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Editor’s note (March 27th): Police in Maryland said that the six people who remain missing following the Key Bridge’s collapse are now presumed dead.
THE VIDEO footage of the collapse of Baltimore’s Francis Scott Key Bridge was shocking. At around 1.30am on March 26th, when a container ship rammed into one of its support columns, the central section of the 1.6-mile (2.6km) structure collapsed into the Patapsco river below, sending people and vehicles into the water. Workers repairing potholes were on the bridge at the time. “Never would you think that you would see…the Key Bridge tumble down like that,” Baltimore’s mayor, Brandon Scott, told reporters. “It looked like something out of an action movie.”
Maryland’s governor declared a state of emergency. Six people are thought to have drowned. Beyond the human toll, the immediate questions concerned the causes and consequences of the disaster—one of the most significant in America for decades, according to Jerry Hajjar, president of the Structural Engineering Institute of the American Society of Civil Engineers (ASCE). The FBI has said that terrorism was unlikely to have been behind it.
The 300-metre-long ship, the Dali, was heading from Baltimore to Colombo, in Sri Lanka, when it “lost propulsion”, according to an unclassified Cybersecurity and Infrastructure Security Agency report. The crew reportedly notified officials that a bridge collision was likely. Eyewitnesses say the ship’s lights flickered just before impact. Locals heard a loud thunder-like rumble in the middle of the night. “The house started shaking,” says Cyrus Gilbert, a resident of Locust Point, directly across the harbour.
Investigators will want to know why the Dali lost control. Nada Sanders of Northeastern University, an expert on the global supply chain, says that the ship had an inspection issue last June. According to Equasis, a shipping database, Chilean authorities gave it a “deficiency” for propulsion and auxiliary machinery (though no deficiencies were recorded in a follow-up inspection in New York).
The bridge could have been structurally sound. A report by the ASCE gave Maryland a B for its bridges and a B- for ports in 2020. “Bridges are not designed to withstand lateral loads from ships on their columns,” said Masoud Hayatdavoodi, of the University of Dundee’s School of Science and Engineering. “There is no question that the bridge would collapse due to the impact on the columns.”
President Joe Biden promises to foot the bill to get the bridge rebuilt as soon as possible. But the impact on the city is already being felt. The port is closed until further notice, causing ripples beyond the harbour. The port supports over 15,000 direct jobs, and roughly 140,000 jobs are linked to it in some way. Daraius Irani, of the Regional Economic Studies Institute at Maryland’s Towson University, says the port closure alone will probably cost roughly $50m a day in lost activity.
The harbour is an important link in America’s supply chain. More than 50 ocean carriers make nearly 1,800 annual visits. It is especially important in the automotive world. Its private and public terminals handled nearly 850,000 cars and light trucks in 2023, the most of any American port. It also ranked first in the country in handling farm and construction machinery, as well as imported sugar and gypsum, and ranks second for coal exports.
If another port experienced a hiccup (because of labour disputes, say, or cyber-attacks), the toll on the American economy could be severe. For now, though, the national impact is likely to be limited. Other ports, such as New York-New Jersey and Virginia, should be able to pick up the slack. Mark Zandi, chief economist at Moody’s, a ratings agency, says the national economy will be OK, but Baltimore will suffer. Commuters and lorry drivers will face disruption. Last year the bridge served 34,000 commercial and passenger vehicles a day, about 15% of traffic in the area.
The harbour has long been a symbol of resilience. In the war of 1812 against the British, the Americans successfully defended Fort McHenry in Baltimore Harbour, an event immortalised by Francis Scott Key in his 19th-century poem that became the national anthem. The tragedy will give the city and port time to implement upgrades that would be harder when the port is active. Baltimore may emerge with a better bridge and harbour. ■
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The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.
As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.
Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.
Experts speaking to CNBC were less sure.
“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.
The CDU/CSU economic agenda
The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.
It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.
“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.
“It is still a reform program which pretends that change can happen without pain,” he said.
Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”
But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.
Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.
Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.
Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.
Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.
“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.
“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.
Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.
“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.
Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.
Coalition talks ahead
Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.
The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.
“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.
The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.
“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.