Across the board, the 2009 economic news is bad for Germany. Unshipped goods and containers are piling up at the Hamburg port as Germany Faces Worst Post-War Economic Downturn.

Germany is facing its biggest economic decline since the Second World War with Chancellor Angela Merkel’s government saying Wednesday it expects Europe’s largest economy to contract by 2.25 per cent this year.

Germany’s Economics Minister Michael Glos and Finance Minister Peer Steinbrueck released the latest data on Wednesday, revising their prior 2009 forecast down sharply from last October’s prediction of 0.2 percent growth.

Since then, German exports have declined precipitously and are expected to be down 8.9 percent for the year.

Joblessness to increase

At same time, the Berlin government’s annual economics report predicts rising unemployment as a result of the global economic slowdown. The number of people out of work is expected to climb by 500,000 to 3.5 million before the end of the year. That would push the German unemployment rate back up to 8.4 percent, according to the ministers’ report.

German consumers remain skeptical

Adding to the bad financial news, a Forsa Institute survey published on Wednesday revealed that a majority of Germans remain skeptical of Chancellor Angela Merkel’s second 50-billion-euro ($66 billion) stimulus package.

In fact, 59 percent dismissed the government’s plan to offer 2,500 euros ($3,200) as an incentive to car buyers who trade in older vehicles for more environmentally friendly automobiles. Only 11 percent said they would even consider accepting the offer.

Only 11% would consider taking $3,200 in “free money”. There were string attached of course (you had to buy a car), but all in all that’s pretty amazing.

Is Germany Turning Into A Planned Socialist Economy?

Inquiring minds are investigating the the makings of socialist “planned economy” in Germany. Please consider Berlin Sees No Limits to Economic Intervention.

As part of her efforts to combat the economic crisis, German Chancellor Angela Merkel is increasing the state’s influence in the market, buying holdings in banks and bailing out individual industries and companies. Is Germany turning into a planned economy?

The government in Berlin is undergoing an astonishing change of heart. Only a few weeks ago, Chancellor Angela Merkel spoke out against “arbitrary, unfocussed economic stimulus programs” and large-scale government intervention in the real economy. She made it clear that under no circumstance should “the government acquire permanent new responsibilities in the economy.”

But now, suddenly, it seems like the public sector’s economic intervention cannot be forceful enough for the administration. Last week, Merkel introduced the biggest economic stimulus program in German postwar history, as well as giving her blessing to a series of government interventions into companies and industries, the likes of which the country has not seen since German reunification.

The government has acquired a 25 percent share of Frankfurt-based Commerzbank, and it plans to purchase a majority stake in the ailing Munich-based mortgage lender Hypo Real Estate. It is looking into providing assistance to the highly leveraged Schaeffler Group, based in the Bavarian town of Herzogenaurach, and has made several hundred billion euros in additional guarantees available to companies.

With its investment and lending programs, the Merkel administration is promoting questionable merger projects, turning itself into something of an über-entrepreneur in many industrial sectors and, by placing the state-owned KfW in a key position, promoting precisely the financial institution that acquired the reputation of being “Germany’s stupidest bank” during the financial crisis.

“With this economic stimulus package, Germany is moving a step closer to the French approach to industrial policy,” warns Bert Rürup, chairman of the German Council of Economic Experts.

The Fiscal Insanity Virus has clearly struck German Chancellor Angela Merkel. In the UK, Prime Minister Gordon Brown, Bank of England Governor Mervyn King, and the Chancellor of the Exchequer Alistair Darling, all seem to be in the late stages of FIV as noted in Pound Sinks As Britain Teeters On Edge Of Bankruptcy.

Amongst world leaders there appears to be no immunity whatsoever against the ravages of FIV. And for all the talk of hyperinflation in the US, it appears that Bernanke is not doing much of anything that is not happening everywhere else too. This is precisely why it is highly unlikely the US dollar is going to collapse anytime soon.

Currency debasement is on relative terms. And relatively speaking, government leaders worldwide are all doing the same insane things. So if you are looking for a reason for gold to rise, there you have it. Gold is the only known cure for FIV. Get inoculated soon.

Mike “Mish” Shedlock
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