Friday, November 22, 2013

What's happening in Germany?

  • Yesterday, Angela Merkel tried to defend the German trade surplus by saying this (bloomberg):

I think it would be absurd if we were to try make German companies reduce production or cut back on quality.
Well, yes, that would absolutely be absurd, therefore nobody actually demanded anything like that. What on earth is wrong with German politicians, today? "Oh, look over there - a straw man!" "Attack!" But, she also made less silly claims:
It’s also a fairy tale that workers in German export industries are badly paid.
Compared to what? Chinese worker? Well, true... but a better comparison would be German workers ten years ago.
  • Russian threats block Ukraine-EU trade deal (DW) I am not a big fan of the headline. In fact, it is the EU which put massive pressure on the Ukraine: "EU foreign ministers on Monday said Yanukovych had to decide if his country would move toward Europe or Russia" While Russian pressure seems to have been directed at a joint agreement between the EU, Ukraine, and Russia.
  •  Journalist talks with an art collector living in self-imposed poverty. There is a problem with his collection though, partly it is what the Nazis called "entartete Kunst" "degenerate art", which his father was supposed to sell for Hitler; partly it is art stolen from Jewish owners; and only some works were bought by his father legally. here's a longer background story.

Thursday, November 21, 2013

Immigration Up 11 Percent In The First Half Of 2013

As expected, immigration into Germany was up significantly in the first six months of 2013, according to destatis. I have written about this new issue and had this to say:

Germany has changed its tactics. Beggar thy neighbor to solve domestic economic issues is dead. Long live beggar thy neighbor to solve demographic problems. Merkel  herself stated on the issue of labor mobility within the EU(my translation):

We have to be open for young people who come to us, since we already know today that we will have six million less workers by 2025. 
So, is it working?

Krugman, Weidmann And Why It Is Actually Worse

Krugman isn't happy that Weidmann is against further ECB measures without offering any justification. But it is actually worse than Krugman thinks.

What's Happening In Germany?

  • New report lauds East German development (Deutsche Welle): Actually, it highlights that the Eastern states are still not even close to the west 23 years after the re-unification. This is a lesson that the other eurozone members should think about. The Eastern states are still significantly weaker eventhough trillions of euros were transfered there.
  • EADS Works Council Urges Caution on Job Cuts From Defense Revamp (Bloomberg): EADS might cut up to 8,000 jobs. The story is lacking one key fact. The management of some of the military programs like the A400M was, well, not all that good to put it extremely mildly. AN70 for example is not only just half the price, it can also carry a heavier payload over longer distances.  
  •  Euro-Area Factory Production Accelerates as China Cools (Bloomberg): That report could have and probably should have been called: Germany the only country doing OKish in the eurozone. So not really news, but I would like to add a bit of perspective on industrial production in the eurozone :
I think it is time to pronounce the patient dead.

Wednesday, November 20, 2013

... And Justice For All

On Monday the German Bundestag discussed the NSA revelations in a special session. It was the first opportunity for the upcoming "Grand Coalition" of CDUCSU and SPD to show of how "grand" they will be. As expected, the session yielded little to nothing. Well, the Social Democrats have already adapted to their new role of applauding CDU speakers; and the only real criticism came from the Greens and the left wing Die LINKE. But, Merkel talked about "serious" allegations which have to to be cleared up.

Luckily, we have just the right organisation for that called the Bundesanwaltschaft ("Federal Prosecutor's Office"), who are currently looking into the revelations in a so called "preliminary examination phase". One which will lead to an actual investigation ... hmm well, maybe.

European Car Registrations In October

The automotive industry in Europe is rebounding. According to ACEA, the  registrations of new cars in the EU were 4.7 percent higher in October 2013 than a year earlier, reducing the gap to last years' sales over the first 10 months to "only" 3.1 percent (down from 6.6 percent for the first 6 months of the year). But make no mistake this was still the second worst October since 2003; and some of the improvement is due to very high rebates.

