A New Berlin Wall?

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Fifty-one days
have passed since the election of Angela Merkel as the first woman
German chancellor. Usually, a newly elected political leader will
be granted a grace period of one hundred days to get things started
his/her way before evaluation. Half of that period has expired,
but it is clearly to be seen that nothing new is going to happen
in Germany.

After having
fired the only helper who had possessed something like competence
well before her election, a professor of economics not linked to
any party, Angie is surrounded by the usual suspects, mostly career
politicians.

The discarded
professor had warned her about the risks of a raised VAT (Valor
Added Tax a.k.a. sales tax), but it seems his warnings were futile.

Angie's announcing
a VAT raise was, besides the personal issue between Oskar Lafontaine
and Gerd Schröder, one of the major reasons for the resulting
stalemate situation in the German Bundestag.

Weird, weird
world: once in a while, a politician's electoral campaign promise
comes true: She is, defying all warning voices, going to raise the
VAT not only by two points but three, from 16% now to 19% from Jan.
1st 2007 on. To worsen things more, the income tax for
higher incomes will be raised from 43% to 45% as well. This so-called
"Reichensteuer" (tax for the rich) will affect not only
income but assets as well.

So much for
the start, these "features" were the main parts of the
coalition negotiations with her coalition partner, The Social Democratic
Party (SPD).

Meanwhile,
after a few international handshakes and some legislation activities,
the outline of her political concept begins to emerge from the electoral
campaign fog:

To buy a truce
in the eternal EU dispute with the British, she promised Tony Blair
Labour prime minister of the UK, two billion u20ACuros out of the German
taxpayers' pockets.

During the
coalition negotiations it had already become clear that the German
2006 budget will be unconstitutional due to a forty-odd billion
increase in the national debt. There was some effort in nomenclature
to save at least the pretext of constitutionality, but you can smear
lipstick on a swine, and it still remains a pig.

From where
she is going to get this money is a good guess.

She promised
another twenty-five billion u20ACuros as an instant cure to reduce the
ten-odd percent unemployment rate. The expired Schröder administration
had launched a series of labor market reforms named "Hartz
I — IV," which turned out to be costly failures, each and every
one. The official unemployment figures have decreased by half a
million, but that was pure cosmetics. These people did not find
new employment, they simply dropped out of the system. Most of them
were engaged in a new sort of self-employment, the so-called "Ich
AG" (Me inc.), which was a planned and consciously intended
failure. Who tries this government-funded way into bankruptcy is
doomed to social welfare. The advantage for our federal government
is that social welfare is the responsibility of the communities
and not our federal government's.

The tax raises
will have two effects: The VAT raise will cut down domestic demand.
A good means to help our economy.

The income
tax raise will make an income increase less attractive for young
and ambitious, highly educated people. The German political class
has been whining and snivelling for quite a while about the increasing
emigration rate of well-educated and motivated people, such as MDs,
IT professionals, engineers and more. Well, to increase the pressure
on this group will definitely help. Last time a German government
had to face such a problem, they built a wall through Berlin and
a barbed-wire fence through Germany, separating East from West.

Won't help
this time either, Angie.

The German
health care system, despite being admired by a certain expired first
lady of the US, had been founded as a failure, but now, after twenty
years of forceful "improvement," it is ready for the slaughterhouse.
Angie has promised a few cosmetic repairs, but she and her staff
are carefully dodging the core issue: it is a coercive collectivist
con game which rewards waste. The health care provider who wastes
the most money gets his deficit paid by those who work economically.
Administration grows like cancer, the patient (and his employer,
who has to pay half of the costs) gets less and less service, but
has to pay more and more for it.

Despite a series
of costly TV and newspaper ads, which urge the average comrade,
oops, citizen, to fall back in line and work for the commun-, ooops,
common good (which remind me of the hold-out slogans of the failing
Third Reich), less and less people can afford to do so.

The amount
of value created outside of the official economy grows in an increasing
rate. Old forms of trade and barter are being reinvented, DIY and
e-Bay are flourishing. The latest development is the Hamburg-based
TOLI initiative. TOLI means: Exchange without leftist ideology.
To throw away operational things is not only waste, it is a disregarding
of the labor that was used to create this value. So to swap item
A, which is no longer of use for me, against item B, for which I
have use, is a good thing. Even better: as long as no money is involved,
it is not subject to taxation. Tough luck, Angie.

Angela "Angie"
Merkel is not a true and faithful party soldier who has served the
"Ochsentour" (ox's journey) through the party organizations,
she is a professor of physics. So she should know the Second Law
of Thermodynamics, which basically says you can't get something
for nothing.

In order to
take money out of anyone's pocket, there must be money in it. When
the taxpayers' pockets are exhausted, there is but one solution:
rev up the printing presses. Inflation exceeding 3% p. a. would
violate the Maastricht Treaty of Stability, but who cares? Germany
has been doing so ever since that treaty came into effect.

Inflation
and debt are mortgages on the future, which our children will have
to pay. The decreasing birth rate in Germany is one of the answers
to this, and it is pouring oil into Angie's wildfire. Her lack of
ability to solve Germany's burning problems is showing up. No solutions,
just more of the usual cosmetics, administration instead of vision,
obedience instead of leadership.

Good night,
Abendland!

January
3, 2006

Ulrich
Biele
[send him mail] is
a consultant in Munich, Germany.

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