• 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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