GERMAN ECONOMY 2019 – RISK OF A RECESSION

To:     The Right Honourable German Chancellor Hon. Angela Merkel

From: Athinarayanan Sanjeevraja

Date: June 28, 2019

RE:     GERMAN ECONOMY 2019 – RISK OF A RECESSION  

Suggestion:

Hon. Chancellor, let me start by paying my respects to you and through you to. I wrote to you on Yemen Civil War in the month of December 17, 2018 and Federal Minister for Economic Affairs & Energy Hon. Peter Altmaier in the month of November 18, 2018 on increase investment in Capex. I am writing to you again on Germany Economy 2019. As a German speaking guy, we are being highly organised in whatever we do. In Germany, production does matter. In the 1980s we were great to calculate a company providing services similar to company in industries. Producing a machine is better option than buying a machine and that fit better into the German economy till date. We should work better in German language. I would like to recommend corporate Germany demand that new employees learn German in a specified time. Corporate Germany must make knowledge of German a pre-requisite which holds great Germany back. The age of corporate Germany is the source of its strength and reputation. The biggest challenge of corporate Germany is missing skilled labours. There is no doubt that we need skilled workers but corporate Germany should not hire migrants from Syria, Afghanistan, Somalia etc as they are poor educational standards and are functionally illiterate. Unless migrants make € 40, 000 net per year, they are not been an economic benefit to Germany and they are hurting our tax system. I acknowledged that unskilled workers have the opportunity to become skilled workers through apprenticeship and determination to learn technical skills. That is unreasonable high to achieve € 40,000 net per year as an illiterate or unskilled worker. We have the programmes and opportunities but we need to build the training, education and social services support to meet the marketable skill sets. Migrants/immigrants must learn our language and they apprenticed in trades and become proud citizens. We are structurally competitive in trades. This will brick the strength of our economy. Markedly below machinery is not worth being considered in Germany because of that we are missing people in skilled crafts and trade especially. IMHO, In Germany, most of the immigrants are far worse in social and economic attainment. I am pretty confident that corporate Germany will continue to do well in the near future. A much bigger problem is the Germany’s political class which is barely capable of administering the status quo.

Hon. Chancellor, I wrote you about “Why Germany immigration failed” in the month of March 2016. Again I’m repeating that the immigration wave which started in 2015 failed to fill the gap such as immigrant’s integration into the labour force failed and most immigrants lack the language and technical skills required to fill the vacancies in corporate Germany. That is low attainment of major immigrants. In addition, Germany’s political class does nothing for technological advance. We are protecting the old industries. We are still using the technologies of first and second industrial revolutions. IMHO, we will never achieve a quantum leap of economic growth by using first and second industrial revolutions. We need to switch to renewable technologies (clean energy sources). I think we are lacking the vision and courage to take a radical step in 2010. We have one of the most successful economic model in history but negative effect of social democracy which emphasis on more benefits and less work. We can’t get any innovation by working less. In order for Germany to grow stronger and prosper we innovates the things in order to adjust the world market. In the US, most of the innovations come from garages. For instance, Amazon was started in a garage. Apple was started in a garage but if I am not mistaken, the EU would have a rule against starting a company in a garage. It’s an attitude and hard work that counts but not size.

Hon. Chancellor, most of the economists and IMF criticised that Germany is running massive budget and current account surplus with its other EU member states. They said Germany need to loosen its fiscal policy and must run fiscal deficits as southern European countries have large current account deficits. IMF economists may not aware of it many EU countries run very strong current accounts. It has nothing to do with consumers but current account surpluses being very competitive and efficient usually with strong industrial and export sectors. We have more or less always had a surplus even during extreme boom times. We have the ability to manufacture almost anything. If our industry can supply much of the domestic demand, domestic consumption rises but the surplus won’t go away. Moreover, German’s investors are increasingly invested in abroad. Any success in these investments mean some profits are coming back to Germany and as these investments grow the current account swells as well. I have said so umpteen times other Euro-zone member states can grow by investing more and consuming less to reduce their current account deficits or boost productivity and competitiveness. It is a balancing act. I firmly believe that sensible investments will improve our long-term competitiveness. In other words, the return on investment capital in terms of socio-economic dividends should be greater than the cost of the capital. If it is possible we should use the surplus on productivity enhancing infrastructure for instance, closure of production facilities for repair and problems with production due to failure of machinery or technology development. High savings rate in a low interest environment comes at a price but we believe that save more instead of spending. Spending on credit is a bad practice for us.  

Hon. Chancellor, we have a very successful industrial strategy. We exports inside and outside the EU. In economic rule it is double entry because Germany is in the EU. For instance, if Germany exports Volkswagen to Spain, Germany’s creditor to Spain but in the EU level Germany will get an IOU from Spain. In economic rule, it is a double entry. That is why I wrote to the EU 28 leaders on “Full Fledged Fiscal Policy Coordination in the Euro Area in the month of May 20, 2014. There will be no one left to bail out in the Eurozone unless the banking union and fiscal union takes place as earliest as possible. The key to success of the EU project is more responsibility and economic growth. Here it is

http://athinarayananadvisoryauthority.blogspot.com/2014/05/full-fledged-fiscal-policy-coordination.html?spref=bl. I am supporting the EU fiscal union and banking union since 2014. I have just read the Bundesbank Report. The report was completely angelic and non-biased. Bundesbank report says that industrial output is expected to be weak in the second quarter due to be offset by consumer spending and construction. The report does not say that our economy is a risk of recession. We know that the whole world is suffering from low productivity and mounting debts. We are suffering from low productivity but not drowning in debt. Our economy more depends on China economic rebound and stabilisation but we need modest change in socio – economic thinking to improve our living standards, productivity and competitiveness in near future. The German economy grew 2.2 percent in 2017 and 1.5 percent in 2018. The German economy is slowing down while the interest rate is zero and the ECB have massive QE programmes, it is threatening our economy. Your Humanitarian immigration (mercy and kindness) is also burden to our economy. A shortage of workers would have caused the German economy to falter. It is an undeniable fact. The obvious one is that immigrants are needed by strong economies like Germany to replace an ageing workforce. If I am not mistaken, shortage of workers could have easily been filled by inter-European or EU migration making all of the Europe or EU stronger instead of spending 10 percent on the million refugees allowed in and could have supported all kinds of mean to aid. I can’t imagine the cost of teaching 1 million refugees. Education money spent to teach German to foreigners far more that to teach the German kids and adults. We would have built schools and housing where the need is greatest to provide for apprenticeships for people from other parts of Germany and other Europeans to fill the need. The Swiss economy relies on unskilled migrants from the EU 27. Most immigration from the EU countries into Switzerland is highly educated professionals from Germany, France, and Italy. Switzerland takes most of the unskilled labour from the poorer non-European countries like Albania, Kosovo, Serbia so that Switzerland can control the amount of immigrants to suit Switzerland needs. Swiss Cantons have strict control over immigrants, if I am not wrong registration is very difficult. In addition, social welfare for immigrants is very little and healthcare is privatised and strictly controlled. If we decided to go down the route of increased immigrants has an impact on the quality of life. New immigrants need water, healthcare, food and accommodation, transport from the moment they arrived. We didn’t prepare the physical environments for while welcoming the refugees in 2015. IMHO, the controlled immigration of skilled workers should regarded as positive for our nation but uncontrolled immigration, unknown skills surely regarded as negative for our nation. Unskilled immigration depresses wages for our unskilled workers and increases income equality that we seem to care so much about.

Hon. Chancellor, as I discussed earlier Germany has a persistent and large current account surplus but Germany’s export companies are increasingly invested in abroad and not in Germany. It is threatening our country’s attractiveness as an investment hub. I still remember that When Hon. Barack Obama was the President of America, I advocated to Hon. Barack Obama when the US was in financial crisis and nearly 10 percent unemployment that if any US companies shift their productions or services to abroad, impose heavy tax on those companies so that they can invest in the US, the US will get back its economy and employment on track. In addition, any effort to encourage employment is at the low end of the scale by raising the basic tax allowance or granting waivers on social security contributions by their very nature or both. I am not sure whether this policy will work for Germany or not as Germany is a member of the EU. The EU laws and policies should serve Europe and Europeans interest. I’ll grant you that our government policy should encourage investment at home or at least not discourage it. We have large capital base compare to other euro-zone member states but we are naturally less promising environments for new investments than other euro-zone member states with less capital. The most challenge for our policy makers is to follow policies that enable the most efficient use of their existing capital base so that new capital investment becomes more profitable at home. If we cannot export at higher and higher level it’s stuck with selling on to our consumers and that is going to hit our economy.

Hon. Chancellor, our economy does need a boost in the form of monetary policy decisions by the ECB and fiscal policy decisions by your administrations. Our real skill lies in high efficiency, reliability, efficiency on our apprenticeship systems, job training programmes and skilled workers are an excellent way to encourage the integration of immigration in to our society that are worked in an era of our stable societies, low inflation, strict labour laws, lifelong job security, wage cut and foreign workers influx. It just cannot be possible that a country that is welcoming refugees can succeed because it will cause social instability. It is obvious that uncontrolled immigration is also politically destabilising. We should act to preserve stability and limit immigration. When workers are cheaper than machines, corporate Germany fails to invest in productivity. The reality of mass migration or excessive immigration or open door policy is falling wages, falling tax revenues and falling productivity. Thus, if we want productive and inventive we need skilled managers, skilled engineers, skilled technicians and skilled production workers who are innovative, diligent, collaborative, competitive, intelligent and relatively incorruptible so that we can continue to be an engine of growth. We need immigrants who bring an intangible energy that is essential to our growth. We need skilled workers in much more quantities than unskilled workers. We need to be smart and should only allow highly skilled workers and wealth creators to come to Germany or any European Union member states. We can organise it in a way that immigrants maximises the economic and social benefits for our country or the EU member states. Pragmatism, we need to integrate the immigrants in a way that makes immigrants successful and productive members of our society. The key to peace of our nation comes down to economic and social benefits. We are certainly a better positioned to make the most of the situation, though we always understood the necessary of a robust manufacturing sector and maintain an export based economy and remain a first world country. We always have been proud of its engineering prowess. We should be much more forward thinking than others in all fields. Our nation should be forefront of environmental policy. We need to put its best minds toward new environmentally clean technologies which reduce emissions, improving air quality and reducing congestion. We need to address the weight of heavy goods traffic which clogging up Germany vital transport arteries. We need to move at least 70 percent of heavy goods traffic via rail that will massively reduce emissions, improving air quality and reducing congestion. In addition, we need to address the insufficient birth rate of our nation. For instance, we need to promote and enact solutions to help our families to give more birth and raise many children to ease the financial burden of families who have more than one child and help families to raise new generations instead of claiming the virtues of immigrants. Our demographic challenge should be resolved by encouraging ethnic Germans to have more kids at replacement rate. 

    

I fervently hope that some of my thoughts to bring convergence in our economic and social benefits for our nation. 

Vielen Danke für Ihre Aufmerksamkeit.

Gott schütze dich mit gutter gesundheit!

Aufrichtige Grüße,

Athinarayanan Sanjeevraja

Tamil Nadu

Copy to

The Federal Minister for Economic Affairs & Energy Hon. Peter Altmaier

The Federal Minister of Economics & Technology

NOTE: Hon. Chancellor, I saw voyeuristic video of you standing on stage with President of Germany Hon.  Frank-Walter Steinmeier, it shows clearly you are suffering some sort of physical distress. Let’s hope it is not a serious medical condition or a symptom. I fervently hope you have access to the best doctors in Europe.

“Hundert Jahre sollst du leben und dich freuen”!