Gold, Euro Slump As Merkel Admits "New Elections Are The Better Way"

EURUSD is testing overnight lows (and gold is tumbling) after German Chancellor Angela Merkel said she would prefer to go ahead with new federal elections rather than try to form a minority government.

 

Seeking her fourth term, Bloomberg reports that Merkel is “skeptical” about a minority government as it may not bring about necessary stability and is open to another so-called grand coalition with the Social Democratic party, she said in an interview with ARD television.

In the absence of an agreement to secure a majority in Germany’s Bundestag, “I’m certain that new elections are the better way,” she said.

And FX markets reacted...

"Worst Case Scenario" Looms As Merkel"s "Jamaica Coalition" Collapses; EUR Sinks

We warned on Friday that German Chancellor Angela Merkel faced a "night of the long knives" in her efforts to bring together the co-called "Jamaica" coalition of four parties and after a desperate weekend of talks, Bloomberg reports Merkel"s efforts at forming a coalition have failed meaning a second election looms and sending the euro sliding.

As Bloomberg reports, talks on forming German Chancellor Angela Merkel’s next government collapsed, throwing the future of Europe’s longest-serving leader into doubt and potentially pointing the world’s fourth-biggest economy toward new elections.

After a 12-hour negotiating session that ended shortly before midnight Sunday, the Free Democratic Party walked out of the exploratory talks, saying the differences with the Green party were too great to bridge.

Merkel has sought for four weeks to enlist the two smaller parties for her fourth-term coalition.

“It’s better not to govern than to govern badly,” FDP head Christian Lindner told reporters in Berlin.

No further coalition talks were scheduled, he said. There was no immediate comment from Merkel.

EURUSD is down aropund 40 pips on the news...

As MINT Partners" Bill Blain noted previously, Germans are not used to multiple elections – and a second vote early next year would be massive negative for Merkel herself – she may even have to stand down if coalition looks like falling. That could be massive shock.

As a result, the prospects for more volatile European peripheral markets, particularly Greece and Italy, are likely to be exacerbated, and we might well see some of the currency and European stock market froth blow away in coming days as the scale of the “German Problem” becomes clearer.

• My worst case Germany scenario is a second election early next year, political uncertainty as Mutti Merkel finds herself squeezed out, and a scramble to build a new coalition government in her aftermath.


• The best case scenario isn’t much better: that Merkel manages to forge a new coalition, but it will be a long drawn out affair and the resulting administration will be vulnerable, weak and fraxious.

These sound like German problems, but they mean the “leader of Europe” is likely to be entirely inward focused in coming months/years.. at a time when the European union will be facing a host of new issues regarding closer union, banking union and reform of the ESM, bailout and QE policies. There will also be new potential crisis points – Italian elections next year, Greece bailout, renewed immigration crisis or a blow-up with Trump. And these are just the known unknowns.

This has profound implications for the so-called French/German axis as it slides towards Paris. We are not going to see a new German government “waste time” on issues like closer EU union, European Banking Union, or critical finance issues like reforming ESM or new approaches on QE and Bailout funds. Forget Wiedemann for ECB president, it’s more likely to another Frenchman (Trichet II) – I’m sure its already underway. In short.. Germany negotiations could get very fraxious while Europe is dragged down in its wake. I doubt the markets have discounted it yet.

Schäuble: Another Financial Crisis Is Coming Due To Spiraling Global Debt, "New Bubbles"

Following the disappointing for Angela Merkel and her CDU German election results, which propelled the populist AfD into Germany"s political establishment with 92 members of parliament, the first casualty was Germany"s finance minister, Wolfgang Schäuble, who in a few days will relinquish his long-held post and move on to the ceremonial role of Bundestag president. As part of his farewell tour, Schäuble - like so many other former members of the establishment- took a parting shot at the system he helped create and warned that "spiraling levels of global debt and liquidity", as well as "new bubbles" present a major risk to the world economy.

Speaking to the FT, the Europhile beloved in Germany for successfully steering one of the world’s largest economies for the past eight years, and who nearly led to Grexit in the summer of 2005, said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets. Confirming another fear widely propagated by the Putin propaganda alternative media, Schäuble also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans, something we have warned about since 2012, and an issue which remains largely unresolved.

A strong advocate of fiscal rectitude and debt reduction, Mr Schäuble dominated Europe’s policy response to the eurozone debt crisis and has been vilified in countries such as Greece as an architect of austerity. But he will mainly be remembered as the most ardently pro-European politician in German chancellor Angela Merkel’s cabinet, skilled at selling the benefits of the euro and of deeper European integration to an often sceptical German public.

To underscore his point, Schäuble said that the Brexit vote last year had demonstrated how “foolish” it was to listen to “demagogues who say . . . we’re paying too much for Europe”. “In that respect they made a great contribution to European integration,” he said. “Though in the short term that doesn’t really help Britain.”

Ahead of his last finance minister meeting on Monday, Schauble "sought to reassure Germany’s allies that the AfD’s surprise success would not in any way affect the country’s commitment to liberal democracy."

“There’s no chance Germany will ever relapse into nationalism,” he said. The AfD’s voters were dissatisfied, felt excluded, were angry about perceived injustice and worried about how the world was changing. “But there’s no reason to believe that democracy and the rule of law are in danger,” he said.

However, taking a broader swipe at the current financial regime, Schauble warned that the world was in danger of “encouraging new bubbles to form”.

"Economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity and the growth of public and private debt. I myself am concerned about this, too," he said echoing the concern voiced just one day earlier by IMF head Christine Lagarde, said the world was enjoying its best growth spurt since the start of the decade, but warned of “threats on the horizon” from “high levels of debt in many countries to rapid credit expansion in China, to excessive risk-taking in financial markets”.

Schäuble also echoed the latest warning from the BIS, which last month said that the world had become so used to cheap credit that higher interest rates could derail the global economic recovery.

Meanwhile, Schäuble defended austerity, saying the word was, “strictly speaking, an Anglo-Saxon way of describing a solid financial policy which doesn’t necessarily see more, or higher deficits as a good thing." The soon to be former finance minister also took a pot shot at the UK:

“The UK always made fun of Rhineland capitalism,” he said, contrasting Germany’s consensus-driven, social market model with Anglo-American free markets and deregulation. “[But] we have seen that the tools of the social market economy were more effective at dealing with the [financial] crisis . . . than in the places where the crisis arose.”

Of course, Germany"s success - almost entirely a function of the common currency which has effectively kept the Deutsche Mark from soaring - has come at the expense of crisis after crisis among Europe"s southern states. Unfortunately it has resulted in an entire generation of unemployed youth in countries like Greece, Italy and Spain.

Still, in keeping with his dour image, Schäuble"s last words were pessimistic:

“We have to ensure that we will be resilient enough if we ever face a new economic crisis,” he added. “We won’t always have such positive economic times as we have now” concluded the jolly 75-year-old.

Perhaps Wolfi is worrying too much: after all, according to Janet Yellen, "we will not see another crisis in our lifetime." And if we do, well central banks are primed and ready to injects trillions more to keep the artificial "recovery" and market "all time highs" can kicked just a little bit further.

"Left Behind..."

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

“Forget Germany, Spain Is The Real Problem”, reads a headline. Eh… no. Germany is definitely the problem in Europe. Spain is a bit player. That doesn’t mean nothing major could happen in Spain in its fight with Catalonia, and soon, but Spain, like all EU nations, is a de facto province of Germany.

What matters in the end is how Brussels and Merkel deal with Spain. And while it’s tempting to say that perhaps Brussels, the EU, is the main European problem, the European Union is run exclusively by and for Germany, so that doesn’t work either.

