After penning “Global Unrest is Underway Amid Net-Zero Autocracy” Part 1 and 2 (X thread) in Jul. and Nov. 2022, “A Dark Age Winter of Discontent in Europe” Part 1,2,3, and 4 (thread) from Sep. 2022 through Mar. 2023, then “War and Recession are Hastening Eurozone Deindustrialization” in Jul. 2023, and lastly “The Reappearance of a Utopian Green Energy Transition Collapse” (thread) in Nov. 2023, the workhorse of Europe’s economy that is Germany has suffered an economic decline resulting in the implosion of Volkswagen’s (VW) automobile industry and a collapse of Germany’s coalition government. The stark reality of failed fiscal policies and diplomacy facing the European Union (EU) along with Germany’s faltering industrial base threatens financial stability, global trade, and manufacturing base within the EU. Here is an excerpt from mid-summer 2023 and a German press article four months later:

“An era of deindustrialization across Europe began due to World Economic Forum (WEF) political puppets implementing zero-carbon fiscal policies for renewable energy, the economic and inflation fallout from pandemic monetary policies, the inflationary energy crisis due to sanctions levied against Russia over the war in Ukraine, and a state-sponsored covert sabotage of the Nord Stream pipelines under the Baltic Sea.” – TraderStef

“Germany is rapidly losing its appeal as an industrial location. Two thirds of the companies surveyed have already relocated parts of their value creation abroad, explained the consulting firm Deloitte. In the mechanical engineering and automotive sectors, a particularly large number of the decision-makers surveyed expect Germany to become even less attractive as a business location. 45% of the companies surveyed expect Germany to fall further behind other industrial locations. Among companies in the mechanical engineering and automotive industries, the figure is as high as 65%, of which almost two thirds expect a significant loss of attractiveness and one third a slight loss. According to Deloitte, however, in the other sectors – including chemicals, construction, and transport and logistics in particular – the assumption that the attractiveness of the location will remain the same predominates (46%). As many as 20% assume that attractiveness will increase. 67% of the companies surveyed have already reacted to the situation by relocating their value chain to a moderate to large extent. According to the survey, these relocations have so far concentrated on component production. However, planned relocations are also increasingly affecting ‘higher value-added parts’ such as pre-assembly and production in general. Areas that are rarely considered for relocation are purchasing, associated services, research, and central corporate functions such as management, marketing, and sales. Asia and the USA are important investment destinations.” – ASB Zeltung, Nov. 2023

Here are a few key economic statistics and charts to consider about Germany and Europe from numerous sources. Focus on the accuracy of data presented in the graphics before I opine on the current crises in governance and manufacturing.

• Economic output: Germany’s economy accounts for roughly one-quarter of the EU’s total output, making it the largest and dominant economic power in the region.
• Nominal Gross Domestic Product (GDP): Germany’s GDP is approximately $4.71 trillion which accounts for 24.9% of the EU’s total. It surpasses the UK’s $2.62 trillion and France’s $2.54 trillion. Germany’s Real GDP (inflation-adjusted measure) was -0.3% in 2023, is projected to be 0.0% in 2024, and 0.8% in 2025.

 

 

 

• GDP Purchasing Power Parity (PPP): Germany’s economy ranks fifth globally with a value of around $6.02 trillion.

 

• Trade: Germany is the EU’s largest trading nation with a significant share of international trade in goods and services. Major trade partners include the United States, China, and other European countries.
• Industrial production: Germany is home to a large manufacturing sector, with industries like automobiles, machinery, and chemicals driving economic growth.

 

 

Several factors led to the collapse of Germany’s coalition government that immediately followed President Trump’s sweeping victory in the U.S. presidential election. Economic policies that include an unrealistic race to transition from internal combustion engines (ICE), abiotic oil, petroleum-based derivatives to clean energy renewable dominance, and NATO’s proxy war and Chancellor Olaf Scholz’s geopolitical decisions surrounding the Ukraine-Russia battlefield resulted in Germany’s destructive path. Despite the turmoil, some EU nations are still doubling down on banning the sale of ICE vehicles by 2035. The primary event that quickened the economic decline was a covert state-sponsored sabotage of Russia’s Nord Stream 1 natural gas pipelines damaged by explosives placed on the Baltic Sea’s seabed in Nov. 2022 which has deprived western Europe of inexpensive energy delivery via Germany. Both Nord Stream 1 pipes and one of two Nord Stream 2 pipes were severed or damaged near the Danish island of Bornholm, and Germany has thus far refused to utilize the surviving pipeline.

