Germany's auto manufacturers are among the industries taking damage. Vice Chancellor Sigmar Gabriel is for ending sanctions
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This article originally appeared in German Economic News. Translated by Werner Schrimpf for Russia Insider.
The German government has, as of late, become increasingly nervous. It has been trapped by the U.S. administration; the sanctions against Russia have killed their exports, particularly since Germany’s most important export industry was sent reeling by the recent Volkswagen exhaust scandal. There is, however, not much left for the Germans than to issue an appeal for help – Germany is wedged, and it is the people that suffer.
Reuters recently reported that Germany’s minister for economic affairs, Mr. Sigmar Gabriel “encouraged” the lift of sanctions - essentially, he appealed strongly to the U.S. to cease imposing its sanctions. Those very sanctions by which the nations of Europe must abide were imposed upon them and enforced by the USA, putting huge pressure on the EU to bring EU member-states into line, regardless of local political will or economic consequences.
Mr. Gabriel argued that it would make very little sense to ask Russia for support in Syria, while simultaneously keeping the sanctions in force. In his words; “Everybody should be smart enough to realise that you cannot keep sanctions on the one hand and ask for cooperation on the other.” Gabriel stated last Friday in Berlin that a new and fairer relationship with Russia should start with a second pipeline (that is to say, a “Northern Stream”) and end in the lifting of sanctions.
According to the EU, the end of sanctions is one initiative attached to a comprehensive implementing of the Minsk agreement, which stipulates an armistice in Eastern Ukraine. The freedom fighters of Donetsk more or less complied with these rules, but the junta regime in Kiev did all that it could to fuel the situation. Gabriel argued: “The Ukrainian conflict must not strain the relationship between Europe, the U.S. and Russia in such a manner that Russia fells that it must step away as a partner to solve the crisis in Syria”.
Unfortunately Mr. Gabriel is late with his attempt. Russia has already begun its initiative in Syria and will, after all, conduct this initiative - even without having reached a consensus with the USA. To be realistic, Mr. Gabriel’s “words of peace” have no context to the Ukraine, and in the case of Syria apply solely to the extent that Germany’s chaotic policy towards millions of refugees from this region severely disturbs the delicate economic situation.
Just recently, the German government announced and promised an initiative of full-time effort and dedication to create hundreds of thousands of jobs for the unwashed masses of refugees flooding their country. However, the big car groups (Volkswagen taking the helm) will inevitably compensate for the billions of Euros in costs for penalties, court fees and so forth by shedding jobs, simply following the harsh logic of all global groups listed on the stock exchange. As well, there are other ugly symptoms of crisis – not just because of the millions of refugees entering Germany in great mobs to take advantage of German social housing, security and benefits, but also caused by the car makers’ extremely stupid failure in their attempt to cheat U.S. regulators.
Not surprisingly, the German government is nervous. Everyone is well aware that the exhaust scandal will significantly damage Volkswagen, and therefore consequentially, the whole German economy. According to estimates from the well-renowned financial information group “EuroIntelligence”, the monetary loss for Volkswagen could reach the sum of 100 billion Euros - this would exceed the cost of the Greek rescue adventure by a great deal, and painting German industry in a bleak light. As of late, the Financial Times – recently acquired by a Japanese group – is regularly running fierce attacks against the Germans, representative of the recent wave of anti-German sentiment held by investors. The whole business sector could well be severely affected, denting the German economy substantially.
Forcing the German car producers to execute the United States’ sanction-scheme against Russia caused great monetary consequences for all companies involved. Not only major car producers are affected, but suppliers as well - the German mid-sized companies representing the backbone of their economic powerhouse have been hit brutally, with cracks showing across the board. The German government had no real choice but to agree to the sanctions from the start, and to their prolongation. But now, when the exhaust scandal turns into global hysteria against the German car industry, the government is severely pressed to act.
Daimler’s CEO Dieter Zetsche distances himself and his company from Volkswagen; “We always obey legal rules, and would not manipulate our cars,” Zetsche told German newspaper ‘Frankfurter Allgemeine Zeitung’. According to Zetsche, no devices are, or would ever be installed, which could degrade the efficiency of the exhaust system. When asked whether all car producers are cheating, he stated; “[There is a] clear answer - no!”
Competitors, however, are looking to take advantage of the disaster. And more trouble is, of course, coming up on the horizon. VW cars under suspicion of manipulation are no longer licensed in Switzerland, for example. Swiss authorities are going to bar licensing of all concerned Volkswagen models until all assumed manipulations are cleared.
In Switzerland up to 180,000 vehicles are involved - these are mainly models from the brands Audi, Seat, Skoda and Volkswagen, produced between 2009 and 2014, those equipped with Diesel engines of the type 1.2 Tdi, 1.6 Tdi and 2.0 Tdi. So-called EURO-6 engines from the current lines of production are not affected.
The European Central Bank (ECB) has stopped the acquisition of secure car credits - an ECB insider explained that there will be an investigation before a decision will be taken as to whether Volkswagen will be expelled from ECB’s securities acquisition program. This practice of preliminarily banning these securities is a standard procedure, according to ECB officials.
There might be negative consequences on the stock markets. In the past, German car manufacturers used their lobby power in Brussels to get favourable rules on exhaust values. Fiat is out for revenge, and the Italian lobby group “Confindustria” has opposed the German car manufacturers for years, arguing they would misuse their power to achieve specific advantages from the EU - a powerful argument, given recent events.
A further problem with Volkswagen is that of the shareholders’ role of the German state of Lower Saxony. The minister for economy, Sigmar Gabriel, was a former advisor of Volkswagen in Brussels, taking care of the company’s interests in the framework of the European Union’s rule-making process. The prime minister of Lower Saxony, a member of the Social Democratic Party like Sigmar Gabriel, is still a member of Volkswagen’s supervisory board. Naturally, this causes a fair bit of finger-pointing, and not entirely without good reason.
Now, however, Sigmar Gabriel is asking the USA for mercy, in order to save what little can still be saved. This is, however, unlikely to happen - the American military-industrial complex is a cruel master, and evidently holds little sympathy for the German people - the German government is trapped. Worst of all, the CDU fellows within the government are used to following such a servile attitude towards the United States that they wholly outmanoeuvred the initiative of Mr Gabriel. The tragedy remains. “Corporate Germany” is, and will increasingly be, without power in global terms. It seems that the U.S. and Russia will once again give Germany the cold shoulder.
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