Folker Hellmeyer predicts that the economic damage for Germany and the EU will be very significant if they continue to follow the US sanctions policy
The article originally appeared at German Economic News. Translated for RI by Alexander Samarkin
Folker Hellmeyer, chief economist at Bremer Landesbank, has no doubts about the future of the global economic system: The axis Moscow-Beijing-BRICS will prevail against the old hegemon USA. These countries have had enough of the West, because they want to pursue a long-term strategy and not opportunism. The EU is likely to be among the losers, due to its blind sanctions-obedience.
German Economic News: The EU-countries report continuing losses because of the sanctions against Russia. What damage have the sanctions already done, in your estimation?
Folker Hellmeyer: The damage is much more comprehensive than the statistics show. Let's start with the economy and the hitherto accumulated damage. The view on the decline of German exports of 18% year-over-year in 2014 and 34% in the first two months of 2015 includes only primary losses. There are also secondary effects. Economies of European countries with a strong Russia business, amongst others Finland and Austria, suffer massively. As a result, these countries place less orders in Germany. Moreover, in order to circumvent the sanctions, European conglomerates consider to create production facilities at the highest efficiency level in Russia. Therefore we lose this potential capital stock, which is the basis of our prosperity. Russia wins the capital stock.
German Economic News: It's not clear whether the sanctions will end in the foreseeable future. How much can the bill amount to, particularly for the German export economy?
Folker Hellmeyer: Germany and the EU have put there economic reliability towards Russia into question. The mutual trust has been broken by Germany and the EU. It takes several years to rebuild this trust. There are up to five years between signature and delivery in exports of German and European plant equipment. Siemens has now been thrown out of a major project for this reason. Alstom lost the contract for the railway Moscow-Beijing. Ergo, the potential damage not only for Germany but also for the EU is much more massive than current figures could express. The future damage can not be exactly quantified, but it's definitely significant.
Moreover, in the framework of the Shanghai Corporation and the BRIC countries, the axis Beijing-Moscow is planning the biggest economic growth project in modern history – the construction of the Eurasian infrastructure from Moscow to Vladivostok, to Southern China and India. To what extent the emerging countries see the sanctions policy of the EU and Germany in these mega projects as an affront not only against Russia, remains to be seen.
Apparently some participants in European politics lack the comprehension of the full scope of their actions on our behalf.
German Economic News: Who will ultimately pay for the damage?
Folker Hellmeyer: The measureable damage consists of loss of growth, lost wages, lost contributions to the social system and loss in tax revenue. This is valid for the past 12 months and the years to come. Thus, the people of Germany and the EU pay through lost prosperity and stability. The unmeasurable damage is an increased geopolitical risk situation for the people in the EU.
German Economic News: If we look at the situation in Ukraine in a sober light, it seems like the government in Kiev is mainly interested in keeping the situation aboil in order to always get new loans. Does any Western politician actually ever speak a clear word with them?
Folker Hellmeyer: It is irritating indeed. People that are not only focused on „Western quality media“ are surprised at the media's masking of Kiev's aggressions and the discriminatory laws implemented by Kiev's government that are in stark contrast to the claim of western values and democracy. To Mr. Steinmeier's credit, he does speak plainly behind closed doors. The question is whether the actions beyond the Atlantic support Mr. Steinmeier. I refer in this regard to the case of Victoria Nuland. Fact is that with the coup in Ukraine a Moscow-friendly oligarchy has been replaced with a US-friendly oligarchy. That was geopolitics that benifits third powers, but definitely not Germany, not the EU, not Russia and not Ukraine.
German Economic News: The finance minister Natalie Jaresko is a former staff member of the US State Department, who aquired Ukrainian citizenship only one day before she was sworn in. Is the former investment banker simply unbeatably good or is there a master plan behind it?
Folker Hellmeyer: I don't know her personally. A lot has been written about her. This results in a picture that doesn't allow the term „unbeatably good“. The fact that important positions in the Ukrainian administration are being taken by external personell with extreme proximity to the US and its institutions, underscores the geopolitical character of the coup. Ergo the term „master plan“ is at least arguable.
A prominent figure in recent German politics, not in office anymore, said in bilateral talks that US-geopolitics is best described as a game of chess on the chessboard of Ukraine with the blood of Ukrainian pawns over the boards of Moscow against the power center Beijing. I share this view.
Fact is that the emerging countries are emancipating themselves from US hegemony. This becomes evident with the creation of institutions competing with the World Bank (AIIB) and the IMF (New Development Bank). This displeases the still prevailing hegemon. The current international hot spots from Afghanistan, Iraq, Syria, Lybia, Egypt to the Ukraine are expressions of this clearly recognizable struggle for power. Didn't we want to establish democracy and freedom in all those countries? Let's have a look at the success....
German Economic News: Several EU countries, such as Italy, Austria and Hungary, mutter increasingly audibly about the sanctions. In Germany, however, prevails an almost ghostly unity. Why is that?
Folker Hellmeyer: The German citizen is saturated. Despite the lost business, he's still doing well. The next vacation is around the corner. The German media is, politically correct spoken, hand-tame towards US geopolitics and so are our politicians. The politicial and medial leveling of this issue is effective.
German Economic News: Which impact do the sanctions have on the German-Russian relationship?
