Viktor Orban gone, headache still remains for Germany

The landslide victory secured by Peter Magyar of the Fidesz party in the recent Hungarian election just shows a silver lining. The illiberal democrat Viktor Orban is gone but the perennial problems of running the financially devastated country remains. For Germany it is still the same head-ache.

The Hungarian results are heart-warming. Peter Magyar who was once a party insider with Viktor broke away and formed his Fidesz party to campaign for the latest round of elections that Viktor ritually holds every four years. By no mean it is an easy task to unseat the 62 year old Viktor who has sunk his paws over finance, state machinery and the media. Peter garnered 53.6% of the ballots cast but in the end was able to secure 69% of the seats numbering 138. Total strength of the parliament is 199 seats where 106 members are elected in solo-member constituencies and 93 via proportionate voting. Viktor braced himself through with 55 seats.

The sixteen years of autocratic rule by Viktor has made a huge dent not only in the state of money & finance but in the entire fabric of state bureaucracy. It was a one man show for Viktor who remained a close associate with both Putin and Trump. He was a thorn in the flesh for EU as a vocal member continuing to object funding for Ukraine as well as implementing sanctions over Russia.

Germany will continue to have the Hungarian head-ache even after the change of helmsman. The country is in a financial mess. Staying outside the Euro-zone, Hungarian currency Forint (Code: Huf) is one of the low-value monetary unit in the world. At the time of writing one Euro is equal to 363 Huf. Economic stagnation has battered the country and her citizens who shoulder high inflation, deficient public sector goods & services along with fewer investment opportunities. Except for fuel & gas provided courtesy Russia, Hungary has nothing to boast about her economic welfare.

Amid cries of “Russians go home – Ruszik Haza in Hungarian” reverberating in the public squares the reality cannot escape the attention of Friedrich Merz led German coalition. EU especially Germany has got to come with grips of the current malaise in politics, economy extended to geoeconomics prevailing within Hungary and bring out solutions for short term and long term issues.

A major short term issue is how Germany take care of unfreezing the frozen funds earmarked for Hungary totalling € 17 Billion.  Even if a via-media is found how to convince other members of EU to come on board.

By the same token, there is a long term issue of bringing Hungary into Euro-Zone. As of today seven countries namely, Bulgaria, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden are not in the Euro Zone. Other than Denmark the rest are obligated to join once they meet up with necessary financial requirements.

Hungarians are a proud nation. They have long term historical relationship in European theatre. For example Polish–Hungarian ties are more than 1000 years old. Germany cannot force Hungarians to swallow the bitter pill of handing over their rights & privileges to EU Bureaucracy. Hence, Germany is constrained in using any and every financial leverage it possesses to bend Hungary.

For more than anything else the Hungarian constitution would remain as the major road-block which Viktor succeeded in placing against Germany led European Union.

Navigating strategy amid geoeconomics, therefore, requires Germany to come with an innovative solution similar to the opt-out clause granted to Denmark

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser

 

 

 

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Germany must extricate from Ukraine, sooner than later

Baby steps are taking place regularly in Berlin as regards to expressing support for Ukraine in the latter’s failing war with Russia. These are more of show rather than of substance. The unescapable fact remains that Germany must extricate herself from this imbroglio sooner than later. My stake:

Here are two such baby steps:

1. Germany and Ukraine executed yet another mutual defence agreement when Ukraine's Defence Minister Mykhailo Fedorov and Germany's Boris Pistorius signed the latest one.

2. It was also announced that Berlin and Kyiv have decided to elevate their relations to the level of a "strategic partnership". Chancellor Merz, called this as the only correct decision for Ukraine’s defence because Ukraine is exhausting its human resources and she is in urgent need of new fighters. Hence, German army could be employed to round up eligible men of fighting age amongst the Ukraine refugees living in Germany.

For all intents and purposes the government, under Chancellor Friedrich Merz, maintains a strong yet for a show unwavering commitment to Ukraine's sovereignty and territorial integrity. The duplicitous mask must be un-masked for the betterment of three parties: Germany, Russia and Ukraine.

