Politics

What are the chances of an “oops Brexit”?

Friday of next week – not long to go now until 29 March 2019, the official date on which the British are due to leave the EU, as enshrined in British and European law. Even though the British House of Commons clearly rejected a no-deal Brexit only last week, it remains the default scenario as long as the EU and Great Britain fail to agree on an alternative solution. And at the moment the negotiating partners still need to clear a number of major stumbling blocks before a solution can be found. The first is the British parliament and its stubborn refusal to back Brexit which has already resulted in several bitter defeats for the Prime Minister. Whether Theresa May will dare to put her departure deal to the vote again on Wednesday depends largely on the Northern Ireland DUP. If the party signals its willingness to agree to the…

German housing market: Slight decline in building permits in 2018; tighter regulation could worsen the situation

The shortage of housing is a key reason for the sharp rise in real estate prices and rents. This is unlikely to change all that quickly. For the number of building permits even fell minimally last year by 0.2% to 347,300 residential units. At first glance, this does not appear all that serious, given that the number of permits has not even fallen by 1,000 units. Moreover, the decline in permits for residential homes was particularly pronounced. On the other hand, the number of permits for houses and apartments has risen by 3,000 to 332,600 units. Making this more problematic is the fact that the construction of new apartments is trailing behind, with completions grinding to a halt. Last year, around 300,000 units are expected to have been constructed, around 100,000 units less than the estimated annual demand for new construction. With capacities in the construction industry more or less…

DeutschlandBank AG

Since the beginning of September 2016 there has been stubborn speculation over a merger between Deutsche Bank and Commerzbank. On taking office in April 2018 Deutsche Bank’s new CEO, Christian Sewing, virtually excluded a merger between the two major banks for the next twelve to eighteen months, citing the current integration of Postbank and the group’s ongoing restructuring as the reasons. While these arguments are still valid today, the political and possibly also the commercial pressure now seems great enough for informal talks to be conducted with respect to a possible merger between the two banks. The positive effects of merging these two big banks could be: 1. The scalable investment costs for technology and digitalization. 2. The substantial potential cost synergies resulting from similar business fields. 3. A possible transfer of customer deposits within the group. Arguments against it include: 1. Higher capital requirements due to size. 2. The…

Brexit agreement: no, no and no again?

On Wednesday evening, the majority of the House of Commons voted to rule out a no-deal Brexit under any circumstances. We can draw two conclusions from the outcome of the vote: on the one hand, Prime Minister Theresa May suffered another defeat in parliament, as she wanted to rule out leaving the EU with no deal at the end of March only and not in general. Her attempt to push through a rejection of this proposed amendment with the help of the conservative whip clearly failed. Even some members of government voted against May’s orders or abstained at least. On the other hand, May used her speech after the vote to quite rightly point out that unless new concessions are made, the UK will still leave the EU at the end of the month without an agreement. After all, the result of the vote is not legally binding. Furthermore –…

Turkey: Recession prior to the local authority elections, outlook remains muted

It’s now official: The Turkish economy crashed into recession at year-end 2018. Economic output fell palpably in the final quarter, down 2.4% on the prior quarter. Accordingly, gross domestic product (GDP) decreased for the second time in a row. The decline was also more pronounced than in the summer quarter in which the fall was 1.6%. Since the economy was still dynamic at the beginning of 2018, the growth rate for the year as a whole was positive at 2.6%. The poor economic figures pose a problem for President Erdoğan with local elections in Turkey at the end of March. The government has already introduced various measures in efforts to combat the high inflation figures, to keep the economy ticking over, and ultimately to placate the population. These have included raising the minimum wage, cheaper government distribution of basic foods as well as an extension to the reduced rate of…

Turkish central bank remains steadfast

The Turkish Central Bank (TCMB) recently decided to leave key interest rates unchanged at 24%. Probably even more important was the renewed confirmation of the bank’s intention to keep to its tight monetary course „until the inflation outlook shows a marked improvement“, with „further monetary tightening being delivered”, if necessary. With the local elections due to take place at the end of this month, the recent decision should generally underscore the central bank’s reputation. Although monetary independence in Turkey is not quite as strong as in the US, the UK or EMU, efforts to counter the continuing price pressure appear to be high on the central bank’s agenda. All in all, the recent decision of the Turkish Central Bank represents a positive development for Turkey. A politically independent central bank is a valuable asset for a country, and attempts to damage or restrict this independence usually create greater reluctance on…

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