Folker Hellmeyer: The relationship on the political level is broken. Yet the dialogue is still maintained from both sides. That's generally positive. Moscow's disappointment particularly about German politics is massive. There is a very realistic evaluation in Moscow in terms of German and European capabilities to articulate and live a policy independent from the US and in their own interest. In the business sector this looks different. The talk levels are being used. They are preparing for the day X after the sanctions. However, a quick revival to the pre-crisis level is unlikely. Russia is a bear. They are building new supply routes now that they will not simply give up after the sanctions policy. Arbitraryness may be „en vogue“ in the West, but not in Moscow. With every day that passes in the sanctions policy, we eat up joint future.
German Economic News: What impact do the sanctions have on the national economies of the EU?
Folker Hellmeyer: We miss out on export growth, we miss out on the peace dividend. We reform the weak countries of the Euro-zone and restore their international competitiveness under hard sacrifices and then deprive them of markets. Does the left hand of German and EU politics know what the right does?
German Economic News: Which risks do we see for European banks?
Folker Hellmeyer: These risks are largely managable. The monitoring that was undertaken by the superintendence is effective and doesn't allow sustainable accidents.
German Economic News: Why do the big organizations duck away, such as the Federation of German Industry (BDI)? One would think , the reason why they exist is to represent the interests of the industry?
Folker Hellmeyer: There is a considerable difference between public statements of these organizations and their internal state of affairs. Something is brewing in the field of business. However, in regard of their public statements I'm disappointed. They act politically correct. Political correctness is limited correctness and therefore incorrect by definition.
For an export-oriented economy the issue of sanctions policy is of distinctive and for some companies of existential significance. To romance about the the primacy of politics is with regard to the mandate of the associations a partial denial of liability.
German Economic News: The contempt that the US government shows in dealing with Europeans is truely remarkable – keywords NSA and „Fuck the EU“. Don't European politicians have any self-respect or are they too cowardly?
Folker Hellmeyer: Anyone, who is a true democrat, who takes his duties for the „res publica“ seriuosly, who doesn't trample on his own right to self-determination, needs to draw conclusions from these remarks. Those who do not, have deficits in respect to our set of values. I'm the wrong person to talk to. You have to ask our politicians these questions.
German Economic News: Inversely proportianal to the subservience towards Washington is the aggressiveness inwards: First dissenters were defamed as „Putin-Versteher“ [Putin-understander or Putin-whisperer] now you are a „Putin-troll“ if you don't howl with the wolves. Does the cold war already cost us a part of our democratic freedom?
Folker Hellmeyer: In late 2007, I enunciated in the preface of my book „Endlich Klartext“ [„Finally Plain Text“]: „First the free markets die, then democracy!“ In this book I also analysed the US hegemonial system. The current geopolitical conflicts are being abused domestically to demolish democratic liberties with increasing speed. I am more concerned than ever. Currently I deal with the term „terror of the mainstream“. We pretend to be tolerant and pluralistic. But if you differ from the mainstream in politically sensitive issues, you run the risk of being isolated and defamed. These developments are contrary to the claims of democracy and freedom. Yes, the current conflicts cost us democracy.
German Economic News: In the USA there is – unlike in Germany – a very lively debate about the hegemonial behaviour of the government, and that from the left and the right. Why not in Germany?
Folker Hellmeyer: That’s right, but that debate has no political consequences in regard with the proportions in the Parliament. Over here the debate is unincisive, having said that, the Parliament is a bit more colorful, albeit hindered by the Grand Coalition in regard with efficient opposition. In the end, many Germans might confuse prosperity and liberality with the term freedom.
German Economic News: How does the conflict continue? Is it conceivable that Americans and Russians get together again – perhaps because of IS or Syria – and the Europeans again trail behind both great powers and pay?
Folker Hellmeyer: To me, the conflict has already been decided. The axis Moscow-Beijing-BRIC wins. They’ve had enough of the West. In 1990 these countries accounted for about 25% of the world economic output. Today they represent 56% of the world economic output and 85% of the world population. They control about 70% of the world’s foreign exchange reserves. They grow annualy by an average of 4-5%. Since the USA were not prepared to share international power (e.g. votes in the IMF and world bank) the emerging countries build their own financial system. This is the future.
At the moment, the EU is being pulled in a conflict, that was caused by the US because they didn’t want to share power and still don’t want to, which sterilizes the EU in its development opportunities. The longer we pursue this policy in the EU, the higher the price will be and the less serious will we be taken as dialogue partners.
Without Moscow and Beijing no problem in the world can be solved. The USA could indeed act much more pragmatic than we can imagine today. The lack of the EU's and Germany's own agenda makes us look like losers.
German Economic News: What has to happen until we see an independent foreign and economic policy in Germany again?
Folker Hellmeyer: For this question I'll pass. I ask for your understanding.
German Economic News: What does it mean for a business location if the government plays geopolitical games rather then representing German interests in the toughest way possible like all the others.
Folker Hellmeyer: It means that the own location is being harmed.
German Economic News: Does the average parlamentarian understand the interdependency of politics and economics?
Folker Hellmeyer: In this regard I am skeptical.
German Economic News: Will politics become better if politicians understand less about economics, but there are more of them in return?
Folker Hellmyer: Definitely not. The stability of a democracy depends on the stability of its economy. If permanent damage is inflicted on an economy, the radicalization of a society increases. The German Empire made this experience in 1933. Aside from that, there is the option of an elected dictatorship as in an oligarchy. With this regard there is a survey of the Princten University: “The USA is not a democracy anymore, it's an oligarchy!” Ooops, that was not political correct....
At the moment there is more at stake than ordinary people want to acknowledge. You see me deeply concerned.