The only thing that might work if you really want to find a bigger issue than Germany is if you would point at the role the incessant lies about economic conditions for people play. But that’s not a European issue, that’s global.

The talk about how economies are recovering, how there’s light at the end of the tunnel, and how any day now we’ll be back to where we were at some point in time that many can not even remember. But then, at least when it comes to Europe, that happy talk comes from Germany too, to a large degree. Just wait till Draghi starts cutting his QE.

You can try and tell people that they’re doing just great, using the media you control, and it’ll work for a stretch, if only because they want to believe it, badly, but when these same people can’t even feed their children while you make such claims, you will eventually lose their attention and support. The difference between beliefs and experiences.

If you’re a politician, you try to feed people what they want to hear, invariably an upbeat message, but there comes a time when you have to back it up. You can say that austerity is necessary, inevitable, and the only choice, and it will be beneficial to them, but austerity is one of those things that have a very limited best before date.

If you can only make employment numbers look good by creating a gig economy that takes away all their benefits, and their entire sense of security, they’re going to turn their backs on you. Because you’re lying.

Rising inequality is a one way street right up to the point where it turns into a dead end alley. Inequality breeds more inequality until it no longer can, until people say ‘I want that cake you are having because my kids are hungry. And I brought a pitchfork’.

That is where we’re at, and that is why Merkel lost some 25% of her votes. That is why there’s Trump and Brexit, and why an impossible candidate like Marine Le Pen in France gathered so much attention and support. It’s why eastern European countries will start fighting Brussels and Berlin much harder than they have to date, and why Berlin will fight back harder than it has. Poor Greece.

In the US, there’s only one party, and it divvies up the spoils of very rich campaign contributions. Bernie Sanders tried to circumvent this; not a chance. Trump succeeded. In Britain, there was no difference between left and right for a long time, and no alternative party either. That led to Brexit. In France, Macron started a whole new party from scratch and somehow got it funded (bankers?!). It wiped the left off the map.

The same happened in Holland, where like in France the right wing alternative was judged too unpalatable by too many. No left left. The leaders of Germany’s Alternative für Deutschland do not have the visibility for that yet. In Italy, Five Star have a good shot at the throne. Greece’s Syriza already overtook both left and right. In eastern Europe, right wing parties often didn’t even have to overthrow an existing order, they could just slide in.

The pattern is so obvious only those who stand to lose from acknowledging it end up not seeing it, or telling themselves it’s all just an incident. But it’s not, because the shrinking economies everywhere are not. When left and right, either in public or in practice, rule a country together and their promises don’t hold up, people will look for a way out. If far right is the only way available, they will pick that.

It’s not because they’re all nazis or something like that. But people do lean towards smaller units of organization, decentralization, when they get poorer. And despite all the talk of recovery, that is what most people have seen happen to their lives, while their leaders told them they’re just fine. So you get this kind of headline (and map) for the US (h/t Mish/ZH).

Large Parts Of America Are Being Left Behind

Economic prosperity is concentrated in America’s elite zip codes, but in an interesting report on Distressed Communities, from The Economic Innovation Group, it is increasingly clear that economic stability outside of those communities is rapidly deteriorating. As Axios noted, this isn’t a Republican or Democratic problem. At every level of government, both parties represent distressed areas. But the economic fortunes of the haves and have-nots have only helped to widen the political chasm between them, and it has yet to be addressed by substantial policy proposals on either side of the aisle. Economic Prosperity Quintiles.

And a very similar headline appears in the Guardian in a report about the German election.

‘A Lot of People Feel Left Behind’: Voters on the Far-Right Surge in Germany

Sarah, 37, teacher, Bonn: “A lot of people feel left behind. They are looking for scapegoats. It is the easy way to deal with problems. The AFD makes use of this feeling. With the grand coalition, there was no real debating culture left. The CDU went too much into the middle, leaving the right out. Just like the SPD under Schröder left the left-wing out.”

Perhaps a lot of those who voted for Trump, and Brexit, Le Pen, Wilders, the AfD, are not so much looking for scapegoats, they’ve identified those as their incumbent politicians; they’re instead looking for a way away from them. All these people who feel left behind base that feeling primarily on their deteriorating economic circumstances. And if the only alternative they have rants, against foreigners and immigrants, they’ll go with that.

Angela Merkel pushed over 1 million refugees and immigrants down the German population’s throats. She never asked their opinion. But many Germans are not doing any better than many Americans or French or British. So the consequences of such things are predictable. You have to explain, you have to communicate with your people. Just saying ‘we can do this’ is not enough. No more than ‘change we can believe in’ was. It’s just hollow.

Merkel lost ‘only’ 25% of her votes. Because Germans know what right wing is, and what it can do. Germany is not full of nazis, no more than America is. Both countries just have a lot of people who feel trapped in a web of lies, and their existing and alleged democratic systems offer no way out of that web.

All these countries, the people and their politicians, have the tendency to see their situations as somehow unique, but they’d be much better off looking at what they have in common with others.

The only solution is to tell people the truth, that the incumbent political class has screwed up badly because of limited brain capacity and unlimited greed, and that they should elect people next time who are both smarter and less sociopathic. But that is not something that comes voluntarily, that takes a battle. And it tends to end careers, and lives.

That is what we can expect. In many different shapes and forms, but all for the same underlying reasons. You can’t fool all of the people all of the time, you can’t even fool a majority for long. You can only fool a limited number of them for a limited amount of time.

Well, time’s up.

Merkel, Schulz Agree: "It's Clear, Turkey Should Not Become An EU Member"

Having blasted Germany for "abetting terrorists," Turkish president Edrogan was on the receiving end of some ire this weekend as the refugee crisis and the EU deal with Turkey dominated the TV debate between Chancellor Angela Merkel and her coalition ally SPD challenger Martin Schulz on Sunday.

The rivals agreed, however, that Turkey can’t be part of the EU.

"If I become German chancellor, if the people of this country give me a mandate, then I will propose to the European Council that we end the membership talks with Turkey. Now all red lines are crossed, so this country can no longer become a member of the EU,”said Schulz during the debate, forcing the CDU leader to clarify her position on the issue.

“The fact is clear that Turkey should not become a member of the EU,”said Merkel, agreeing with Schulz.

“I’ll speak to my [EU] colleagues to see if we can reach a joint position on this so that we can end these accession talks,” added Merkel, who is hoping to get re-elected for a fourth term.

As RT notes, the government in Ankara is moving away from democratic principles at a “breathtaking” speed, Merkel said, adding that at the moment “the accession negotiations are non-existent.”

However, she refused to completely freeze the relationship with Turkey.

Additionally, Reuters reports that the actions of the Turkish authorities are making it “impossible” for the country to join the European Union, an EU executive said on Monday after German Chancellor Angela Merkel called for ending accession talks.

Quoting European Commission President Jean-Claude Juncker from last week, before Merkel’s election campaign comment, the Commission’s chief spokesman told a regular news briefing:

“Turkey is taking giant strides away from Europe and that is making it impossible for Turkey to join the European Union.”

He stressed, however, that any decision on whether to formally halt the long-stalled membership process would be up to the 28 member states of the bloc, not the Brussels executive.

Turkey has been receiving funding from the EU, which will reach €6 billion by 2018, as part of the deal to halt the migrant flow into Europe, signed in March 2016. Turkey was also promised visa free travel and expedited talks on joining the EU, but the discussion of those issues remains stalled due to Ankara’s refusal to relax its harsh anti-terrorism laws. As EU-Turkish ties hang in the balance, President Recep Tayyip Erdogan has been actively reiterating his threats to withdraw from the deal and again allow migrants to pour into the EU.

