A Bad Year for an Election

“Germany Set to Suffer Record Deficit,” headlined the May 14 Financial Times. In mid-May, media outlets were filled with such negative headlines on Germany’s economy. “German Economy Hits Bottom,” ran the headline on abc News May 15, followed by the quip, “Germany’s gdp the lowest since the country’s foundation.” The lead article in the Financial Times ran under the headline, “Eurozone gdp Falls 2.5% as Germany Shrinks.” On May 16, the London Times ran the dramatic headline, “Record Fall in gdp Sees Germany Take Over as the ‘Sick Man of Europe.’”

On the broader front, the eurozone economy is in deep trouble. Some pundits already say that Europe will experience a more disastrous effect on its economy than the United States in the wake of the subprime mortgage meltdown. Others predict the beginning of the end for the European Union.

The common thread through most analyses of the EU’s current crisis is the effect of the sudden stalling of Europe’s powerhouse economy, the EU’s strongest member: Germany.

So many mixed signals have been coming from observers of the German economy since it first showed signs of the effects of the global financial and economic crisis that it’s often been difficult to gain a true picture of the true state of the situation. However, the latest figures released on the state of Germany’s economy indicate that Germany is in for a tough time, at least in the short term, as its industry inevitably sheds jobs, downsizing to weather the storm. Politicians are arguing over ways to tackle the huge stumbling blocks that face any move to intervene in the economy. The systemic inflexibility within Germany’s labor market, its social security and banking systems are legendary.

It may well be that the average German is about to hurt—and the hurt will come during a crucial election year.

A Deflationary Spiral?

Reports indicate that the eurozone—with Germany at its center—is treading on the brink of a deflationary spiral.

The Economist observed, “Firms cannot take losses forever without shedding jobs. Unemployment in Germany and elsewhere will begin to pick up quickly this year and carry on in 2010. Even where cutting jobs is costly, it is unavoidable given the scale of the fall in gdp. The European Central Bank seems to have hunkered down for a long recession. It is now prepared to offer banks unlimited loans for 1 percent for up to 12 months, and that horizon may even be extended. When you have fallen so far, it is a long way back out” (May 15).

The consumer price index in Germany has showed inflation slowing. In March prices actually dropped 0.1 percent. “One month of price decreases does not signal a sustained deflation, but it did start ringing alarm bells throughout Europe,” wrote Stratfor. “[F]ears are growing that Europe as a whole could be entering a deflationary spiral” (April 9). These fears have been compounded by rising unemployment and Germany’s sliding industrial production and exports.

The effect of such a scenario can be devastating. “Deflationary spirals are particularly worrisome because they are caused by the widespread belief that things are not going to get better,” Stratfor continued. “[D]eflation is largely a psychological phenomenon, caused by a general anticipation that prices will decline further and that economic conditions warrant a larger-than-usual cash buffer. … Thus, a deflationary spiral is self-reinforcing and can be reversed only through a reduction in the desire to hold large cash balances.”

It is against this backdrop of negative news on the EU economy that European parliamentary elections were held in June. The results confirmed observers’ fears of the dangerous effects this economic crisis could have on the Continent—and Germany in particular.

Europe’s Swing Right

Between June 4 and 7, the EU electorate voted to seat their representatives in the European Parliament for the next five years. Center-right, far-right and extremist fringe parties all gained in this election. The far right gained ascendancy in the Netherlands, Austria and Hungary, with Germany, France, Italy and Spain all showing a pronounced swing to the right. The left, the socialist grouping, was the big loser.

Rising unemployment, falling income, rising debt, falls in gross domestic product, street rallies by the masses, continuing threats by Russia to cut energy supplies—all this combines with a dramatic rise over the past year of membership in extreme right-wing political movements within the EU, and an escalation in attacks on European Jews, to present a worrisome picture of the current mood in Europe.

One of the outcomes of the EU parliamentary elections was that German Chancellor Angela Merkel’s Christian Democrats and Bavarian sister party, the Christian Socialists, made gains while the party of her main challenger for the chancellorship, Foreign Minister Frank-Walter Steinmeier, the Social Democratic Party, lost traction. This had pundits predicting that Merkel would be a shoo-in to retain leadership of Germany following September’s elections.

We are not so sure.

We live in times of intense political and economic turmoil. One of the wild cards that impinges greatly on German politics is Russia. Mrs. Merkel’s relationship with Vladimir Putin, the real power in Russia, is a prickly one. On the other side of the coin, Steinmeier has strong and positive connections with the Russian prime minister, and retains strong ties with the Russian energy market through his long personal and political relationship with ex-Chancellor Gerhard Schröder, himself a close associate of Putin. Schröder, no real friend of Merkel, currently holds a senior executive post with Russian energy giant Gazprom. Meanwhile, biding his time in the wings, Bavaria’s senior EU bureaucrat Edmund Stoiber looks on with interest at developments in Germany and Russia in the lead-up to Germany’s federal elections.

Energy Politics

Should Russia elect to play the energy card, perhaps urged on by Angela Merkel’s political enemies, the whole face of the election campaigning could change overnight. Already Russia has warned of energy cuts in mid-summer. If Russia proceeds, the timing could hardly be worse for Merkel. On the other hand, if Steinmeier, Schröder and Putin are all in cahoots to bring Merkel down, such timing could be seen as intended to enhance the election prospects of Steinmeier.

Uninterrupted energy supply figures high on the scale of needs of the average German, conscious of Russia having turned off the tap thrice during the depths of past winters. Of all high-profile German politicians, Steinmeier has positioned himself to most effectively deal with Russia, especially its energy politics. Should energy suddenly rise to the top of the list of concerns of the German electorate, we may yet see a significant swing away from Merkel and to Steinmeier by September. It’s a scenario worth watching closely.

A Repeat of History?

The economic crisis in Europe coinciding with a right-wing swing in the electorate harkens back to similar times 80 years ago.

Those with a keen sense of history remember the Weimar Republic and compare today’s scenario in Germany with that of the 1920s. Many variables at play today make the comparison an inexact fit. Yet the real fear in an election year—where a prime candidate, Steinmeier, is playing the scare card—is that if public opinion on the economy turns negative, Steinmeier may face a self-fulfilling prophecy with disastrous results for the German economy coupled with a disastrous outcome to the September election.

The coming months will be crucial in determining the future course of both the EU and Germany. Much now hinges on how Chancellor Merkel’s shaky coalition government handles Europe’s key economy. Her political opponents, which in this year’s election race include her own coalition partners—especially Steinmeier—will be ready to stab Merkel in the back the moment she makes a mistake. On the main issue of the economy, Merkel is currently dragging her feet. But the latest set of figures on the German economy are going to mount considerable pressure on the chancellor to take some major political risks to at least be seen to be attempting to do something to put things right for the new “sick man of Europe.”

We have for decades encouraged our readers to watch Europe, and to especially watch for conditions of crisis that would produce a climate ripe for the rise of spiritual and political demagoguery within the EU. Those conditions are ripening right now on the European continent!

Preparing for a Demagogue

The outcome of Europe’s parliamentary election may well set the mood for a surprising result in Germany’s upcoming federal elections. As our editor in chief, Gerald Flurry, has maintained, “We need to watch the European Union for a man stepping in and seizing control of that entity through flatteries. He is going to hijack the EU. … Politics in Europe are going to shift dramatically to the right” (Daniel Unlocks Revelation).

As we have previously pointed out, there is one strong man who appears to be biding his time, politically, who once declined the job of minister for the economy in Chancellor Merkel’s government. Did Edmund Stoiber have the foresight to see that portfolio as a poisoned chalice, given the deep-seated systemic economic problems that hamstrung Gerhard Schröder when he was chancellor, and now threaten to end Chancellor Merkel’s political career?

What did Stoiber have in mind when he recently blamed the global economic crisis on the “Anglo-American” system? What did he have in mind when he declared that he was convinced that a “totally new economic system” would emerge from the present global crisis? Was this Bavarian, mentored by German strongman Franz Josef Strauss with his “Grand Design” for Germany and Europe, indeed contemplating the possibility that he, who once ran the most successful state economy in Germany, might have a leading part in implementing that new global system of economy?

To those who have followed the rise of Germany and the European Union, especially those who have studied Herbert Armstrong’s writings on the subject, these are intriguing questions that may well be answered in the months to come.

Watch Germany during this crucial election year—very closely. We plan to report to you direct from Berlin during this important election in September. The future of Europe is, as it always has been in the past, closely linked to the reaction of Germany in this time of unprecedented crisis. This is the greatest financial and economic crisis to descend on Germany since Weimar. How will Germany react?

Your Bible prophesies the outcome, believe it or not. If you are willing to accept our challenge to prove it, then read and study our publications Germany and the Holy Roman Empire, Daniel: Unsealed at Last! and Nahum: An End-Time Prophecy for Germany.

Again we say, WATCH GERMANY!