow by one percent by 2025. Despite these hopeful signs, Habeck expressed concern about the country's structural challenges:
Despite these signs of hope, I remain concerned about the structural problems of our economy. The medium-term growth potential is only 0.6 percent
He concluded:
To achieve higher growth in the medium and long term, we need structural changes.
However, specifics were scarce: Habeck mentioned that the Chancellor's Office, the Finance Ministry and the Economics Ministry were busy exchanging ideas on reviving the German economy. But he made no mention of the FDP's twelve-point plan.
His own agenda?
We must promote new economic dynamism, strengthen innovation, reduce unnecessary bureaucracy and resolutely tackle the labor shortage.
Troubled American aircraft manufacturer Boeing reported a net loss of $355 million in the first quarter. Revenue fell to $16.6 billion, down eight percent from a year ago.
Safety issues weigh heavily: Boeing reduced production in the first quarter due to safety issues. Only 67 of Boeing's flagship 737 were sold, compared with 113 a year earlier.
Dave Calhoun © imagoBoeing will "take the time necessary to strengthen our quality and safety management systems," CEO Dave Calhoun wrote in a statement. However, these restructuring measures may take some time. On Friday, a Boeing took off from Dusseldorf and had to return just five minutes after takeoff due to technical problems. On Sunday, another Boeing lost a tire during takeoff in South Africa.
Nevertheless, the stock market reacted positively to yesterday's results. On the one hand, it was expected to have a higher loss. On the other hand, it was pleased with the order backlog of about $529 billion (compared to $520 billion last year). The share price remained virtually unchanged over the course of the day (down 0.45 percent).
Disappointing outlook: The Facebook group, Meta, has severely disappointed the stock market with its outlook. Although the results for the past quarter exceeded expectations, the shares lost around 15 percent during U.S. after-hours trading on Wednesday. Meta predicted sales of between $36.5 and 39 billion for the current quarter. Analysts had expected an average of $38.4 billion.
High AI costs: Meta is also preparing for higher costs this year due to the increased focus on artificial intelligence. The aim here is to catch up with the competition. Meta puts the range for expenditure this year at $96 to 99 billion. The Metaverse and Meta’s virtual reality glasses also continue to generate high losses.
However, Meta's advertising business continued to run at full speed in the past quarter. Sales rose by 27 percent year-on-year to $36.45 billion. Profit more than doubled to around $12.4 billion.
In January, we reported on the discovery of a painting by the famous Austrian artist Gustav Klimt. "Fräulein Lieser," presumably painted around 1917, was long thought to be lost. The same month, the Kinsky auction house in Vienna announced that it had found the work and its owner. It was auctioned off yesterday.
But the story took a new turn: One day before the auction, a potential heir to the painting learned of the find from the newspaper and contacted the Federal Monuments Office in Vienna. His claims came under investigation, and the export license for the painting was withdrawn for the time being.
The artwork is one of the last works Klimt created in Vienna shortly before he died in 1918. It is assumed that it went to the woman who commissioned it, Henriette Lieser. She was the wife of the Viennese industrialist Justus Lieser until 1905 and was considered a financier of the Viennese art scene. Henriette Lieser was murdered in the Holocaust.
Auctioneer Kovacek announces the sale of the painting © dpa"Fräulein Lieser" was bought at auction yesterday for €30 million by a man from Hong Kong. The highest price ever paid for a work of art in Austria.
Wishing you a wonderful start to your day. Stay informed. Stay with me.
Best wishes,