Nord Stream 2 completed, Trump’s statements about its destruction unclear… “The construction of all strings of the Nord Stream gas pipeline was completed; therefore, statements by US presidential candidate Donald Trump about the destruction of the Nord Stream 2 pipeline at the construction stage are unclear, Kremlin spokesman Dmitry Peskov said at a briefing, answering a question from TASS. ‘Nord Stream was eventually completed. Moreover, one string of Nord Stream 2 is intact, and at any moment, as the President [of the Russian Federation, Vladimir Putin] said, it is ready to be launched’… The construction of Nord Stream 2 began in 2018 but was suspended a year and a half later. In late 2019, the Trump administration announced sanctions against companies involved in the construction of the Nord Stream 2 and TurkStream pipelines. However, with the help of Russian ships, both strings of the pipeline were completed by December 2021. Due to delayed certification from the German side, however, supply never started. In February 2022, after Russia recognized the sovereignty of the Lugansk and Donetsk People’s Republics, German Chancellor Olaf Scholz ordered the halt of the certification of Nord Stream 2. As a result, the pipeline was never put into operation.” – TASS, Nov. 1, 2024

Crisis talks taking place between Germany’s Green Party, Scholz’s Social Democratic Party, and Minister Lindner’s fiscally conservative Free Democratic Party (FDP) plunged into disarray when a FDP policy paper was leaked last week which called for scaling back climate policies and implementing tax cuts to stimulate growth. The left-wing coalition partners preferred a continuation of unsustainable social spending on domestic programs worsened by the ongoing immigration invasion and to rely on economic stimulus to bail out German industries. Those issues caused a schism in the coalition while negotiating on fiscal and budget policies going forward that resulted in a collapse of the government coalition. Adding insult to injury are massive labor strikes underway that are grinding Germany’s economy to a halt.

Workers launch strikes as Germany frets over industrial future… “Thousands of German workers launched nationwide strikes to press for higher wages on Tuesday, compounding problems for companies worried about staying globally competitive as high costs, weak exports, and foreign rivals chip away at their strengths… Strikes hit Porsche, Mercedes, BMW… German industry gloomy on growth, investment… Under-fire government meets business leaders… Tense talks at VW as workers face layoffs, closures… IMF joins call for reforms.” – Reuters, Oct. 29

The crisis in government came to a head on the heels of Trump’s presidential election success as German politicians and financial pundits fear tariffs on German exports and its car industry accelerating another recession, potentially leading to a trade war. Lindner was served a dismissal from office by Scholz on Nov. 7 and his successor Jörg Kukies was appointed as the new Federal Minister of Finance.

Facts On Tariffs… “CNBC is lying to you — and the Press is about to do it too with their ‘questions’ for Powell. Again: Tariffs are a zero when it comes to inflation — they neither help or hurt it as a function of imposing and collecting them because there is exact balance, to the penny, of both inflationary and deflationary forces.” – The Market Ticker, Nov. 7

Recent news on the collapse of VW car sales and its manufacturing base saddens me because my family has a history of owning and appreciating VWs. The first new car my father was able to pay cash for was a VW Beetle he used to teach me how to drive and master a manual transmission. The bright side is that my coveted Jetta will likely increase in value as it is eligible for historic vehicle status in the near future.

Last week, VW reported a 42% plunge in operating profit during the third quarter of 2024 that was 21% lower on an annual basis, and vehicle sales fell 8.3% since 3Q23. Liquidity across the Volkswagen Group was a negative160.6 billion euros as of 3Q24 and following a negative net liquidity of 147.4 billion euros at the end of 2023. The 3Q24 stats come after VW cut its 2024 annual outlook in September for the second time in just a few months. VW’s earnings disappointment resulted in its stock price plunging to a 24-year low.

VW’s largest market is China where competition is chipping away at its financial performance. The company faces pressure on multiple fronts that include low consumer demand for EVs, eroding margins, stalling growth across the EV sector, additional regulatory costs attributed to the EU’s tightening of CO2 targets in 2025, and geopolitical tensions add uncertainty. On Oct. 28, VW’s works council announced that management was planning massive pay cuts and layoffs, as well as the closure or size reduction of all its German plants. VW’s chief negotiator Arne Meiswinkel stated “the situation is getting more serious.” Due to developments in the auto industry in Europe and especially within Germany, it’s necessary for VW to substantially “lower costs and increase efficiency” and embark upon unprecedented plant closings so it can invest in the company’s future.

Volkswagen’s crisis: How can Europe’s car industry survive?… “European carmakers are selling fewer of their cars than expected, and their new EV models are struggling to find favor with customers. It’s not just the continent’s biggest carmaker Volkswagen that’s struggling and facing factory closures — French carmaker Renault and Italy’s 14-brand car group Stellantis are also producing significantly more cars than they can sell. According to business data and research company Bloomberg Intelligence, one in three European factories of carmaking behemoths like BMW, Mercedes, Stellantis, Renault, and Volkswagen are underutilized. In some plants, less than half of the vehicles that could theoretically be produced are being made.” – DW, Sep. 23

VW Closing Four Plants, a First in its 90-year History – The Electric Viking, Oct. 31

 

Ralph Schoellhammer: Germany Economic Collapse – Redacted, Oct. 30 (timestamp 1:01:38 to 1:17:23)

 

Plan Your Trade, Trade Your Plan

TraderStef on Twitter / Website: TraderStef.com