Daily Briefing

Who will go first - Löw or Merkel?

WM-Public Viewing – Fanmeile Frankfurt
A metaphor, if you will. Source: dpa

A widely respected German leader is facing the sunset of a career studded with accomplishments; after 12 years, there is even talk of the end of an era. I’m talking about Joachim (“Jogi”) Löw, trainer of the German soccer squad, which under his tutelage won the World Cup in 2014, only to fail in the first round this year after an ignominiously uninspired showing against South Korea last night. The score was 0:2.

It is of course tempting to predict an overall score of 0:2 also for German leaders facing sunsets. Angela Merkel, by coincidence, became chancellor (in 2005) at about the same time Löw was advancing from assistant to head coach. Both have presided over a feel-good country in the years since. Now both are grappling with their legacy, and are possibly out of a job soon. It wouldn’t be the first time that German soccer has tracked German society and politics as a whole.

For Merkel, the end game — if that is what it proves to be — starts today. After addressing the German parliament, she is off to Brussels for the EU summit that appears likely to decide her fate. She will try to make deals with Italy and other countries to take back some migrants from Germany. But Italy and the others are in no mood to help her.

Then, on Sunday, she will try to convince Horst Seehofer, her interior minister and frenemy, that whatever progress she negotiated is enough. Seehofer, who has been sharpening his attacks on Merkel, will probably claim that he has a duty to act, and issue an order to turn back migrants at the German border. Merkel would then have to fire him, setting off the chain of events I described here. Yes, Germany is in the throes of a full-blown crisis.

Cash, not credit

A while ago, I tried rather histrionically to explain the different mentalities of Anglo-Saxons and Germans when it comes to money — borrowing, saving and investing. One notable consequence is that Germans rely in their private retirement planning on a product that Americans or Brits barely know: a so-called “capital-life insurance policy”. Dramatically oversimplified, it’s like a cross between an endowment policy and a mutual fund. There are actually more such policies — 88 million — than people in Germany!

But these policies have brought insurers and policyholders nothing but trouble. They were underwritten when interest rates were high, so that insurers could promise large returns upon retirement, even after making a good profit. Because interest rates have been low and even near zero for so long, however, the policies have become loss makers for the insurers, as we explained here. That’s why the insurers now want to cut payouts to policyholders.

Yesterday, a court ruled that the life insurers may in fact reduce their payouts. A lobby for policyholders (remember: 88 million) had called that “expropriation”. But it means that German life insurers are less likely to become the next Lehman Brothers. That doesn’t mean they’re out of trouble, however. A new report by the government finds that 34 insurers, more than a third of the total, need tighter supervision from the financial regulator, called Bafin, to stay sound.

Old school conservatives

One similarity between America and Germany is the role of the supreme court in both countries, which is greater than in Britain or France, for example. Sooner or later, every major social and political controversy in the US or Germany lands, in one form or another, before these courts. In America, with its common-law tradition of case law (in addition to statute), the court’s role is even greater. That’s why it is big and worrying news that Justice Anthony Kennedy is retiring.

Appointed by Ronald Reagan, Kennedy is what used to be considered a conservative, before the Republican party metamorphosed into a cult. As the court shifted right over the years, Kennedy found himself in a position neither Reagan nor he could have foreseen: He became the swing vote. (Cases swing, I don’t, he once retorted.) Thus he was for gay marriage but against union rights, for the free-speech rights of moneyed lobbies to pervert American democracy but against banning abortion, and so on.

Now Donald Trump gets to replace him. This will be his second pick for the court after Neil Gorsuch last year. No matter what Trump does to the world in his remaining term, these two choices already assure that Trump’s legacy will linger for decades.

Handelsblatt, not Handelsblatt Global

And a reminder: Tomorrow, as every Friday, you won’t get our Daily Briefing, but the translated Morning Briefing by Sven Afhüppe, editor-in-chief of the German-language Handelsblatt. If you want to hear from me tomorrow, sign up for my Weekly Review, out every Friday.

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