Financial Crisis, Trade War, Populism: The threat to our prosperity is greater than it has been in a long time, and apocalyptists outdo each other with worst-case scenarios. But could it be different?
There is no shortage of bad news. Politics, financial markets, international tensions: Uncertainty factors can be seen everywhere. The potential for destruction is enormous.
- The national populism has many countries firmly under control – with the oncoming trade war as a blatant symptom.
- The US , where investigators harass President Donald Trump more and more , faces a constitutional crisis.
- In Central and Eastern Europe, populist governments that openly oppose EU law have become the norm, including Italy, whose government is threatening to stop payments to the EU budget.
- The danger of a chaotic EU exit from the UK is far from over – with the collapse of the internal market as a possible consequence.
- And the central banks – headed by the US Federal Reserve, the European Central Bank(ECB) in tow – are trying to leave the crisis mode and skim off the global money glut. A big experiment with the potential to trigger a worldwide financial crash.
- Turkey is on the way to disaster, other emerging economies must at least prepare for financial crises .
- In the Middle East , the conflict with Iran threatens to come to a head. A further increase in the price of oil could be the result.
Uncertainty, wherever you look – and Germany is highly vulnerable.
This week will shed light on the extent to which the darker world economic situation is already having an impact on the Federal Republic: Monday is news on corporate sentiment, Wednesday on consumer mood, Thursday on the labor market and inflation.
But as shocking as many reports may be, it could be different. Because uncertainty includes the possibility that many dangers do not materialize in the end. Not every loud threat follows a corresponding action. Not every conflict escalates until the big bang.
Here is a positive future scenario.
Imagine, everything will be fine
Take the trade war : So far, only a small part of the global exchange of goods is subject to special tariffs. So far negotiations are continuing, between the US and China, between the US, Mexico and Canada. Other regions are talking about further liberalization, including the EU and China. The expectation that some conversations will lead to success is by no means absurd – but probable.
Or the central banks : The turnaround in interest rates is so gentle that upheavals in the major economies have so far failed to materialize. Fed , ECB and Co. remain predictable.They follow their own announcements, avoiding surprises, so that everyone can gradually adjust to more expensive money. That worked so far, it could continue to work.
The Fed does not let itself be tempted by Trump’s attacks on its independence, but remains stoically on course. The ECB will be able to exit the bond purchase program by the end of the year without triggering another sovereign debt crisis. Where there should be problems within the Eurozone, the ESM rescue package is ready.
The emerging crisis in emerging markets , triggered by the now more expensive dollar-based debt service, is gradually being discharged, not in a big bang. Turkey remains an isolated individual case. China, one of the world’s most heavily indebted economies, manages a soft exit from the debt sector.
In spite of loud verbal populism, pragmatism prevails in Europe . Italy remains in the euro, Greece is muddling through, Poland and Hungary are more willing to compromise than in the past.
In Britain, there is a second referendum in this positive scenario, reversing Brexit. A development that would give European integration unprecedented buoyancy. Because it would be clear: the connections within Europe are so strong that ultimately they can not be separated. There is no way back for the EU – only different ways forward.
In the Middle East holds the permanent stalemate between Saudis and Iran. The mullahs’ saber rattling is giving way to a more pragmatic course, which in turn can be attributed to the US government as a result of its sanctions. Syria is not free, but at least it can begin to rebuild. The price of oil remains stable and relatively low.
The good news helps to stabilize the global economic upswing, with positive consequences especially for Germany . There is nothing standing in the way of a continuation of the second German economic miracle well into the next decade. Everything whitewashing?
The wide space between Best Case and Worst Case
Such a best-case scenario is not so outlandish. It’s just as possible as a worst-case scenario.And then there are still many gradations in between.
Perhaps the citizens are smart enough to realize that the populists, with their images of the enemy and unfulfillable expectations, ultimately have nothing to offer.
Perhaps the constitutions of Western countries, especially the US, are strong enough to withstand the erosion of state institutions.
Perhaps the global connections are now so diverse and so strong that ultimately they can no longer be cut off.
Perhaps the financial markets are so powerful that they show their limits to populist politicians.
The picture we have of the future is always uncertain. And usually the result is neither black nor white, but some shade of grey. Or, even better, it’s even colourful.