“The Discord Is Obvious" - Merkel Slams Trump Ahead Of G-20

Ahead of next week"s G-20 summit in Hamburg, Germany, chancellor Merkel had some fiery words about her two least favorite topics: Donald Trump and Brexit. In a speech to lawmakers in Germany’s lower house of parliament on Thursday, Merkel said that “the world has become less united” and acknowledged that discussions at the G-20 meeting in Hamburg on July 7-8 “will be very difficult.” Quoted by Bloomberg, Merkel said that “the discord is obvious and it would be dishonest to paper over the conflict."

The unexpectedly confrontational posture comes as Germany is set to host world leaders including President Donald Trump and Russia’s Vladimir Putin, who are expected to hold their first head-to-head meeting in Hamburg, although the details have not yet been ironed out. Also present will be China"s Xi Jinping and Merkel"s nemesis, Turkey"s president Erdogan, with the meeting taking place "amid a global shake-up that threatens much of the international order on issues established since World War II. On the agenda for the meeting are free trade, climate change and migration."

If recent G-20 summits are any indication, next week"s meeting is likely to end in confusion and even more fingerpointing, with little in terms of consensus and even shorter communiques.

Aware of the upcoming dissensus, to use a word coined by Deutsche Bank, Merkel took a swipe at Trump’s “America First” rhetoric, saying that nations turning to isolation and protectionism are making a serious mistake and showcased a renewed “spirit of unity” in the European Union after the U.K. decision to exit.

All the same, the G-20 takes place “amid a particular set of challenges,” she said. “I’m convinced that we need the G-20 more urgently than ever before, because we can only move things together,” Merkel said. “Whoever believes that you can solve problems through isolation and protectionism is making a grave error.”

However, as Bloomberg notes, the German leader reserved her most dramatic language for the Paris climate treaty after Trump pulled out of the global accord aimed at confronting climate change, which Merkel called “irreversible and not negotiable.”

“We want to tackle this existential challenge and we can’t and we won’t wait until the last person on earth is convinced of the scientific basis for climate change,” Merkel said slamming Trump"s recent pullout from the Paris accord.

Merkel also accentuated the recent geopolitical pivot, in which Germany has distanced itself from its formerly staunchest allies the US and UK, and toward France:

In response to Trump’s inward shift, Merkel played up new French President Emmanuel Macron as an ally, saying the German-France axis will drive forward European unity, “regardless of Brexit.” She is hosting Macron in Berlin on Thursday along with European leaders including the U.K.’s Theresa May and Paolo Gentiloni of Italy to align their position ahead of the G-20.

“It’s clear to both of us that German and French interests are extremely closely linked when it comes to Europe’s future,” she said.

And while the G-20 meeting will likely end up a flop, one wildcard remains: China. While Merkel has reached out to Beijing as a partner on climate change and free trade, she’s also warning Chinese investors that they may face restrictions in Europe. 

Germany’s government is “thinking about defining industrial sectors of strategic importance for Europe,” Merkel said in an interview with business weekly WirtschaftsWoche published Thursday. “For instance, we decided to resume major investments in microchips. If countries like China want to buy up what was just built up with a lot of subsidies, we have to react.”

Ironically, in the "new new world order", China has emerged, at least in its own eyes, as the grand champion of free trade hoping to fill the void left by the "protectionist" US, in the process growing it regional and global influence. Which is ironic because China still remains among the world"s most trade protectionist regimes, and if Merkel is hoping to pivot toward China as the next great source of trade, she is set for a major disappointment.

The EU Is One Big Fatal Flaw

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

The true face of the EU is presently on display in Greece, not in Germany or Holland or France. Brussels must first fix what’s going wrong in Athens and the Aegean, and there’s a lot going wrong, before it can move on towards the future, indeed towards any future at all. It has a very tough job in Italy as well, which it’s trying hard to ignore.

You can’t say ‘things are fine in Germany’ or ‘Finland is recovering’ and leave it at that. Not when you’re part of a political -and to a large degree also economic- Union, let alone when you’re preaching tightening -and deepening- that Union. Not when parts of that Union are not only doing much worse than others, but are being thoroughly gutted. Then again, they’re being gutted by the very Union itself, so Brussels -and Berlin, The Hague, Paris- can’t very well feign surprise or deny responsibility.

Of course the European continent needs a ‘body’, some form of organization -and it needs it badly- that will allow its nations to cooperate, in 1000 different ways and fields, but the EU is not it. The EU is toxic. It is turning nations against each other as we speak. So much so that it’s crucial for these nations to leave the union and dismantle the entire operation before that happens, because there will be no opportunity left to do it once the toxicity takes over. The UK should count itself lucky for getting out while it did.

In its present setting, the EU has no future. And, more importantly, there is no mechanism available to change that setting. It should have been insisted on when the Union was founded, or in one of its various treaties after. This never happened, though, and that’s no coincidence, it was always about power. It’s therefore very hard -if not impossible- to see how the EU could be altered in such a way that it has a chance of survival.

Changing or tweaking a few rules is not going to do it. It’s the very Brussels power structure that is inherently faulty, and those parties that under this structure have the power, are the same ones who would have to change it (against their own interests). There is not a single decision concerning important -for instance economic- EU policies that can be taken against the wishes of Berlin. And Berlin demands what’s good for Germany, even if that is bad for other member states.

In order to save the EU, German representatives would have to vote against their own national interests. But they were elected specifically to protect those interests. There is no better way to illustrate the fatal flaw in the -construction of- the EU. Politicians are elected to protect the interests of their member states, and no member state can possibly prevail but Germany, because it’s the biggest. You can put any label you want on that, but democratic it’s not.

Germany and Holland are doing great, according to the most recent economic data. But how is that a reason to celebrate when Greece and Italy, among others, are not doing great at all? Why the difference? It’s not because they spend their money on “Schnaps und Frauen” as Eurogroup president and Dutch demissionary FinMin Dijsselbloem so poetically suggested.

It’s because the Eurogroup has not acted in their best interests. Because when their interests differed from the Dutch and German ones, the latter won out. Easily. And they always will under the present terms. As head of the Eurogroup, Dijsselbloem should represent the best interests of all member nations, not just Holland and Germany.

So should Angela Merkel as the de facto head of the EU. And it’s a very simple fact, easy to explain as well, that these interests can conflict. Obviously, that Merkel can call all the important shots in the EU should be a red, flashing, blinding and deafening alarm sign to start with. Germany should have taken a step back, back in 1960 or so, or even 1999, but for obvious reasons didn’t, and got away with that. It’s about power, it was never about Union other than to increase Power.

European politicians have not been able to make the ‘shift’ from nation to Union. Once they are faced with decisions that may harm their national interests, but benefit those of the EU as a whole, they must revert back, by default, to their own respective nationalistic priorities. Even if they are the ones who complain loudest about rising nationalism and protectionism.

And they’re -kind of- right, or justifiable. German, French, Dutch politicians are not accountable to Slovakian or Slovenian interests. That’s just extra, nice if it happens to coincide with what Berlin or Paris want, but not a priority in any sense of the word. Understandable, but lethal to the idea of a Union.

There is your fatal EU flaw. The whole common interest idea is just a sales pitch, always was. Which worked fine in times of growth. But take a look now. There’s nothing left. The rich north has used the poorer south to transfer its losses to. It’s not a union, it’s old-fashioned colonialism.

Europe’s political problem can perhaps best be expressed by comparing it to the US. Germany, plus to a lesser extent Holland, and France, have so much power that it would be like California and New York could call all important shots in America. But they can’t. Trump’s election shows that they cannot. Europe doesn’t even have that escape valve.

Delving a bit deeper, Kansas and California may be different cultures, but their people speak the same language, they watch the same TV shows, read the same news. Different cultures, but also part of the same culture. In Europe, most people have no idea who EU head Juncker is, or care, or how he got where he’s at.

Most likely know who Angela Merkel is, but they don’t know that she takes all the important decisions about their lives now. If they did, the pitchforks would be out in minutes. Luckily for Merkel, the EU is as opaque as can be,

90% of Europeans need subtitles to understand Juncker and Merkel. Or for some journalist to translate for them. Everyone in Kansas and California understands what Trump says, no matter how confused he may sound or what they may think of him. He’s American, and so are they. He’s one of them.

Needing subtitles to understand Juncker and Merkel may work in times of plenty. But in lean years, people don’t take kindly to that kind of thing, that someone you can’t even understand, and that you can’t hold to account, makes important decisions that impact you directly, as you see your jobs and savings and homes vanish and the future of your kids disappear.

That is asking for trouble. The EU has that trouble, and it will have much more of it. The only way out of that trouble is for the Union to dismantle itself. But as we can see in the whole Brexit story, that would involve so many interested parties giving up on so many perks that feed them, politicians, businesses, what have you, that none of it would ever happen voluntarily.

The EU has become a farcically intricate web of policies and laws and regulations, all built on fatally flawed foundations, that no citizen of sound mind feels connected with. The only way out of that is to literally get out. The UK got it right, whether they meant it or not.

The EU cannot be reformed because the only people -and the countries they represent- who could do the reforming, profit hugely from the present state of affairs, from not reforming. Fatal. Flaw.

As any builder can tell you who’s ever seen a structure on the verge of collapse: some can be saved and some of them you just have to let go. Raze ’em and start from scratch. Which in many cases, as builders know, is simply the best choice.

Please don’t get me wrong: of course there are tons of things the EU has done that are great, and right, and all that. But it’s the power structure that will inevitably kill it no matter what else it does that actually works. And that structure is beyond redemption.

Trump Handed Merkel $375 Billion Invoice For NATO Defenses During Recent Visit

A couple of weeks ago we wrote several notes about German Chancellor Angela Merkel"s painfully awkward visit to the White House.  After meeting in private, the pair sat down in the oval office for a brief press conference where you could cut the tension with a knife.  At one point someone from the media asked for a handshake but the request was promptly ignored.

"Can we get a handshake?"

*Merkel looks at Trump*

*Trump grins*

*Press is ushered out without any handshake* pic.twitter.com/dKxu5C5X9Y

— Steve Kopack (@SteveKopack) March 17, 2017

Now, a couple of weeks later, we learn what may have prompted some of the tension in the room between Merkel and Trump that day.  According to a new report from The Times of London today, Trump apparently took advantage of Merkel"s visit to Washington D.C. to pass her a $375 billion invoice for "overdue" NATO defense expenses.  Per The Hill, Merkel largely ignored the invoice though it certainly seems to have accomplished it"s goal of ruffling some feathers.

“The concept behind putting out such demands is to intimidate the other side, but the chancellor took it calmly and will not respond to such provocations,” a German minister told the newspaper.

Trump during his presidential campaign railed against the NATO alliance and has called for member countries to increase defense spending to support the organization.

Merkel “ignored the provocation,” the Times said.

As reported, the invoice was based on a 2014 pledge from NATO countries to spend 2% of their GDP on national defense.  As such, Trump allegedly instructed aides to calculate how much German spending fell below that 2% target for the past 12 years, added interest and created an invoice which he hand delivered.

Meanwhile, with the benefit of this new information, Trump"s tweets from March 18th, after his meetings with Merkel, take on all new meaning.

Despite what you have heard from the FAKE NEWS, I had a GREAT meeting with German Chancellor Angela Merkel. Nevertheless, Germany owes.....

— Donald J. Trump (@realDonaldTrump) March 18, 2017

...vast sums of money to NATO & the United States must be paid more for the powerful, and very expensive, defense it provides to Germany!

— Donald J. Trump (@realDonaldTrump) March 18, 2017

And while Merkel has largely ignored the invoice, other German ministers have decided upon more aggressive responses.  Per the Independent:

In response to the claims, German defence minister Ursula Von der Leyen rejected the notion the European nation owed the US or Nato.

She issued a statement saying: “There is no debt account at Nato

“Defence spending also goes into UN peacekeeping missions, into our European missions and into our contribution to the fight against [Isis] terrorism.”

Her comments were backed by Ivo Daalder, permanent representative to Nato from 2009 to 2013 under the Obama administration, who queried the President’s understanding of the organisation.

He tweeted: “Sorry Mr President, that’s not how Nato works. The US decides for itself how much it contributes to defending Nato.

“This is not a financial transaction, where Nato countries pay the US to defend them. It is part of our treaty commitment.”

Never a dull moment in the Trump White House.

Germany Slams Trump's Claim That It Owes "Vast Sums" To NATO And The U.S.

The pleasantries, lack of handshake between Trump and Merkel notwithstanding, are officially over.

One day after Trump returned to his favorite medium to slam Germany for abusing NATO"s funding scheme, and US defense spending generosity, accusing Germany of owing "vast sums" of money to both NATO and the US, Germany has struck back. As a reminder, this is what Trump tweeted on Saturday morning:

Despite what you have heard from the FAKE NEWS, I had a GREAT meeting with German Chancellor Angela Merkel. Nevertheless, Germany owes vast sums of money to NATO & the United States must be paid more for the powerful, and very expensive, defense it provides to Germany!

That in turn, was followed on Sunday morning by a statement by German Defense Minister Ursula von der Leyen in which she responded to Trump, rejecting the US president"s claim: "There is no debit account at NATO," von der Leyen said in a statement, adding that it was wrong to link the alliance"s target for members to spend 2 percent of their economic output on defense by 2024 solely to NATO.

German Defense minister Ursula von der Leyen

"Defense spending also goes into UN peacekeeping missions, into our European missions and into our contribution to the fight against IS terrorism," von der Leyen said. The defense minister added that everyone wanted the burden to be shared fairly and for that to happen it was necessary to have a "modern security concept" that included a modern NATO but also a European defense union and investment in the United Nations.

Before taking office, Trump suggested that the U.S. might not come to the defense of allies who didn’t meet the 2 percent spending goal, and said the coalition doesn’t always best serve American interests. But U.S. officials have publicly praised the alliance since Trump took office, and Merkel is among European leaders who have outlined steps to boost defense spending to the target level.

To be sure, Trump wasn"t the first U.S. leader to complain that most NATO nations, including Germany, weren’t meeting the alliance’s goal that members spend 2 percent of their GDP on defense. Germany spends about 1.2% currently.

In fact, none other than President Barack Obama in 2016 said in an interview with The Atlantic about his foreign policy doctrine that “free riders aggravate me.” Sigmar Gabriel, Germany’s foreign minister, said a few weeks ago said that meeting the 2 percent goal is “unrealistic,” although that’s a much lower percentage than the U.S. spends on defense.

The exchange of barbs took place shortly after Friday’s visit by Merkel, postponed from earlier in the week by a snowstorm, which was a day of tense cordiality and sometimes awkward body language. Trump was unresponsive when Merkel leaned in for a handshake in the Oval Office at the request of photographers. There were few public attempts at the jocularity leaders often use to leaven such encounters, except for a barbed reference Trump made that they had “in common, perhaps” the experience of surveillance by U.S. intelligence.