The Ukraine war was a conspiracy planted in the minds of West Europeans by the then US Administration to drain resources out of both Europe and Russia. It was a partial success. Europe got devastated financially and militarily due to exhaustion of the military stock of arms and ammunition along with large cash outlay earmarked for this war. As far as Russia is concerned initial setback apart the country has advanced in all areas including in geoeconomics.

The loss of Russian gas had a staggering effect on Germany. As the engine of European growth she suffered the largest dip in her GDP bottoming 2.7% on average. Value terms speak the horror story. Almost € 220 Billion lost in revenue generation. Still the administration of Friedrich Merz continues to gloss over the hefty loss. Although repeated announcements are being made to the effect that Germany is not abandoning domestic development due to Ukraine support the evidence shows the contrary.

The corporate plan of Germany of undertaking massive domestic investment to modernize economy by infusing about €500 billion over the next 12 years is fairly affected by the cash outflow towards the Ukraine war. Here is the cash outlay of wasteful Ukraine expenditure:

1. As the second largest donor Germany allocated almost € 100 Billion for the Ukraine project. Military aid alone accounts for € 55 billion and additional € 12 Billion is earmarked over and above this figure.

2. Revenue expenditure of maintaining over 1.156 million Ukraine refugees within Germany cast a pale of gloom. Dole paid to Ukraine refugees is estimated as € 39 Billion. Out of the 1,156 million refugees nearly 58% are women around 672,000. The rest is the men group numbering 484,000, majority of whom are eligible for conscription and have escaped from the clutches of Army Sergeants by migrating to Germany.

My Advice

Navigating strategy amid Geoeconomics, Merz led German Coalition must not waste time in making baby steps but concentrate on the following adult steps:

a) Parley with Putin to bring about peace in the region

b) Wash the hands out of the Ukraine war

c)  Hand over the Ukrainian refugees to the UN.

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser

 

 

 

 

 

Brexit happened, what about Dexit?

The United Kingdom officially left the European Union on 31 January 2020. Germany the founder member of the EU cannot do the Dexit, meaning Deutschland exiting from the Union. What prevents Germany saying bye-bye to her erstwhile Union Partners?

First and foremost, the Article 23 of the German Basic Law (Grundgesetz), alternately known as the "Europe Article," mandates compulsion over Germany’s participation in European Union. It requires Germany developing a democratic, social, and federal European Union to which part of her own sovereignty is transferred. Hence, there is an umbilical cord that binds the country with the Union.

If an attempt is to be made by the people of Germany upon departure from the EU, a resolution must be passed to this effect with 2/3^rd majority in both the houses of Parliament, Bundestag and Bundesrat. Let me explain the difference between these in the German bicameral legislature. The Bundestag consists of members directly elected to the federal parliament numbering 736 who have  responsibility for passing federal laws, whereas the Bundesrat consists of members appointed by the 16 state governments to represent their interests, having  a wide sway over passing new legislation or annulling an existing one.

Even if this high hurdle is crossed there hangs another Damoclean Sword. The German Constitutional Court acts as the guardian of Basic Law and after hearing the motion of any Dexit the Court can award a decision via majority decision. If and when a counsel submits a secondary motion calling for unanimity of decision due to the seriousness of the matter under discussion the Court might opt for such a unanimous decision which could blow a death knell to the attempted Dexit!

Findings

Geoeconomics is the biggest exit trap so to speak. I furnish below estimated loss figures that could emanate from Dexit along with the real figures experienced by UK during Brexit:

1. Cash outlay lost in a 10 year period: UK £ 140 Billion; Germany almost same figure in Euro

2. GDP loss percentage: UK 6% annually; Germany similar or slightly lower figure

3. Investment loss: UK 10% overall for 10 years; Germany over 15% for the next five years

4. Loss in employment creation: UK 1.8 to 3 Million; Germany less than 2.5 Million

5. Digital cash – flow loss: UK unknown; Germany more than € One Trillion

6. Pound sterling did not crash as forecast; Euro as a currency would be decimated allowing Deutsche Mark to be revived once again.

Overall, the picture is not so gloomy for Germany as compared with that of UK.

My Advice

Navigating strategy amid geoeconomics, Germany must take the plunge to leave EU to emerge as the Fourth largest Geoeconomics power along with Iran her Aryan brother!

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser