Mood darkens in Germany as economic warning signs mount

Germany may no longer be soccer world champions, but the country remains the place to beat for media mood swings - from self-love to self-loathing.

Two days after the national side crashed out of the World Cup in the first round, Der Spiegel magazine weighed in with a grave diagnosis, complete with German tricolour in meltdown and the cover strapline "There once was a strong country".

Its syllogistic synopsis: given the crises in the sluggish soccer team and crooked car companies – traditionally surrogates for postwar German national pride – then Germany must be in crisis, too.

National trainer Joachim Löw and chancellor Angela Merkel, after successful decades at the top of their fields, are now "haggard" and "wornout" figures who outstayed their welcome at the top with an "inflexible" approach that favours "clinging to old principles of success".

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"If in doubt, they depend on the power of habit without realising the danger this approach masks," Der Spiegel intoned, seeing parallels with car executives who fiddled with old diesel technology rather than see the e-mobility writing on the wall.

As a news weekly, Der Spiegel is notoriously fond of Cassandra copy. Buried at the end of 10 pages of catastrophic copy, even it admitted "one shouldn't overstretch the parallels between the performance of a football team with the political and economic state of a country".

And yet it’s hard to shake the impression that, after 13 comfortable years, sheltered in a calm cove from others’ crises, Germany is sailing into uncharted and choppy waters.

Refugee coup

In Brussels on Friday, in fighting form despite just two hours' sleep, Dr Merkel insisted she had pulled off a refugee coup: political agreements with EU allies to cut asylum pressures in Germany and placate her Bavarian allies.

Telling is how her own deputies have detected their leader's dwindling power and no longer outdo each other in public displays of sycophancy-laced loyalty

But on Sunday, after "pointless" talks with Dr Merkel in Berlin the previous evening, Bavaria's Christian Social Union (CSU) leader, Horst Seehofer, dismissed her Brussels deal as an array of aspirational ideas that could complicate, rather than resolve, the refugee question.

After 18 years as Christian Democratic Union (CDU) leader, and almost 13 in the chancellery, Angela Merkel is in her final act. The question is just how short it will be.

Telling is how her own deputies have detected their leader’s dwindling power and no longer outdo each other in public displays of sycophancy-laced loyalty.

Watching the exhausted CDU leader, metres away at a Berlin garden party last week, one leading MP announced: “She’s wrecked.”

As the tremors of transition grow in Europe’s largest country, so too the uncertainty for the economy – and the rest of the Continent.

German unemployment may be at a post-unification low, but Germany’s closely watched Ifo institute, warning of “gathering storm clouds”, has cut its growth forecast for the year dramatically from 2.6 to 1.8 per cent.

Of particular concern is the German export motor, the driver of prosperity in the past decade. Germans are nervous about the interest US president Donald Trump has developed in his ancestral homeland.

His unilateral and protectionist "America First" policies are undermining the postwar order into which Germany, perhaps more than all others in Europe, has invested.

Declaration of war

In diplomacy, so too in trade. After imposing US trade tariffs on EU steel, Mr Trump reportedly told French president Emmanuel Macron his aim was for "no Mercedes models to roll on Fifth Avenue in New York".

Last week, in the latest humiliation, Deutsche was revealed as the only bank to fail the US federal reserve's latest bank stress test

Berlin views this as a declaration of war on all leading German brands and suppliers, from BMW to Bosch, struggling with legacy diesel fraud and the looming e-mobility revolution.

The most effective tactic to attack German prosperity: hack away at the German automotive industry that employs more than one million people directly and many more in secondary companies.

Things are looking just as bleak for another one-time German blue-chip poster boy: Deutsche Bank. The Frankfurt institution has been in the wars across the Atlantic since its pre-financial crisis traders admitted selling "shit" products to clients.

Last week, in the latest humiliation, Deutsche was revealed as the only bank to fail the US federal reserve’s latest bank stress test.

Shares in Germany’s one-time international finance calling card are now down 90 per cent on their 2007 peak.

And though Germany Inc’s stock is still solid, political uncertainty in Berlin has catalysed an already darkening mood. The outlook for the country at Europe’s heart has not looked this uncertain in some time.