As Bloomberg adds, the visit was a test of Trump’s foreign policy vision and represented Trump"s first face-to-face talks with a veteran German leader whom he frequently maligned on the campaign trail, and whose free-trade, open-border politics stand in marked contrast to Trump’s nationalistic rhetoric. “He’s been president less than two months; she has been chancellor more than 10 years,” said Richard Haass, president of the Council on Foreign Relations. “She has all this experience. She’s the most important leader in Europe. Some would say she’s the most important leader in the world right now.”

Trump was infuriated at a German reporter’s question about his accusations that Obama had placed him under surveillance before jokingly referning a disclosure that emerged as a result of the Snowden revelations that president Obama was intercepting Merkel’s mobile phone communications. Turning to Merkel, he joked, “At least we both have something in common, perhaps.”

Merkel didn’t smile.

Merkel has been looking to Trump to ease concerns within Europe that the U.S. could abandon efforts to pressure Moscow into changing course. So far it remains unclear just what Trump"s latest diplomatic track is vis-a-vis the Kremlin following a media barrage that his aides have had undisclosed relations with Russia. This week there is a hearing on Russian "hacking" of the US elections, where Trump"s ties to Moscow will be a prominent fixture of discussion.

Shock Poll Shows Merkel Losing Chancellorship If Elections Held Today; JPMorgan Stunned

Overnight we reported that Germany"s default swaps spiked to the highest level since Brexit as a recent poll showed that Merkel"s lead in the polls had slid to multi-year lows ahead of Germany"s elections later in the year, provoking some concerns that a formerly unthinkable "tail risk" outcome was becoming more likely. However, according to new data unveiled today, Merkel"s headaches are only just starting, because in a brand new poll released this afternoon, the CDU would get 30% of the vote, while the suddenly resurgent SPD would get 31%. This means that the SPD"s new head, Martin Schulz, would enter any coalition talks as the leader of the largest party, hence becoming Chancellor, leading to a stunned reaction by JPMorgan.

In a note released this afternoon by JPM"s Greg Fuzesi, the strategist writes that following the recent resignation of Sigmar Gabriel as leader and chancellor candidate of the SPD, there has been much attention on how his replacement Martin Schulz would perform. Having spent most of his career in the European Parliament, most recently as its president, and being relatively unknown in Germany, this is not easy to predict. In his first major TV interview, he was recently pressed to explain how exactly he differs from his predecessor Gabriel and also from Chancellor Merkel, and what his focus on fairness would mean in practice. This was not entirely straightforward for him.

Nevertheless, opinion polls were beginning to show a bounce last week and this appears to be continuing.

This afternoon, a new opinion poll from INSA showed the SPD gaining further support and overtaking the CDU/CSU for the first time in many years. If elections were held now, the INSA poll suggests that the CDU would get 30% of the vote, while the SPD would get 31%. This means that Schulz would enter any coalition talks as the leader of the largest party, hence becoming Chancellor.

It also means that a SPD-Green-Left coalition would currently win exactly 50% of seats, so that a government without the CDU/CSU could even be possible. In effect, the SPD has gained 10%-pts of support in past two (weekly) INSA polls, taking votes away from all other parties (see second chart below). Interestingly, the AfD has also suffered a significant decline.

Given that Schulz is relatively new to German politics, a novelty factor may be partly responsible for the jump in the polls. It is far too early to say whether this will endure, given that the election campaign has yet to properly begin. It will also be important to see whether other polls replicate the swing. The SPD has gained support in all recent polls, but these are all a week or more old and do not show the latest jump in the INSA poll. That said, there is no reason to dismiss the INSA poll. It is the newest organization and the only one to be done entirely online, but it (arguably) performed only marginally worse than other polls at the last Bundestag election.

A Schulz-led SPD-Green-Left coalition or a Schulz-led grand coalition would certainly be a huge event in German politics. Such possibilities no longer look like tail risks. A SPD-Green-Left coalition would bias German policymaking towards greater fiscal expenditure and investment, and center-left policies. But, even such a coalition would not mark a dramatic break with the past in many areas and would, we expect, continue Germany’s strong support of the EU and single currency.

In short, "Chancellor Schulz" may be just what Brussels, and to a lesser extent President Trump, ordered.

German Default Risk Spikes To Highest Since Brexit As Merkel Lead Plunges To Multi-Year Low

Germany’s Social Democrats narrowed the gap with Chancellor Angela Merkel’s bloc to the closest in more than four years, reinforcing a poll bounce after they chose outsider Martin Schulz to challenge Europe’s longest-serving leader. As Bild reports, the 6-point surge in opposition support was the biggest ever recorded for the party... and may explain why German sovereign risk spiked to its highest since Brexit.

As Bloomberg reports, support for the SPD jumped 8 percentage points to 29% from a month earlier, the highest level since the last election in September 2013, according to the Infratest-Dimap for broadcaster ARD. Merkel’s Christian Democratic-led bloc, known informally as the Union, slid 3 points to 33%. Half of those surveyed would support Schulz if the chancellor were elected directly, compared with 34% for Merkel.

The poll underscores this year’s political risks for Merkel, 62, who has previously focused on the challenge by the anti-immigration Alternative for Germany, or AfD. The unexpected candidacy by Schulz, new to German politics after leaving his post as president of the European Parliament, has opened another front while Merkel seeks a fourth term at the helm of Europe’s biggest economy in the Sept. 24 parliamentary election.

As The Independent notes, the SPD appointed Schulz, a former European Parliament president, as leader last Sunday, replacing Sigmar Gabriel who said he was standing aside to boost the party"s chances.

"Martin Schulz is managing above all to win back former SPD voters and to appeal to them emotionally," Emnid"s Torsten Schneider-Haase told the newspaper, adding: "Such a strong shift in party preferences within a week is a one-off."

The move has re-energised the SPD, junior partner in Merkel"s "grand coalition", ahead of September"s federal election. Schulz has vowed to unseat Merkel with a campaign aimed at overcoming "deep divisions" that he says have fuelled populism in Germany in recent years.

As the chancellor grapples with U.S. President Donald Trump’s unpredictability, Europe’s biggest refugee crisis since World War II and a surge in support for anti-establishment forces ahead of elections in France and the Netherlands, the political headwinds at home add to a tumultuous political year in the region.

Which may help to explain why German sovereign risk has spiked to its highest since Brexit this last week...

Merkel's Human Rights Speaker Resigns Over Refugee Policy

Submitted by Mike Shedlock via MishTalk.com,

Merkel’s human rights speaker, Erika Steinbach, resigned over the chancellor’s immigration policy. She also left the CDU party.

Erika Steinbach, who’s been with Chancellor Merkel’s CDU for 43 years, has strongly criticized the leader’s handling of the migrant crisis. She claims conservatives have been sidelined in Germany’s main ruling party.

“Would I vote CDU at the moment? No. Would I join the CDU today? No. I can only draw the honest conclusion of leaving the CDU,” she told “Welt Am Sonntag” (WaS) newspaper.

Ministers ‘encouraged influx’

Steinbach went further, accusing the government of deliberately promoting illegal migration.

“At the Federal Office for Migration, thousands of thousands of passports have been identified as counterfeit, without the legal consequences for the respective migrants being drawn. There is a political will behind it.”

Political Will

It’s quite obvious Merkel wanted mass immigration. It’s debatable why, but German citizens have to put up with the consequences whatever Merkel’s reason.

If there was a strong candidate willing to challenge Merkel from within, Merkel would easily lose her next election. It’s possible Merkel loses anyway.

Regardless, her “Grand Coalition” has completely splintered as members of her own party are fed up. Even if Merkel wins, I doubt she lasts the full term.

