Bielmeiers Blog

DZ BANK

Selecting business news – analysing it – commenting on it. That’s the job of Stefan Bielmeier, Chief Economist and Head of DZ BANK’s Research and Economics Division, and of his team of analysts. In his blog, Bielmeier reports on economic developments in the world's most important economic regions, looks at trends in the international financial markets and states his position on current political events.

Bielmeier’s Blog picks out the essence of the daily data deluge for you – make use of his expert knowledge.
Renewed defeat in Istanbul increases the pressure on Erdogan

The new mayor of Istanbul is Ekrem Imamoglu – and this time for real. The candidate he ran against, Binali Yildirim of the AKP, has already conceded defeat, and President Erdogan has congratulated Imamoglu on his success. For the AKP, and above all for the head of state, the loss of the economic powerhouse to the opposition is a problem. No less a person than Erdogan himself is rumoured to have said: “Whoever wins Istanbul, wins Turkey.” Imamoglu is undoubtedly still well away from achieving that, but having lost the largest city in the country, the AKP has also lost a major source of money with which to supply favourites and others upon which favour is to be bestowed with lucrative jobs and contracts. In addition to this, the AKP now no longer holds the reins in any of the three largest cities in the country. Even if many pundits…

Weaker global economy now also affecting Germany’s Mittelstand

The weakening global economy is now also hitting Germany’s Mittelstand, albeit not as strongly as many a large corporation. For on average the Mittelstand has less of an export focus and is geared more to serving the domestic market. As a rule this spells a slightly more stable course of business. This is not the case, however, for the German mechanical engineering segment, which likewise has a structure that strongly hinges on SMEs. It is already suffering quite considerably from the US-Chinese trade conflict and the weakness of global trade. Indeed, the United States and China are by far the most important destinations for exports by German mechanical engineering companies, which have a very strong international focus. While the German Mittelstand counts numerous world market leaders in what are often very special market niches, international competition has in recent years evidently become far tougher for the broader-based major corporations in…

Why such actionist behaviour on the part of the ECB?

ECB President Mario Draghi has put the ECB under enormous pressure to act on Tuesday with an announcement that has come as a complete surprise and is in my opinion economically incomprehensible: he said that the ECB was considering further monetary stimuli if inflation failed to pick up and there were no signs of economic improvement in the coming weeks. In a move most unusual for a central bank, Draghi has explicitly demanded an improvement in the economic situation and higher inflation expectations. This of course means that the current situation has taken the ECB by surprise, or that actions in recent weeks have been too hesitant. A further interest rate cut was explicitly announced and – if this were to prove insufficient – another asset purchasing programme. In purely formal terms, the new monetary orientation might have been prompted by the visible decline in inflation expectations, and, in particular,…

German housing market: Rent cap will exacerbate the tense situation

The Berlin Senate made up of a red-red-green coalition has scored a direct hit with its rent cap agreed in a benchmark paper on Tuesday of this week. For days, the press has been reporting about how hard-hit tenants are to be provided with affordable apartments. This has gone down well with the general public. A recent survey showed 60% of respondents to be in favour of introducing a rent cap. Given this success, it comes as no surprise to learn that demands are already being made for a nationwide rent cap. The fact that the legal foundations for such a project are doubtful and that it is unsuitable for solving the tense situation on housing markets is evidently of secondary importance. It is therefore questionable whether the Berlin Senate has legislative competence for the tenancy law regulated in the German Civil Code (BGB). And the problems on the housing…

France: Protests failing to undermine the appetite for reform

One thing that really can be said of France’s President Emmanuel Macron: he is not allowing the street protests to deter him from implementing the announced reforms. With the popularity of the so-called yellow vests increasingly waning, he now faces the risk of disputes with the trade unions. Following the labour market reform introduced in 2017 with simplified dismissal and hiring rules, employers and trade unions were recently presented with details of the planned reform of the unemployment insurance system. The key points of the reform include longer periods of employment before unemployment insurance benefits can be granted and a capping of benefits for higher earners. Previously, unemployment insurance could be claimed if within a period of 28 months applicants had worked in at least 4 of those months. From now on, applicants must have been in employment for at least 6 months. Moreover, in future benefits will be made…

China selling its Treasuries: a warning to Trump?

There has long been speculation over whether China might use its huge portfolio of US Treasuries as a weapon in the (trade) war against the US. The latest data from the US Treasury Department is likely to add fuel to these speculations: Having already sold US Treasuries to the tune of USD 20 billion in March, China went on to sell further T bonds worth USD 10 billion in April. The volume of US Treasuries sold by China in the last twelve months thus amounts to an impressive USD 86 billion. As the chart below shows, this is not the first time China’s portfolio of Treasury bonds has fallen, and the current episode is also unlikely to break any new records. The Chinese had already disposed of US Treasuries in 2016, with the sales volume adding up to an even more impressive 150 billion US dollars. However, there is one…