Germany and Europe prepare for Trump’s America

European Council - October 2016. The EU Heads of State or Government met on 20 October 2016 in Brussels. The leaders discussed relations with Russia and the situation in Syria. From left to right: Lars Lokke Rasmussen, Danish Prime Minister, Angela Merkel, German Federal Chancellor, Xavier Bettel, Luxembourg Prime Minister. In the background Teresa May, Prime Minister of Britain is seen. Shoot location: Brussels – Belgium. Shoot date: 20/10/2016. Copyright: European Union.

European Council – October 2016. The EU Heads of State or Government met on 20 October 2016 in Brussels. The leaders discussed relations with Russia and the situation in Syria. From left to right: Lars Lokke Rasmussen, Danish Prime Minister, Angela Merkel, German Federal Chancellor, Xavier Bettel, Luxembourg Prime Minister. In the background Teresa May, Prime Minister of Britain is seen. Shoot location: Brussels – Belgium. Shoot date: 20/10/2016. Copyright: European Union.

Germany, and more generally the EU, is now preparing in earnest to confront the groundbreaking changes in their relations with Trump’s America. Last week, both the German Chancellor Angela Merkel and her Federal minister for Finance Wolfgang Schauble, made direct and indirect statements about the policies now needed for Germany and the European Union. On Thursday 12 January, Merkel quite openly referred to the new strategy needed in EU defense and security, after the US seems to distance itself from Europe. Last Saturday she went even further and ‘advised’ the US to stick to multilateral cooperation and avoid trade protectionism. The risks in this domain grow every day and will culminate after 20 January.

Schauble in his turn indirectly said that the European Central Bank should abandon its over-relaxed monetary policy this year. The obvious aim of that is restore the strength of the euro in relation to the dollar. Currently, the exchange rate between the two monies is very close to parity, thus having greatly devalued the dollar value of the German reserves denominated in euro. Let’s check in detail why Germany is alarmed with what is happening on the other side of the Atlantic Ocean.

The US upsets Europe

For one thing, it’s the changes the new American administration is about to bring in international trade relations. Europe and more precisely, Germany, is a major exporter to the US, in this way supporting employment and welfare at home. The US is the first export market for Germany and the EU. With Transatlantic Trade and Investments Partnership agreement being briefly repudiated by the new American administration, the German and the European exports to the US are now sailing in uncharted waters. More than one Trump team member advising the President elect on trade are against multilateral trade agreements, obviously preferring bilateral negotiations. Britain is the first willing candidate in this respect.

Actually, last week, Teresa May the British PM, alarmed the business community of her country and Europe in general by clearly opting for a hard Brexit. She said that Britain will certainly leave the European Union and will not opt to remain in the EU single market. Instead, London will look to strike bilateral trade agreements all over the world. In this perspective, the first choice is of course Washington.

Killing the TTIP and the TPP

In more detail now, according to Reuters, a Trump adviser said that the Trans- Pacific Partnership on trade and investments, “or a multilateral agreement that looks like TPP but is called something else, is emphatically dead.” The same source said that the new administration will long for bilateral trade agreements abandoning the multilateral pacts. Britain was not mentioned, but the latest comments by May about choosing the hard Brexit option point to the direction of the US.

In view of all that, this past week Merkel twice touched upon the issue of the multifaceted transatlantic cooperation. In the first instance, on an official visit to the neighboring Luxembourg last Thursday, she urged the EU member states to boost their defense and security efforts and spending, because the US do not any more guarantee European space. In fact, she said there is no “guarantee of perpetuity” for Europe from the US.

Europe to pay more

After WWII, the NATO alliance under the US leadership has undertaken such guarantees in relation to conventional forces, while the US offers Europe nuclear coverage, obviously against Russia. Presently, the Europeans are alarmed with Russia, more so after Trump appears ready to cooperate with Moscow. In an interview to the Wall Street Journal he “suggested he would be open to lifting sanctions on Russia”. In the spring of 2014, Russia had blatantly annexed Ukrainian soil, when it occupied the Crimean peninsula. From that day on the EU froze its relations with Moscow, with the Ukrainian question still open and Russia de facto controlling the eastern Russian speaking provinces. No wonder then if Germany feels more vulnerable vis-à-vis Russia in the era of Trump.

As for Schauble, his worries are obviously related to the parity between the euro and the dollar. No to forget, that the single European currency has in the past reached unbelievable highs with the dollar at exchange rates reaching 163 American cents. Against that background the present exchange rates oscillate around 106 dollar cents. The less expensive the euro, the lower the dollar value of Germany’s reserves, thus more expensive acquisition of American assets by German companies. The more characteristic example in this line last year was the acquisition of the cutting edge biotechnology company Monsanto by Bayern for $60 billion. Monsanto is the leader in the genetically modified seeds market in key products like soya and maize. One can easily calculate the difference of the cost of this deal in euro terms, if the rate was 1.63 in favor of the euro and not 1.06.

Asking for a cheaper dollar

However, the new US administration favors more increases of Fed’s basic interest rates, to further suppress the value of the euro versus the dollar. Last Week, Schauble speaking in an interview with the Sueddeutsche Zeitung daily, in order to counter this prospect came out strongly against the currently applied extraordinary monetary measures of the European Central Bank.

As a matter of fact, he demanded this policy to be reversed within the year, despite the enormous difficulties of such a task. Obviously, an increase of euro interest rates and the reverse of ECB’s quantitative easing would act as a strong support for the euro in relation to the dollar. If unchanged, the current policies may lead to a full parity between the two moneys in some months, (presently the euro/dollar exchange rate is around 1.06), or even worse for Germany, to the region below the unit.

In conclusion, there is no doubt that Germany has in earnest started building its defenses vis-à-vis Trump’s America. Not that Berlin was happy with Barack Obama’s governance, but as it turns out those were the good years. Clearly, the new US administration is preparing to amplify Europe’s problems on two central issues; trade and security.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

HPV vaccine: the silver bullet that saves women

Is there a chance for the West to win the war on terror?

Five years down the drain

4 things to know about the state of conflict today

Europe again the black sheep at the G20 Finance Ministers and Central Bank Governors

Towards a tobacco free India

Climate change: Direct and indirect impacts on health

MWC 2016 LIVE: Xiaomi looks to revive growth with flagships

Why Eurozone’s problems may end in a few months

Work Together to Build a New Type of International Relations and a Community with a Shared Future for Humanity

Greece to stay in the euro area but the cost to its people remains elusive

Who will secure Lithuania?

5 technologies that will forever change global trade

To hope or doubt? The state of women’s progress in the world

UN, Somali Government seek $80 million in immediate relief for flood-affected populations

How do we build an ethical framework for the Fourth Industrial Revolution?

An American duel in Brussels: Salesforce against Microsoft over Linkedin deal

Guinea President Alpha Condé: “We must tackle the root causes of migration”

VW emissions scandal: While U.S. car owners are vindicated, Europe still unable to change its laws and protect its consumers

A new catastrophic phase in the Syrian carnage

‘Two pack’ austerity package in force but with less vigor

Eurozone and Britain heading in different directions

This is what countries are doing to fight plastic waste

5 ways to net a sustainable future for aquaculture

COP21 Breaking News_10 December:#ParisAgreement: Points that remain in suspense

DiscoverEU: 15,000 travel passes up for grabs to explore the EU this summer

European Fund for Transition to support more workers made redundant

A day in the life of a refugee: the role of nations and citizens of the world

Jade Spring Meeting 2017 – day 2: Coporate workshops, general assembly and magna moment

How can we build a workforce for our digital future?

“Leaked” TTIP document breaks post 8th negotiations round silence and opens door to critics

New UN agriculture agency report underscores value of fishing in fight against global hunger

Service and Sacrifice: For Ghana, UN peacekeeping is a ‘noble opportunity to serve humanity’

The UN supports Europe’s military action in Libya and the Mediterranean; Russia and China agree

Achieving targets on energy helps meet other Global Goals, UN forum told

The Changing Scope of International Economic Relations – Chinese Leadership in the 21st Century

EU to present a “hefty” exit bill to the UK moments before Brexit negotiations

A Sting Exclusive: Towards better business opportunities for the EU and its neighbours, Commissioner Hahn live from European Business Summit 2015

These clothes grow with your child

UN’s AIDS agency ‘greatly encouraged’ by latest scientific breakthrough showing cure is possible

Counting spillovers from the fast track EU-US free trade agreement

What the car industry has done to help fight climate change – and what it needs to do next

What data dominance really means, and how countries can compete

Gig economy: Employment Committee MEPs want to boost workers’ rights

‘Crimes against humanity,’ ‘war crimes’ and risk of new ethnic violence in DR Congo, warn UN experts

Everything you need to know about the US government shutdown

The world’s e-waste is a huge problem. It’s also a golden opportunity

Trump’s blasting win causes uncertainty and turbulence to the global financial markets

French elections: by the time the EU economy revives and the migration crisis is solved extremists could take over Europe

South Sudan: UN condemns ‘brutal’ sexual assaults on roads to Bentiu

Project Manager – 2024

EU-US resume trade negotiations under the spell of NSA surveillance

Italian Prime Minister Giuseppe Conte: “Europe must listen to the people”

These coastal countries are sinking the fastest

European Union: From financial consolidation to deeper political division

Volkswagen scandal update: “We want clarity fast, but it is equally important to have the complete picture”, Commission’s spokesperson underscores from Brussels

What the global Internet’s stakeholders can learn from Europe’s new data law

Parliament backs a modernised EU electoral law

Women in Iceland have walked out of work to dispute the gender pay gap

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s