• German voters have given rightist parties a large majority
  • But the larger CDU refuses to work with the AfD
  • The government may thus remain centrist and unstable

While living in Germany in the mid-1990s, I witnessed the country move from right to left politically.

Today, the opposite is happening. Sort of.

On Sunday, they gave the centre-right CDU nearly 30% of the vote, the largest share of any party.

This was due in part to voters’ rejection of the centre-left SPD, which received its lowest share of the vote in the history of the Federal Republic.

But this doesn’t tell the entire story. The two above centrist parties between them barely received half the vote.

The centre is being hollowed out. But why?

The issues that appear to be driving voters away from the centre are the economy, energy and environmental policy, immigration, and foreign and security policy.

Let’s start with the economy. Older Germans can remember a time when their country was the undisputed EU industrial and export powerhouse.

Following years of stagnation, younger Germans don’t take that for granted any more. There is a sense of foreboding that Germany is deindustrialising. Firms are packing up and leaving due to high energy, environmental and regulatory costs. And when they go, they leave unemployed Germans behind.

Which brings us to energy and environmental policy. The Energiewende, now decades old, has failed to deliver on its promises of providing reliable, affordable power.

Throughout, Germany remained dependent on cheap Russian gas to provide any necessary backup, in the event the wind didn’t blow, or the sun didn’t shine. As long as that gas was available and cheap, one could have overlooked the Energiewende’s shortcomings.

But the war in Ukraine showed that it was all a mirage. Without Russian gas, much of German industry was rendered simply unviable. The alternatives were either expensive LNG imports or dirty lignite coal.

So, Germany has limped along reliant on both just to keep the lights on. Those lights have been enough to attract large numbers of migrants, however, putting a huge strain on German social services.

German law requires that migrants receive the same benefits as Germans, including unemployment. Estimates are that roughly half of all asylum seekers rely on the standard benefits package, whereas less than 6% of German citizens do.

Some of that migration is due to conflicts, including in the Middle East, Africa and, closer to home, Ukraine. Which brings us to foreign and security policy.

The German public is deeply divided about the war in Ukraine. A key cause of the prior government’s collapse was due to its inability to reconcile differences regarding Ukraine war funding.

The CDU leader, Friedrich Merz, has stated his intention to address all of the above challenges. But with only 30% of the vote, this is easier said than done.

He needs to build a coalition. And the party with which his own party is best aligned on the above issues is the AfD. Indeed, the CDU itself has already shifted to the right on the above issues in part due to the AfD’s growing success, in particular, with younger voters.

But, due to his characterisation of the AfD party as “far-right” and “Russia-friendly” he refuses to even consider forming a coalition with what is now the second largest party in Germany, with 21% of the vote.

That leaves him no choice but to form a coalition with the SPD that just got trounced by voters or perhaps one or more of the smaller, far-left parties.

His first instinct will probably be to reach out to the SPD and see if he can pull them at least a little to the right on the above issues. He might succeed. He might not.

But regardless, if the CDU and SPD form a coalition it will only provide for a narrow majority. A handful of holdouts or defections by SPD members would threaten its survival.

Merz could try to build a larger coalition by inviting in another leftist party but that would complicate negotiations and make it even more difficult to address the controversial issues discussed above.

He might nevertheless try, at least at first, in order to address the Schuldungsbremse, or “debt-brake”. This limits the amount the government can borrow and can only be amended or rescinded with a 2/3 or greater majority.

What if Merz’s attempts to form a coalition with the left fail? He might follow the lead of Germany’s cultural cousins, the Dutch, where the centre-right failed to form a coalition with the left following the last elections and joined up with the nationalist Freedom Party instead.

Regardless of what form any coalition takes, Merz says foreign and security policy will be a priority, in particular the ability of Germany and Europe to become more independent of the United States.

Merz said so clearly in his victory speech yesterday. Addressing the topic of foreign influence on Germany, he said:

“The interventions from Washington were no less dramatic and drastic and ultimately outrageous than the interventions we have seen from Moscow,” he said. “We are under such massive pressure from two sides that my top priority is to create unity in Europe.”

He continued, “My absolute priority will be to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA.”

“I would never have believed that I would have to say something like that on television. But at the very least, after Donald Trump’s statements last week, it is clear that the Americans – at least this part of the Americans in this administration – are largely indifferent to the fate of Europe,” he said.

Sunday evening, I was watching German state television, Deutsche Welle. Shortly after Merz made those comments, one of the pundits in the studio suggested that the best way for him to deliver on any promise of greater German or European independence would be to go nuclear.

And not only for energy, but for defence.

That’s right: He argued that Germany must take defense seriously—and fast. And the quickest path to a formidable military? Developing its own nuclear capability, either independently or in partnership with France, which already possesses one.

While that might seem quite the bombshell, recall what I wrote yesterday about former German Finance Minister Joschka Fischer’s suggestion that Germany go nuclear.  Such a stance might have seemed extreme just a few years ago.  But squeezed between an aggressive Russia in the east and a less supportive America in the west, it would appear the topic has now gone mainstream.

But even with a nuclear deterrent, Germany will not succeed in achieving greater independence if it is sorely lacking in economic strength. The German economy needs affordable, reliable, secure energy.

Here, too, nuclear could play a decisive role. Germany might now consider building a suite of nuclear power plants, perhaps based on next-generation designs, that will correct the mistakes of the Energiewende and enable a reversal of the de-industrialisation of recent years.

The German left has historically been against nuclear power for any purpose. But as Joschka Fischer’s comments suggest, that may now have changed. If so, there’s going to be a huge surge in German demand for nuclear fuel and the infrastructure to utilise it, for whatever purpose.

My colleague James Allen remains bullish on a select group of companies positioned at every critical stage of the nuclear supply chain—from uranium mining to fuel production, plant construction, and power transmission. If you’d like to see which companies are leading the charge, you can find out more here.

Until next time,

John Butler
Investment Director, Fortune and Freedom

Rendezvous with Catastrophe

Bill Bonner

Bill Bonner, writing from Baltimore, Maryland

“You are a traitor and a fool,” wrote a Dear Reader.

The ‘traitor’ charge has no sting. But as for the ‘fool’? He may be on to something.

Is it traitorous to notice that the US is being pulled down by its own Deep State scalawags, its jacked-up world improvers and its over-stretched empire? We don’t think so.

But it is probably foolish to say so. Like noticing your wife’s first gray hairs, it might be best to keep it to yourself. So, let’s look at today’s confusing, chaotic, nonsensical dots.

How about a $5,000 stimmie check? MarketWatch:

Trump Adds Support For DOGE Dividend

Donald Trump loves putting his name on things — buildings, steaks, and even stimulus checks. Now, he’s added fuel to the idea of a $5,000 DOGE Dividend stimulus check to taxpayers, courtesy of the Department of Government Efficiency. At a speech in Miami on Wednesday, Trump said his administration is considering a plan to give 20% of DOGE’s savings back to the public.

Giving money ‘back to the public’ is spending it. Not saving it. A $5,000 stimmie will be welcomed by many people… but so were ancient Rome’s bread and circuses.

Last month, the US ran a deficit of $127 billion, which brought the total to $838 billion in debt for the first four months of the fiscal year. At this rate, the annual deficit could top $2.5 trillion. As long as there is any deficit at all, the money being passed out to buy support from voters is financed by debt — bringing America’s rendezvous with catastrophe closer.

Even the most pro-American of old-timers are beginning to wonder. For more than half a century, Warren Buffett has advised investors to ‘never bet against America.’ Well, now the traitor is betting against America’s businesses.

MarketWatch:

It surely says nothing cheerful that Warren Buffett, the world’s most famous and successful investor, now holds more than half of his company’s net assets in cash and Treasury bills. Or that in his latest annual letter to investors, the 94-year-old has taken a break from his usual patriotic boosterism, and instead is warning about the risks to America from “fiscal folly” and from “scoundrels and promoters” who “take advantage of those who mistakenly trust them.”

Sen. Rand Paul explains how the scoundrels operate. MSNBC:

“Things are not as they appear to be in Washington,” Paul declared. “While Elon Musk and the Department for Government Efficiency (DOGE) are trimming the fat, finding billions—if not trillions—in waste, fraud, and abuse, the Senate is rushing to pass a budget that increases spending. What gives?” Paul pointed to the Senate’s proposed budget, which includes a $150 billion increase in military spending, $175 billion for border security, and $20 billion for the Coast Guard. 

Last week, we were describing chickens and eggs — that is, the elegant way in which the key elements of a real economy are connected. No chickens, no eggs; no eggs, no chickens.

If sales are to go up, consumers must have more money to spend. But a debt-funded stimmie is a hollow deception; it will just increase prices.

Because the chicken is barren; there is no real output to justify the expense. Real earnings must be earned. Businesses pay their employees for their output.

But the expense depresses their earnings. So, they can only afford to pay for things that are actually productive. A business can cut costs and thereby increase its earnings. It can innovate and add wealth to the whole society. But if its sales grow faster than GDP, it must be taking them from other enterprises.

And yes, of course, the whole economy can grow — thanks to Progress!

We enjoy painless dentistry, self-driving cars, and movies streamed into our houses; we believe we are better off. But we can’t all enjoy above average wealth. And as a society, we would not be one penny richer — even if the feds were to give us each a check for $1 million.

But what about asset prices?

Can the chickens (producers) ever be worth more than the eggs they produce? Can they go up and up forever, making stock owners richer and richer?

 We’ve seen that US stocks rose 366 times over the last 100 years. How much of that was real? And what is likely in the next 100 years.

Tomorrow… more un-patriotic treachery… and more foolish observations.

Regards,

Bill Bonner
Contributing Editor, Fortune & Freedom

For more from Bill Bonner, visit www.bonnerprivateresearch.com