Germany

German economy: After the low point, what’s next?

The German economic data for the month of April, which have been published in the past few days, reveal the full extent of the current crisis. The industrial sector in particular has been hit extremely hard. The latest foreign trade data also show this. Compared to March, German exports in April fell by almost a quarter. In seasonally adjusted terms this corresponds to a loss of almost 25 billion euros. The sharpest declines were in trade with those countries that were hit hardest by the corona pandemic. Exports to France and Italy, which were almost in total economic lockdown in April, fell by between 40 and 50 percent. Exports to the USA also fell by almost 36 percent. Conversely, German companies also imported significantly fewer goods from abroad in April. This is mainly due to the fact that production in this country also had to be cut back sharply in…

Economic stimulus package in Germany sets the right accents

All in all, the grand coalition’s new economic stimulus package represents a good compromise in view of the differing positions both between and within the individual parties. The fact that they did not get involved in the „scrapping premium 2.0“ and instead opted for a temporary reduction in VAT is the right decision. It is not lobbyism that has prevailed here, but economic rationality. This measure will support all major purchases, including, of course, the purchase of cars. However, no one sector is given preferential treatment. It is a simple and fast-acting measure that also has a desired distribution effect. After all, the burden of excise duties is heaviest for lower-income households. The various tax measures in favour of businesses are also to be welcomed. Among other things, the possibilities of tax loss carry-back and depreciation have been extended. The reduction of the EEG levy on the electricity price from…

Economic stimulus package: More is not always better

The heads of the coalition sit together in the Chancellor’s Office and discuss the federal government’s new economic stimulus package. It is clear that it will come. It is also no longer a matter of dispute that it will have a volume of 80 to 100 billion euros. Because a lot helps a lot, that’s what everyone agrees on. But obviously not yet about the „small print“, i.e. what the money is to be spent on. In the run-up to the meeting, the positions have already been set out. The Federal Minister of Finance has made his preferences public, as have the Minister of Economics, a number of state premiers, the SPD party leadership, and numerous members of parliament from the SPD and CDU/CSU factions. So the wish list is so long that an agreement has become unlikely even today. It ranges from family allowances, a prolonged and increased short-time…

Economic stimulus package: Sometimes long negotiations also help…

Many participated in the discussion, the wish list was long. The interests of the participants in the negotiations were quite far apart. As a result, the coalition partners‘ talks lasted much longer than planned and there was a fear that a bad compromise would be reached. But all in all it turned out to be a pretty good compromise. The fact that they did not go for the „scrapping premium 2.0“ and instead opted for a temporary reduction in VAT is a good sign. It is not lobbyism that has prevailed here, but economic rationality. This measure will support all major purchases, including, of course, the purchase of cars. But no one sector is given preferential treatment. It is a simple and fast-acting measure that also has a desired distribution effect. After all, the burden of excise duties is heaviest for lower-income households. The various tax measures in favour of…

German companies are regaining some hope

German companies are regaining hope. Business expectations for the coming months improved significantly in May following the crash in March and April. The incipient easing of corona restrictions is evidently improving the prospects for many companies again. However, this is not yet the all-clear. The assessment of the current business situation deteriorated even further in May. The crisis is therefore still far from over. But at least the first glimmers of hope are emerging in the battered service and retail sectors. Meanwhile, a deep slump in overall economic output is expected for the second quarter. In the first three months of 2020, gross domestic product had already slumped by 2.2 percent. And this despite the fact that the corona pandemic did not yet have a significant impact on economic output in January and February, and the most severe restrictions did not take effect until mid-March. According to current reports, private…

Purchasing managers‘ indices in the EMU: Downturn slows down, nothing more

The eurozone economy is still in recession in May as restrictions to contain the spread of the global coronavirus pandemic continue to weigh on the economy. Although sentiment among purchasing managers improved somewhat as a result of the gradual easing, a return to economic normality is not in sight. This is because the comprehensive composite purchasing managers‘ index of sentiment in industry and the service sector is still well below the neutral level of 50 index points at 30.5, compared with 13.6 points in the previous month. According to IHS Markit, both sub-sectors – industry and services – contributed to the rise. Among the service providers particularly affected by the initial restrictions, the improvement in May was somewhat stronger. This is also reflected in the survey results among German and French purchasing managers. Overall, the improvement at an extremely low level is a first ray of hope. Nevertheless, the eurozone…

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