Angry Germany Slams Trump Criticism: Urges US To "Build Better Cars", Accuses Washington Of Causing Refugee Crisis

An angry Berlin has responded with a staunch defense of its policies after President-elect Donald Trump criticized German Chancellor Angela Merkel in two separate Sunday interviews, one with Germany"s Bild and one with the Sunday Times, for her stance during the refugee crisis while threatening a 35% tariff on BMW cars imported into the US.

Germany’s deputy chancellor and minister for the economy, Sigmar Gabriel, said on Monday morning that a tax on German imports would lead to a “bad awakening” among US carmakers since they were reliant on transatlantic supply chains. “I believe BMW’s biggest factory is already in the US, in Spartanburg [South Carolina],” Gabriel, leader of the centre-left Social Democratic party, told the Bild newspaper in a video interview.

“The US car industry would have a bad awakening if all the supply parts that aren’t being built in the US were to suddenly come with a 35% tariff. I believe it would make the US car industry weaker, worse and above all more expensive." Playing Trump"s threat off Congress, Gabriel added that he "would wait and see what the Congress has to say about that, which is mostly full of people who want the opposite of Trump" as quoted by The Guardian.

In his interviews with Bild and the Times, the US president-elect had indicated that he would aim to realign the “out of balance” car trade between Germany and the US. “If you go down Fifth Avenue everyone has a Mercedes Benz in front of his house, isn’t that the case?” he said. “How many Chevrolets do you see in Germany? Not very many, maybe none at all … it’s a one-way street.”

So, when asked what Trump could do to make sure German customers bought more American cars, Gabriel had a simple suggestion: “Build better cars.”

Asked what Trump could do to make sure German customers bought
more American cars, Sigmar Gabriel said: ‘Build better cars.

Trump"s interview had an adverse impact shares in carmakers BMW, Daimler and Volkswagen, which fell on Monday morning following the President-elect"s comments. BMW shares were down 0.85%, shares in Daimler were 1.54% lower and Volkswagen shares were trading 1.07% down in early trading in Frankfurt. The reason for Trump"s latest outburst at Germany"s car giants is that all three carmakers have invested heavily in factories in Mexico, where production costs are lower than the US, with an eye to exporting smaller vehicles to the American market, a move which Trump vocally disapproves.

Meanwhile, a BMW spokeswoman said a BMW Group plant in the central Mexican city of San Luis Potosi would build the BMW 3 Series starting from 2019, with the output intended for the world market. The plant in Mexico would be an addition to existing 3 Series production facilities in Germany and China.

* * *

Responding to Trump’s comments that Merkel had made an “utterly catastrophic mistake by letting all these illegals into the country”, Gabriel said the increase in the number of people fleeing the Middle East to seek asylum in Europe had partially been a result of US-led wars destabilising the region.

Slamming US foreign policy - and thus the Obama regime, not to mention Angela Merkel"s close friend Hillary Clinton - as a culprit for the European refugee crisis, Gabriel said that “there is a link between America’s flawed interventionist policy, especially the Iraq war, and the refugee crisis, that’s why my advice would be that we shouldn’t tell each other what we have done right or wrong, but that we look into establishing peace in that region and do everything to make sure people can find a home there again,” Gabriel said.

“In that area Germany and Europe are already making enormous achievements – and that’s why I also thought it wasn’t right to talk about defence spending, where Mr Trump says we are spending too little to finance Nato. We are making gigantic financial contributions to refugee shelters in the region, and these are also the results of US interventionist policy.”

Gabriel, who will likely run as the centre-left candidate against Merkel in Germany’s federal elections in September, said Trump’s election should encourage Europeans to stand up for themselves.

“On the one hand, Trump is an elected president. When he is in office, we will have to work with him and his government – respect for a democratic election alone demands that,” Gabriel said. “On the other hand, you need to have enough self-confidence. This isn’t about making ourselves submissive. What he says about trade issues, how he might treat German carmakers, the question about Nato, his view on the European Union – all these require a self-confident position, not just on behalf of us Germans but all Europeans. We are not inferior to him, we have something to bring to the table too.

“Especially in this phase in which Europe is rather weak, we will have to pull ourselves together and act with self-confidence and stand up for our own interests.”

While Merkel has yet to provide a direct response to Trump"s statements and refused to comment on the interview during a news conference with New Zealand Prime Minister Bill English, saying she would wait until after Trump"s inauguration and then planned to work with him at all levels of government, her spokesman, Steffen Seibert, said the chancellor had read the Trump interview “with interest”, but declined to comment in more detail until the president-elect had been sworn in.

“We are now waiting for President Trump to start his term and will then work closely with the new government,” he said, adding that "It’s a clear statement of the positions of the new American president, but the positions of the chancellor on many of these issues are equally clear."

Martin Schäfer, a spokesman for the German foreign ministry, rejected Trump’s labelling of the EU as a “vehicle for Germany”. He said: “For the German government, Europe has never been a means to an end, but a community of fate which, in times of collapsing old orders, is more important than ever.”

The foreign ministry also rejected Trump’s criticism that creating “security zones” in Syria would have been considerably cheaper than accepting refugees fleeing the war-torn country. “What exactly such a security zone is meant to be is beyond my comprehension and would have to be explained,” said Schäfer, adding that there had not been enough willingness among the international community to lend military support to create a no-fly zone in Syria.

* * *

Germany was not the only nation unhappy with Trump"s statement: Pierre Moscovici, European economic affairs commissioner, also found fault with Trump’s assertion that other European countries would follow in Britain’s footsteps and leave the EU.

“I’m not worried, I think this idea that Brexit is going to be contagious is a fantasy, a bad fantasy,” Moscovici told reporters in Paris. “Brexit is not a great thing,” he said, warning Trump that comments advocating a break-up of the EU would not get the trans-Atlantic relationship off to the best start.

* * *

Yet while Germany and Brussels were unhappy with Trump"s criticism, Moscow was delighted, and sure enough Trump’s remarks on Nato were met more favourably in Moscow, where Dmitry Peskov, spokesman for the Russian president, Vladimir Putin, agreed with the US president-elect that the alliance was “obsolete”.

“Since Nato is tailored toward confrontation, all its structures are dedicated to the ideals of confrontation, you can’t really call it a modern organisation meeting the ideas of stability, steady growth and security,” he said.

But Trump’s suggestion that the US could lift its sanctions on Russia in exchange for an agreement to reduce the countries’ nuclear arsenals elicited a cooler response. Peskov said Russia had not been conducting talks with the US about nuclear arsenal reduction and said cancelling sanctions was not a political goal in Russia. "Russia wasn’t the initiator in introducing these restrictions, and Russia, as the president of Russia has underlined, doesn’t intend to raise the issue of these sanctions in its foreign contacts,” he said.

Last month, echoing similar comments by Trump, Putin said Russia needed to strengthen its strategic nuclear forces. Leonid Slutsky, a Russian MP, said he “wouldn’t connect these two issues and make the cancellation of sanctions a negotiating point in such a delicate area as nuclear security”. Konstantin Kosachyov, head of the foreign affairs committee in the Russian senate, said the cancellation of sanctions was “definitely not an end in and of itself for Russia”.

“It’s not even a strategic goal for which something needs to be sacrificed, especially in the security sphere,” he told state news agency RIA Novosti. “We think [sanctions] are a bad legacy of the departing White House team that need to be sent after it into history.”

* * *

And yet, perhaps Trump"s bluster was merely the latest ruse to get everyone on the negotiating table. It may be working already: as Reuters reports, Chancellor Merkel is working to set a date this spring for a meeting with Donald Trump, who will be sworn in as U.S. president on Friday, German government sources said on Monday. Merkel had offered to meet Trump in the United States in her capacity as chairman of the Group of 20 leading economies, the sources said.

