Who benefits more, EU or Germany?

On the first sight, it would appear Germany is taking the lion share of benefits arising out of her relationship with the European Union as a whole. But deep analysis indicates both are driving benefits quantitatively and qualitatively as members of the Union.  Here are the facts:

Understandably, overall score is not exactly at 50:50. For example, Germany posits as the largest trading partner accounting for almost 25% of the total EU-GDP, mainly due to her size and population spread. In terms of area she is sixth largest but population of more than 85 million people grants her greater buying and selling power. Furthermore, her contribution to the EU Budget alone is a staggering: € 20 Billion per annum, highest among the members.

When it comes to the profile as investment provider Germany stands tall. She is the largest investor providing more than € 410 billion as FDI to fellow members in vital areas including but not limited to manufacturing, infra-structure development and financial services that has the potential to improve quality and competitiveness of the recipients. Chief areas receiving this largesse include green energy, digitalization and R&D. on the reverse side members who receive assistance are perhaps reduced to play the role of supply chain facilitators to German firms.

Despite fairly sluggish economy experienced in 2026, Germany continues to attract human resource talents from across the entire European Continent. While this enhances German productivity it also makes other members to suffer from brain drain.

A key point to ponder is the under-valuation of Euro as common currency. Assume Deutsche Mark is still the currency of Germany then German export to Union would be fairly expensive resulting in low demand for the country’s products. Even if that happens, Germany would be on the top, because German banks would provide export finance to German firms and at the same time import finance to buyers in other countries in Europe. Annually, Germany gets an incremental inflow of cash from Europe to the tune of € 170 Billion, enhancing her GDP.

Yet another pointer, which is often ignored, is the application of the measure considered to be the ultimate arbitrator of fiscal health. Under EU fiscal rules, member states must maintain an annual government budget deficit below 3% of their GDP, to ensure sustainable public finance and economic stability. Union members who brace it would be put on a rigorous reformative programme. Today there are 11 such members, Italy being the latest addition to the dog house. Rumania is the badass with 7.9%. There are good boys too. Cyprus is at top notch with +3.4. Germany posits at minus 2.7% and is still in the safe zone.

My conclusion

That said, even though Germany is said to amass quite large benefits from the European Union, she also follows a grandeur policy of give and take. In sum, Germany has mastered navigating strategy amid geoeconomics in managing her finance and fiscal portfolios on an even keel.

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser

 

 

 

 

German dilemma, defence or development

Today, Germany is facing a big dilemma: whether to concentrate on defence or develop the country so as to move on from the current Middle Level State to a Great Level State and to be recognised as such globally. Here are the brass stacks:

America lost her case as the solo superpower to the emerging trio of Russia, China and surprisingly Iran. Consequent to the US-Israel war against Iran where the latter emerged unbeaten resulting in the formation of a contiguous landmass connecting all three countries Russia, China and Iran. What is surprising is that Iran under massive sanctions imposed by the West including Germany Iran has managed to strike the optimum level on the defence-development trade-off.

Geoeconomics dictates that both these aspects must be approached on even keel because of the tense and inter-locking relationship between both ends of the spectrum. Huge military expenditure could possibly make a country strong yet stunting human and social progress domestically. Whereas pure welfare state would make a nation easy prey to outside militarily aggressive powers.

Let us look at America which has a one Trillion Dollar budget splurging over defence by ballooning the military-industrial complex as the mainstay of American manufacture. China on the other hand went on a shopping spree in developing infra-structure such as housing, roads, railways and enhancing manufacturing industry such as shipbuilding and armaments. Today, China   emerges as a great power firstly in geoeconomics and thereafter in geopolitics & geostrategy as well.

Sadly, Germany followed the American example but on the reverse side. She sub-contracted her defence to NATO. Of course, there is armament industry, but this caters to the whims and fancies of NATO led America and not based on the needs of the Eurasian chessboard. Accordingly, Germany left Russia to run the show there. Choosing internal economic issues over external geoeconomics issues, Germany squandered all her chances to become a resolute military partner either in NATO or in the European neighbourhood. Underlying assumption is to allow France to carry the big stick as the Nuclear Triad to provide semblance of defensiveness.

Here is how Germany illustrates that how she got herself on the horn of defence – development dilemma:

Defence Minister Boris Pistorius intends to build Europe's largest conventional army, with a target of at least 460,000 deployable personnel across the country and elsewhere. To meet this goal, Berlin plans to recruit more men beyond currently available positions resulting in manpower surplus to ensure readiness. Pistorius framed the expansion as a strategic ambition: Germany must become the dominant conventional military power on the continent, perhaps challenging even France.

Chancellor Friedrich Merz while boasting  “We are still at the top of the world; we can build, a strong army” tones down stating the obvious drawbacks including weak economy, declining investment, high energy prices, ever-increasing bureaucracy and high taxes impacting negatively. Topping it all he mentioned. “We have a shortage of skilled labour, and all of this, coupled with massive demographic changes”.

Navigating strategy amid geoeconomics impel both Merz and Pistorius to put their heads together to arrive at via-media in defence - development trade-off.

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser

 

 

 

 

Is Germany sleepwalking towards depression or stagnation?

Economic collapse is ruled out, Germany is too strong for that to happen.  We have to look into the question of either economic depression or stagnation. Let me explain both contingencies and allow the jury out there to ascertain towards which end of the stick, Germany is sleepwalking.

Here is a brief over the conditions commonly understood to prevail during economic depression and economic stagnation:

Economic depression relates to severe, sustained and widespread low in most of the economic activities worse than in a recession creating havoc in household income and expenditure. Both consumer income and investment potential go on a downward spin.

Economic stagnation is in contrast, relates to a period where GDP growth in quantum and percentage is minimum or negative, accompanied by high unemployment, low consumer demand along with moratorium imposed on wages. This results in fall of living standards overall. Manufacturing per se gets the beating.

Here are salient features of the state of economic affairs of Germany as on today:

1. Inflation: Average rate has ratcheted up from 2.5% a year ago to 2.8% today. Breaking down into areas shows services cost +3.5%, Food cost +2.0%, over the previous year. Energy price management of minus 1.8 % though salutary has drained Federal cash holding

2. Interest rate was jacked up little to compensate the strain on the consumers. From 2.5% it was fixed upward to 2.8%

3. Employment: Total number of employed is around 46 million where those in the 21 to 64 age bracket has the large quantum at 81% employees. Still the gross unemployment figure hovers around 3 Million people

4. Despite GDP growth rate as forecast by the IMF for the year 2026 is 0.8% in actual fact this may be much lower say around 0.2 to 0.3%

5. Consumer income is still strong at € 46,000 per annum

6. Overall consumer expenditure ticked upward 1.4% where housing cost is estimated to account for 37%, a big chunk indeed followed by food accounting for 15% and transport steering around 12%

7. A praiseworthy factor is the German willingness for leisure and entertainment which is still strong around 15%, illustrating Germans are jolly good fellows.

My conclusion

Even though I humbly I concur that the Jury is out there on the situation of Germany sleepwalking towards either depression or stagnation, I surmise Germany may be sleepwalking towards a brief period of economic stagnation.

The duration can be shortened to  two or three years provided that the Government and my Aryan brothers in Germany begin navigating strategy amid geoeconomics by installing right policies and procedures to get over this bad spell.

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser