Germany Has More To Worry About Than Going Out of The World Cup

(Bloomberg) -- Call it Germany's spoiled summer.

For all that's going well in this country of about 83 million people -- a growing economy, booming real estate market and record-low unemployment -- national pride has taken some crushing hits in recent weeks. While Germans like to remind the rest of the world that they make awesome cars, play some mean soccer, elect stable governments and possess a solid bank of global repute -- those accepted truths have begun unraveling.

Chancellor Angela Merkel, the bulwark of European stability, is fighting a rising mutiny in her own government; the once-proud auto industry is limping from one scandal to the next; Deutsche Bank AG is crawling into a shell of its former self. And topping it off was the shock of the national soccer squad's humiliating defeat on Wednesday, when Germany, the defending champion, stumbled out of the World Cup in the first round, the first time since 1938.

“I didn't expect us to win the cup again, yet to not get past the first round is a real shocker,” Reiner Malberger, a visibly shaken soccer fan from Dortmund, dressed in a German national team jersey, said after sipping beer from his plastic cup at a public-viewing event in Berlin.

The loss was an event of such national significance that even the chancellor felt compelled to weigh in: “Honestly, all of us are very sad tonight,” Merkel said at a public event in the aftermath of the 0-2 upset at the hands of South Korea, a team that ranks 57th on the FIFA scale that is led by Germany. Now the future of German soccer coach Joachim ‘Jogi' Loew, who has led the squad for almost 12 years, is being called into question.

Merkel, in office for one year longer than Loew, also faces an uncertain future -- just three months after she cobbled together a new coalition for her fourth term. Her Bavarian allies are threatening the stability of the government with vows to act unilaterally to get tough on migrants trying to enter the country if she doesn't seal a European Union-wide deal on the matter at a summit starting Thursday.

While the political drama caught many observers accustomed to a stable political system in Germany off guard, Merkel's mess was eclipsed on Wednesday by the national outrage following the defeat on the pitch. The banner headline from Bild, Germany's biggest newspaper, on Thursday morning summed it up: “Without Words!" The story even led the serious Frankfurter Allgemeine Zeitung, while Der Spiegel called the team's performance a "historical disgrace."

That's a description also befitting the German auto industry. Not a week passes by without new revelations about the diesel cheating scandal that first enveloped Volkswagen AG in 2015. The CEO of Audi was arrested last week, accused by prosecutors of trying to tamper with evidence in their ongoing investigation, and has remained in jail since, an unprecedented downfall in Germany of a senior corporate leader. The steady stream of bad news prompted the organizer of the country's most prestigious automotive awards to cancel the glitzy event last week, saying there were no reasons for jubilation.

Further knocking the car industry, Germany's most important export machine, has been President Donald Trump's threat to slap painful tariffs on vehicles imported into the U.S. Daimler AG, which sponsors the German soccer team, was forced to dramatically revise its profit forecast for this year, saying its exports are being hurt in a global trade war.

“We regret the loss for the team and for the German fans,” a Daimler spokeswoman said. Mercedes had built a massive marketing machine around the national squad and the world cup, toying with the prospect of a fifth world-cup title and presenting the players and their trainer as cool rock stars posing around sleek limousines.

And then there's Deutsche Bank. Seemingly every day, there's another departure of a key banker as Germany's largest lender tries to shave off thousands of jobs in a push to return to profit. The bank is by far the worst performer on Germany's benchmark index this year, having lost 43 percent of its value since the beginning of 2018.

And while Germany mourned its humiliation on the pitch, spectators abroad couldn't help display some gloating and Schadenfreude. In England, whose team hasn't progressed to the semi finals since 1990 and only won the trophy once more than half a century ago, the tabloid media could barely contain its glee. The Sun's front page headline was a definition of the term Schadenfreude and a photo of some dejected German players.

June 27, 2018

Discount airline Ryanair Holdings Plc, meanwhile, used the defeat for some ambush marketing, touting its “Loew fares” for any traveling soccer fan who might suffer the misfortune of an early trip home. And former England player Gary Lineker, who famously once said that Germany always won at soccer, provided an update on his much-quoted rule.

“Football is a simple game,” Lineker wrote on Twitter after the match. “Twenty-two men chase a ball for 90 minutes and at the end, the Germans no longer always win. Previous version is confined to history.”

--With assistance from Oliver Sachgau, Arne Delfs and Tony Czuczka.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net;Rebecca Penty at rpenty@bloomberg.net;Benedikt Kammel at bkammel@bloomberg.net

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