Tuesday, November 19, 2013

Lowest Common Denominator

Germany still does not have a new government. The talks between Merkel's CDU/CSU Union and the social democrat SPD are stalling. In fact, the only real agreement seems to be on a a quota for women on corporate boards. But, the discussions about a minimum wage (the SPD wants €8.50);  mothers' pension (for mothers of children born before 1992); or the toll for foreigners on the Autobahn that the CSU wants are going nowhere. This weekend the CSU leader Horst Seehofer hinted at new election as an option. Only two things seem certain: this will be the longest time Germany has ever been without a new government; and the next government will likely be one based on the lowest common denominator.

The Economist Hans-Werner Sinn

Krugman in last Friday's op-ed wrote about the euro crisis and the German reaction to the ECB rate cut. He mentioned the reaction of economists to the decision. One of them was Hans-Werner Sinn:
The influential German economist Hans-Werner Sinn declared that Mr. Draghi was just trying to give Italy access to low-interest loans.

Monday, November 18, 2013

Further Deterioration Of The Spanish Bank Balance Sheets

You might have heard a few days ago, that Spain wanted to exit the ESM program. You might have also heard that the European officials were "fully supportive" of the decision. So all what was missing was the new Banco de Espana data showing that the banks actually did not need another bail out. I have written a few months ago, that the Spanish bank balance sheets were actually in the process of deteriorating in relative terms. Today, the numbers for September were published.

Industry, Real Wages, And Childish Managers

This weekend, the CEOs of several German car manufacturers decided to behave like three year old kids because they really want that chocolate bar low labor costs; and are against a minimum wage of €8.50 and for a huge amount of "temporary" workers. The CEOs of Daimler, VW, Opel and BMW were interviewed by the Bild Zeitung and Daimler CEO Zetsche even threatened Mutti* Merkel that the company would "have to think about a relocation of production".

Let's take a look at some of the firms and the overall situation in the German industry.

Thursday, November 14, 2013

Massive 0.1 Percent Eurozone Growth In Q3

The European Commission pretended a few months ago that the modest second quarter GDP growth in the eurozone (0.3 percent) proved them right. We have learned today that the success story continues - at an even slower pace of 0.1 percent compared to Q2. Germany "lead" the way again with a 0.3 percent (down from 0.7 percent last quarter).

Tuesday, November 12, 2013

Sinn, Unsinn, And The ECB

Paul Krugman wrote that there are huge tensions over the ECB rate cut. German "economists" are criticising the rate cut decision. Well, that is true, but for the most part it's just stuff we've heard a hundred thousand times before.

For example, Michael Hüther head of the IW institute said that the policy is both not working in program countries (which is true) and damaging the North (which is wrong) at the same time, because ... poor savers. He claimed that the rate should be "around 3.0 percent to 3.5 percent" for Germany, which is completely laughable if one actually looks at inflation which just "reached" a new low three year low of 1.2 percent in Germany, in Oktober. But hey, the ECB could also look after German savers instead of doing its actual job of keeping inflation close to but below 2.0 percent.

Monday, November 11, 2013

Reforming The Renewable Energy Law... Again

We still don't have a coalition contract for the next government, but today we learned more about the plan to reform the Renewable Energy Law. Merkel has realized that offshore wind energy is quite expensive after, well, Merkel massively increased (from under 9 €ct/kWh to around 15 €ct/kWh - depending on location - for 12 years plus 8 more at a lower level) the subsidies in the form of an allocation fee paid by consumers in 2009.  This new "reform" will not lead to any significant improvements to the consumers.

Wednesday, November 6, 2013

More Surveillance In Germany?

Snowden's revelations have shown the world that the US and British governments cannot be trusted. Additionally, it is very likely that many if not all allied intelligence services aided the NSA and GCHQ; and also used similar methods though likely on a smaller scale, which is probably much more of a funding issue than anything else. Some believed that there would be a change in thinking now. The current coalition talks in Germany show that this is the case, sadly in a very different direction than many expected.