The chancellor has spoken with Trump only once, shortly after his election to succeed U.S. President Barack Obama. Following Trump"s latest "stunning" public statements, she now appears to be in a hurry to not only speak with him again, but also meet face to face.

In 2017 Address, Merkel Decries "Distorted Picture" Of Refugee Policy "Painted By Populists"

In an awkwardly similar rhetoric to the failed slogan of Hillary Clinton, German Chancellor Angela Merkel told her nation that "together, we are stronger. Our state is stronger," giving no ground on her increasingly questioned open-border refugee policy as she slammed the "distorted picture" being painted by populists.

Chancellor Angela Merkel urged Germans to stay calm in the face of Islamist terrorism and, as Bloomberg reports, criticized nationalists for offering false hopes of security, signaling she’ll count on voters to opt for stability when she runs for a fourth term in 2017.

In her New Year’s Eve speech to the nation, Merkel predicted a contentious political climate in a year that’ll include Donald Trump’s inauguration as U.S. president on Jan. 20 and elections in France and the Netherlands.

“As we pursue our lives and our work, we tell the terrorists: They are murderers full of hatred, but it’s not they who determine how we live and want to live,” Merkel said, according to an advance copy of the nationally televised speech on Saturday. “We are free, humane, open. Together, we are stronger. Our state is stronger.”

Merkel’s comments reflect the surge in political risks to her chancellorship, though she may benefit because she’s familiar to voters and has no obvious successor after 11 years in office.

Merkel gave no ground on her open-border refugee policy and took aim at populists who question the value of the European Union “or even of parliamentary democracy itself.”

“What a distorted picture,” she said. While the EU should focus on tasks it can truly do better than national governments, “we Germans should never let ourselves be tricked into believing that going it alone as a nation could lead to a happy future,” Merkel said.

Merkel sought to push back against her critics, saying she’ll work for a political debate “where we argue passionately about many things, but always as democrats,” with criticism voiced “peacefully and with respect for the individual.”

Merkel has become the target of online vilification and an unprecedented political challenge by the anti-immigration Alternative for Germany, or AfD, since leaving Germany’s borders open as more than 1 million refugees arrived over the past two years.

Wann schlägt der deutsche Rechtsstaat zurück? Wann hört diese verfluchte Heuchelei endlich auf? Es sind Merkels Tote!#Nizza#Berlin

— Marcus Pretzell (@MarcusPretzell) December 19, 2016

The Suicide Of Germany

Submitted by Guy Milliere via The Gatestone Institute,

• Of the 1.2 million migrants who arrived in Germany in 2014 and 2015, only 34,000 found work.


• Angela Merkel went to lay white roses at the scene of the Christmas market attack in Berlin. Thousands of Germans did the same. Many brought candles and cried. But anger and the will to combat the threat remained largely absent.


• Nothing better describes the present state of Germany than the sad fate of Maria Landenburger, a 19-year-old girl, murdered at the beginning of December. A member of a refugee relief organization, Landenburger was among those who welcomed migrants in 2015. She was raped and murdered by one of the people she was helping. Her family asked anyone who wanted to pay tribute to their daughter to give money to refugee associations, so that more refugees could come to Germany.


• The law that condemns incitement to hatred, presumably intended to prevent a return to Nazi ideas, is held like a sword over whoever speaks too harshly of the growing Islamization of the country.


• The great majority of the Germans do not want to see that Germany is at war, because a merciless enemy has declared war on them. They do not want to see that war has been declared on Western civilization. They accept defeat and docilely do what jihadists want them to do: they submit.


• If Angela Merkel does not see the difference between Jews exterminated by the Nazis, and Muslims threatening to exterminate Christians, Jews and other Muslims, she is even more clueless than it seems.

The attack in Berlin on December 19, 2016 was predictable. German Chancellor Angela Merkel created the conditions that made it possible. She bears an overwhelming responsibility. Geert Wilders, a member of Parliament in the Netherlands and one of Europe"s only clear-sighted political leaders, accused her of having blood on her hands. He is right.

When she decided to open the doors of Germany to hundreds of thousands of Muslims from the Middle East and more distant countries, she must have known that jihadists were hidden among the people flooding in. She also must have known that the German police had no way of controlling the mass that entered and would be quickly overwhelmed by the number of people it would have to control. She did it anyway.

When hundreds of rapes and sexual assaults took place in Cologne and other cities in Germany on last year"s New Year"s Eve, she said that the perpetrators should be punished "regardless of their origin", but she did not change her policy. When attacks took place in Hanover, Essen, Wurzburg, and Munich, she delayed comments, then pronounced sanitized sentences on the "need" to fight crime and terror. But she still did not change policy.

She only changed her position recently, it seems because she wants to be a candidate again in 2017, and saw her popularity declining.

The comments she made immediately after the December 19 attacks were mind-numbing. She said that "if the perpetrator is a refugee", it will be "very difficult to bear" and it will be "particularly repugnant for all Germans who help refugees on a daily basis."

Such remarks could be considered simply naïve if someone were not informed, but Angela Merkel does not have that excuse. She could not ignore warnings from German and U.S. intelligence services saying that Islamic State terrorists hiding among refugees were planning to use trucks in Christmas-related attacks. The situation endured by Germans has been extremely difficult to bear for more than a year. Crime had "skyrocketed"; diseases extinct for decades have been brought in with no vaccines -- long since discontinued -- to treat them; second homes are seized by the government without compensation to shelter migrants, and so on. It did not take long to discover that the main suspect in the Berlin attack was an asylum seeker living in a refugee shelter.

In another country, Merkel might have been shamed into resigning; in Germany, she is running for re-election.

The German population is aged and the birthrate is dangerously low: 1.38 children per woman. The immigrants are replacing the German population, which has been disappearing little by little. The Germans who pass away are the Christians or, more often, non-religious secularists. As everywhere in Europe, Christianity is disappearing; the immigrants replacing the Germans are Muslim.

The German economy is still strong but running out of steam. Returns on invested capital are declining. At a time when human capital is the main source of profits, German human capital is collapsing: people from underdeveloped countries cannot easily replace highly educated Germans. Most do not have marketable skills; newcomers remain long unemployed and dependent. Of the 1.2 million migrants who arrived in Germany in 2014 and 2015, only 34,000 found work. If the unemployment rate is low, it is because there is a growing shortage of labor: today 61% Germans are between 20 and 64 years old. It is expected that by mid-century, the figure will fall to 41%.

Politically correct propaganda speeches that are inexhaustibly broadcast in Germany -- as in the rest of Europe -- never speak of demography. Instead, they refute any evidence that the German economy is not doing well. They also say that Islam and Christianity are equivalent; they are obstinately blind to the fact that Islam is more than a religion: it is a political, economic, and moral system that encompasses all aspects of life, and has never coexisted long or peacefully in a culture different from it. These speeches almost totally ignore the rise of radical Islam and jihadist terrorism; instead, they argue that radical Islam is a marginal cult, and that jihadist terrorism only recruits lone wolves or the mentally ill. Above all, they constantly repeat that any criticism of migration or Islam is ignominious and racist.

The German population is intimidated with fear, both by the antisocial behavior of many migrants and by the speech police of their own governments. Many Germans do not even dare to speak. Those who use public transportation resign themselves to insults. They bend their head and run for refuge to their homes. Attendance in restaurants and theaters is falling sharply. Women have become resigned to wearing "modest" outfits and are careful to not go out alone. Protests organized by Pegida (Patriotic Europeans Against the Islamization of the West) have never attracted more than a few thousand people after a photograph of its founder was released in which he was styled as Hitler.

