Awake, for morning in the bowl of night has flung the stone that puts the stars to flight.

And, lo, has caught the sultan’s turret in a noose of light!

Spanish life is not always likeable but it is compellingly loveable: Christopher Howse: ‘A Pilgrim in Spain’

Cosas de España/Galicia

Politics: How long can Spain’s new ‘Frankenstein’ government last?

Reader David has kindly given me some news that will devastate the mayor of Vigo . . . His city doesn’t appear in the list of the 10 best Xmas lights in Europe this year. Barcelona and Madrid rank at 2 and 10.

And another kind reader has told me about this Guardian article on Galicians who emigrated to the UK decades ago. Which reminded me that nearly every Spaniard I met in NW England before moving there said they’d come from Vigo. Possibly in search of better Xmas lights.

I missed this a while ago, on the albariño grape. These days, I prefer godello.

Portugal

Swings and roundabouts . . . . A superb 3-star hotel in Ericeira on Wednesday was followed by a poor place in Lisbon, albeit at a higher price. I changed my first room because of flaking walls and black mould in a corner. The 2nd – smaller – one is better but has a hanger on the wall instead of a wardrobe. And a radio system that might have been installed by Marconi. Plus, very possibly the tiniest bath in the world. Even smaller than one I had in Venice years ago. At least the place scores highly on location, being opposite a metro station near the centre.

Sintra was more crowded than ever yesterday, in late November. God knows when would be a good time to visit it nowadays. Twenty years ago, this wasn’t a problem. As with Oporto and Lisbon.

The UK

Sad to read that the ugly little bouledogue francais is as popular in Britain as it is in Pv city . . . No consolation to know it originated in the UK. Reading all the negatives here, one wonders why a single one would be bought.

Rather more seriously . . . Over the past 2 years, net migration into the UK was 1.42m, more than the total for the period 1945-2000 and equivalent to the population of the cities of Birmingham and Coventry. Can it continue at this rate? Does it need to, to compensate for the low birth rate?

The EU

Claims the FT: Europe’s problem? It’s too attractive: Harsh measures and lurid rhetoric on migration make the continent look as if it is betraying its own values

Germany

Ah. AEP has now written on the current crisis . . . Germany’s debt-brake drama is poison for Deutschland Inc and for Europe’s monetary union. You can read the article here or below, where I added it because I couldn’t create a link to it 2 hours ago. A heavy read.

Russia v Ukraine

Putin says he’s as ‘open as ever’ to peace talks to end what he calls ‘a tragic war’. So, it’s no longer just ‘a special operation’, then. The chances of Russia giving up any of Eastern Ukraine? Approximately nil, I’d guess

Quote of the Day

How can it be right that while Everton [after a 10-point penalty] are now languishing in 19th place in the Premier League, clubs enjoying more success [Man City and Chelsea] are able to defer (perhaps indefinitely) a hearing, let alone punishment for their alleged [financial] crimes?

The Way of the World

The ‘history-hating’ UK leads the western world in wokeness, it’s claimed here.

English

Words of the Year 2023:-

• The Collins Dictionary – AI
• The Cambridge Dictionary – Hallucinate. Said to be what AI-driven bots do, instead of thinking and rationalising. With amusing – and sometimes dangerous – results

Finally . . .

The lovely Lara ‘from Singapore’ has now been replaced by another 27-year-old woman – Dara – who’s also using a Cambodian number and who’s also sent me a wotsap message apparently by mistake. And 27-year-old Mary Smith in California is again trying to talk to me on FB. A popular guy, me. At least with a would-be fraudster with multiple personalities, all aged 27.

This is a foto adorning an article on the best place to eat in Edinburgh, if you have more money than anything else, I guess:-

Pepper salad, apparently . . .

The Usual Links . . .

For new readers:– If you’ve landed here looking for info on Galicia or Pontevedra, try here. If you’re passing through Pontevedra on the Camino, you’ll find a guide to the city there – updated a bit in early July 2023.

For those thinking of moving to Spain:- This is an extremely comprehensive and accurate guide to the challenge, written by a Brit who lives in both the North and the South and who’s very involved in helping Camino walkers.

Germany’s debt-brake drama is poison for Deutschland Inc and for Europe’s monetary union

Economists have long warned that Germany’s constitutional debt-brake is a timebomb on a long fuse. That bomb has now detonated at the most critical moment in German economic history since the launch of the Wirtschaftswunder in 1949.

The Scholz government must plug a fiscal hole of €128bn to comply with a ruling by the top court, either by slashing spending, or by raising taxes or by bleeding investment in the rising technologies of the next half century. Analysts at Citigroup estimate that €87bn of this must be covered over the next 13 months.

Finance minister Christian Lindner on Thursday took the dramatic step of suspending the debt-brake for 2023 to cover part of the problem, invoking an emergency clause to justify raiding the Economic Stabilisation Fund for money to pay for Germany’s energy price cap. “We put the expenditure for the price cap on a constitutionally secure basis,” he said.

It remains to be seen whether the judges at the Verfassungsgericht agree. There must be a high risk of further court challenges by the defenders of Ordoliberal purity. The larger problem remains in any case: the government cannot fund its core technological investments without cannibalising other parts of the budget.

It must either abandon its plans or tighten fiscal policy into the teeth of a deepening economic slump, amid the steepest fall in property prices since modern records began.

Even Olaf Sholz Tower is in trouble. Signa Group has run out money to pay wages on its 64-storey Elbtower in Hamburg, leaving a half-built concrete shell brooding over the port district of the Chancellor’s home town.

“It is a dangerous situation. Investment is going down, construction is going down, and we could be heading into a very deep recession,” said Heiner Flassbeck, former state secretary for the economy. 

“The debt-brake is the result of pure ideology. Austerity will lead to a deeper recession and then the deficit will grow, and there will have to be further cuts, and so on,” he said.

The law is written into the constitution. It restricts the structural budget deficit to 0.35pc of GDP and became the role model for the eurozone regime of budget surveillance, culminating in the final folly of the Fiscal Compact. In short, it drove the macroeconomic errors that inflicted a debt-deflation crisis and a lost decade on the eurozone.

The debt-brake was introduced by finance minister Peer Steinbrück in 2009, who misunderstood the global financial crisis in every way and at every stage, famously accusing Gordon Brown of “crass Keynesianism” for the sin of countercyclical stimulus during the worst peace-time crash since 1931.

Herr Steinbrück has since recanted. His baleful creation endures. It cannot be repealed without a two-thirds majority in both houses of parliament. The opposition Christian Democrats show no willingness to oblige.

The court judgment that set off this drama a week ago is technical and complex. The key point is that the judges ordered the coalition to stop using ring-fenced funds to evade the deficit ceiling. This cuts off €60bn earmarked for clean-tech from the Climate and Transformation Fund (KTF).

Some €20bn of state and local subsidies promised to Intel and Taiwan’s TSCM for advanced semiconductors plants near Magdeburg are now in jeopardy. So is Solar Valley in Saxony-Anhalt.

“If nothing is done. Our solar industry is going to be destroyed a second time,” said Michael Kellner, the economic state secretary. Last time the cause was technology theft and predatory dumping by China. This time the threat is coming from Joe Biden’s Inflation Reduction Act.

ThyssenKrupp has already begun work on low-carbon steel with a switch from blast furnaces to a direct iron reduction process using green hydrogen. State support for its multi-billion “tkH2Steel” project is now up in the air.

Bernhard Osburg, head of the German Steel Industry Association, said the court ruling has created an economic emergency. “It threatens to bring investments to a standstill, and cause massive and irreparable damage to our industrial fabric (Standort)”.

What about Northvolt’s EV gigafactory in Schleswig-Holstein, with a half a billion of state aid? Or CATL’s plant in Erfurt?

The Institute for Economic Research in Berlin (DIW) said Germany is in danger of losing its footing across swathes of industry, from electrification, to green hydrogen and digital technology, if the country cannot match the incentives of the US and China.

You could argue that Germany alone has been a model of fiscal probity while others have succumbed to ruin. It has a debt-to-GDP ratio of 66pc: France is at 112pc and the US will soon be above 130pc (IMF measure).

But there is a price to pay for this national doctrine of Ordnungspolitik.

“Net public investment has been negative for 20 years. The state is living off its capital at the expense of future generations,” said Marcel Fratzscher, the DIW’s director and author of the Germany Illusion. The country has clung too long to an obsolescent economic model and has failed to build the foundations of a new model.

The rot was disguised during the long years of Merkel immobilism, when Germany’s export industries rode the China boom, and enjoyed a sweetheart gas deal with Russia. Those props have been knocked away. China now competes toe-to-toe with Germany across the same products in global markets.

If ever there was a moment for Germany to tap the lowest borrowing costs in the West to reboot its manufacturing system, it is surely now, as the economy ministry under Robert Habeck understands perfectly. But the country is stuck with the debt-brake, and the mindset that led to it.

The fiscal drama in Germany makes Europe’s monetary union even less workable. It demolishes any last hope that Berlin will let the EU’s €800bn Recovery Fund evolve into a proto-EU treasury. There will be no joint debt issuance to underpin the euro, and no Hamiltonian fiscal union.

The gaping hole in the construction of the single currency will remain. The debt ratios of Germany and France will diverge ever further, putting intolerable strain on the EU’s central axis.

There will be a further bias towards fiscal contraction across the monetary bloc. “If the Germans are saving like Hell, they are going to put enormous pressure on everybody else to do the same,” said Prof Flassbeck.

There is no going back to the extreme austerity of 2010-2015 in Europe but the logic of German retrenchment is that the country will again try to export its way out of trouble by compressing labour costs, taking market share from the rest of the eurozone via beggar-thy-neighbour mercantilism.

That may not be the intention. It is the outcome of such a policy mix within a fixed exchange regime. The German current account surplus is already 6% of GDP. It could return to the toxic level of 8%. This time the South will fight its corner more tenaciously.

Whether the nine scarlet judges of the Verfassungsgericht realise it or not, they have just made Europe’s monetary union an even more fractious and unhappy house for everybody.