The Alternative for Germany (AfD) party, which calls for a halt to Muslim immigration to Germany and keeps on winning more votes, nevertheless remains a minority party. The law that condemns incitement to hatred (Volksverhetzung), presumably intended to prevent a return to Nazi ideas, is held like a sword over whoever speaks too harshly of the growing Islamization of the country.

On December 20, Angela Merkel went to lay white roses at the scene of the Christmas market attack. Thousands of Germans did the same. Many brought candles and cried. But anger and the will to combat the threat remained largely absent. After a few weeks, the page will be turned -- until next time.

Nothing better describes the present state of Germany than the sad fate of Maria Landenburger, a nineteen-year-old girl, murdered at the beginning of December. Maria Landenburger, a member of a refugee relief organization, was among those who welcomed migrants in 2015. She was raped and murdered by one of the people she was helping. Her family asked anyone who wanted to pay tribute to their daughter to give money to refugee associations, so that more refugees could come to Germany.

The great majority of the Germans do not want to see that Germany is at war, because a merciless enemy has declared war on them. They do not want to see that war has been declared on Western civilization.

They accept defeat and docilely do what jihadists want them to do: they submit.

In analyzing the December 19 attack on the Christmas market, German journalist Josef Joffe, editor of Die Zeit, explained Angela Merkel"s decision to welcome refugees as "an act of atonement" and a way to welcome a threatened population, seven decades after the Holocaust. He also explained the passivity of many Germans by a feeling of collective guilt.

If Joffe is right, if Angela Merkel does not see the difference between Jews exterminated by the Nazis, and Muslims threatening to exterminate Christians, Jews and other Muslims, she is even more clueless than it seems.

If many Germans are filled with collective guilt to the point that they want to compensate for what Germany did to the Jews by welcoming hundreds of thousands of Muslims many of whom openly state that they want to replace Germany"s Judeo-Christian culture with Islam, and who are replacing its Christian population with a Muslim one -- that will include ruthless killers in its ranks -- it shows that Germans today either detest themselves so much that they desire their own destruction, or that they have simply lost their will to stand up for what they care about -- an act otherwise known as surrender.

German Anger Rises At Merkel As More Details Emerge About Berlin Truck Terrorist

Several days ago, Merkel may have walked on her own into one a potentially career-ending, political traps as she prepares to runs for her fourth term as Chancellor in 2017, when she said  has said "it would be particularly repulsive if a refugee, seeking protection in Germany, was the perpetrator" of the Monday Christmas market terrorist attack. Alas, despite having already been slammed by her political opponents, such as AfD"s Frauke Petry, who have long claimed that any and all terrorist attacks on German soil are the direct result of Merkel"s open door policies (the AfD and other anti-immigrant groups held a silent vigil outside Merkel"s office in Berlin on Wednesday night to protest her refugee policies), it looks as if by even Merkel"s own admission her government failed at every step to capture the Tunisian terrorism suspect - who we know by now was indeed a refugee seeking protection in Germany, even if it was not granted - despite having had ample opportunities. 

As Bloomberg followed up overnight on just this issue, "critics are lambasting her for allowing hundreds of thousands of asylum-seekers to enter the country, allegedly without proper security checks."

After German media published photos of Anis Amri, federal prosecutors issued a public appeal for information along with the promise of a 100,000-euro ($105,000) reward for his arrest. Within hours it emerged that the man authorities warned could be "violent and armed" had in fact been known to them for months as someone with ties to Islamic extremists who used at least six different names and three different nationalities.

Even the German police union is starting to turn on Merkel: "People are rightly outraged and anxious that such a person can walk around here, keep changing his identity and the legal system can"t cope with them," said Rainer Wendt, the head of a union representing German police.

According to Ralf Jaeger, the interior minister of North Rhine-Westphalia state, Amri arrived in Germany in July 2015 as the influx of asylum-seekers was nearing its peak. Although registered in the west of the country, near the Dutch border, Amri had moved around Germany regularly since February, living mostly in Berlin, said Jaeger. Within months of his arrival, authorities had added Amri to a growing list of potentially violent Islamic extremists, not all of them asylum-seekers.

"Security agencies exchanged information about this person in the joint counter-terrorism center, the last time in November," said Jaeger.

State prosecutors in Berlin even launched an investigation of Amri on March 14 following a tip from federal security agencies, who warned that he might be planning a break-in to finance the purchase of automatic weapons for use in a possible future attack. Surveillance showed that Amri did deal drugs in a notorious Berlin park and was involved in a bar brawl, but no evidence was found to substantiate the original warning.

Adding to the Merkel"s headaches is the latest report from ABC, Anis Amri was known to U.S. intelligence agencies. The fact that the US and Germany, whose "intimate" relationship when it comes to surveillance is well-known courtesy of Edward Snowden, failed to communicate about the suspected truck killer, will be a major source of criticism in the upcoming political campaign.

As we noted yesterday, Amri - whose fingerprints were found on the door and inside the cabin of the truck used in the attack - had been under covert German surveillance after a tip earlier this year, but the surveillance ended in September when nothing materialized, according to The Associated Press. The intelligence painted a picture of a criminal involved in drug deals and the occasional bar brawl, but not necessarily a terrorist. Police said they were gathering a criminal case against Amri, and the last time information was exchanged regarding his case was as recently as November.

Previously, Amri who had a very troubled past, served a four-year jail term in Italy after being sentenced for charges of arson on the Italian island of Lampedusa in the Mediterranean, the closest European Union destination for migrants and refugees embarking from North Africa. He lived in the town of Kleve in North Rhine-Westphalia before moving to Berlin, Germany"s capital, in February and his asylum application was rejected in July of this year. However, Amri was not deported to his home country of Tunisia because authorities couldn"t verify his identity without the proper paperwork.

The Italian news agency ANSA reported that Amri was ordered expelled after his prison time in Italy. However, Tunisian authorities didn"t finish all the paperwork in the required time, so Amri never was sent back to Tunisia, it reported.

Futhermore, Spiegel today reported that Amri had offered himself as a suicide bomber to radical preachers who were being monitored by the police months ago. But his messages were encoded in such a way that they weren"t sufficient for an arrest.

As a result of these troubling discoveries, confirming just how easy it was for the terrorist suspect to slip between the cracks, German lawmakers have called for consequences regardless of whether Amri turns out to have been behind the wheel of the truck in Berlin.

"In my view we experienced a major shift on Monday," said Stephan Mayer, a member of Merkel"s center-right bloc. "Terrorism has reached a new level in Germany. It"s shaken the nation and citizens are worried. I think citizens wouldn"t accept it if we simply returned to the political order of the day."

Mayer proposed extending the period that people can be held in detention prior to deportation, to give authorities more time to gather the necessary paperwork. He said authorities should also be able to deport people deemed a threat to public order.

Germany"s Federal Criminal Police Office currently considers 549 Islamic extremists capable of committing "politically motivated crimes of considerable significance."

Wendt, the police union official, said keeping tabs on all of these people was a major challenge. "From a manpower perspective it would ... be unimaginable to keep all potential threats under police surveillance round the clock," he said.

Meanwhile, late on Thursday, German Chancellor Angela Merkel said Thursday she was proud of the calm public response to the deadly attack. "In the past few days I have been very proud of how calmly most people reacted to the situation," she said about Monday"s attack.

"I am certain we will meet this test we are facing."

Perhaps she is right, but with the German people, which now includes the police and even members of her own political party, already infuriated with Germany"s now obvious inability to deal with the fallout of admitting over a million refugees, of whom hundreds are potential terrorists, the real test facing Merkel in the coming year - the upcoming election - is one which she may not survive. All it would take for the tipping point to be reached, is a few more terrorist attacks on German soil...