Browsing all articles tagged with German

German Economy to Pick up Although Fall Short of Traditional Pace

Germany’s economy will recuperate from a bout of winter weakness however fall well short of the dynamic growth rates of previous years as euro zone recession and global slowdown stunt investment and exports.

There are homegrown problems too. What hue of government will result from September elections is injecting doubts and foreign investors cite worries regarding over-regulation and Germany’s future energy mix after Chancellor Angela Merkel turned her back on nuclear power.

Europe’s paymaster was long flexible to the euro debt crisis but contracted at the end of previous year and only eked out meager growth in the first quarter.

The Bundesbank stated this week a solid second quarter recovery was in prospect. Construction is expected to bounce back following a harsh winter and private consumption will grow thanks to low unemployment inflation-busting wage boost and low interest rates.

Although even the government forecasts just 0.5 percent growth in 2013 and economists doubt German companies will start investing heavily in the short term.

Christoph Schmidt, head of the German Council of Economic Experts, nobody expects strong growth for this year now particularly as the first quarter was so sobering, advisors to the government known as the wise men.

The economy grew just 0.1 percent in the first quarter following shrinking 0.7 percent in the previous three months of 2012.

Schmidt said trade will not contribute much, it could even drag on growth so that leaves domestic demand, private consumption is comparatively stable however investments are restrained and the key question will be when and how much they pick up.


ECB Says Has Tools Left to Act if Required

ECB policymakers said that European Central Bank still has room to plan should the euro zone economy persistent to worsen following it cut interest rates to a new record low previous week. The ECB cut its main rate to 0.5 percent previous Thursday.

Yves Mersch, a member of the ECB’s six-man Executive Board stated the bank still had tools at its disposal, however added that it could only spur lending to small euro zone companies in combination with other European institutions.

Joerg Asmussen stated the ECB had an open mind about what it could do to renew lending to small and medium-sized enterprises known as SMEs a growing concern for the central bank, principally in the crisis-stricken periphery countries.

Mersch said in a panel discussion in the northern German city of Aachen that we still have tools in our toolbox we are not a toothless tiger.

The ECB stated previous week it had set up a task force with the European Investment Bank known as EIB to assess ways to unblock lending to SMEs, for example by supporting a market for asset-backed securities known as ABS based on SME loans. ABS would permit banks to pass some credit risk on to other investors, enabling them up to lend more.

The move to promote ABS is controversial mainly in Germany, because during the financial crisis such securities became toxic due to the default of housing loans that underpinned them.

We have an open mind to seem at all things that we can do within our mandate and this relates to how can the market for asset backed securities, particularly backed by SME loans, be revitalized in Europe.

Asmussen was responding to a question regarding a Wednesday article in German newspaper Die Welt, which cited a central bank source as saying a majority of ECB Governing Council members seemed to be in support of the central bank buying ABSs itself.


Euro zone Slump Moderates However German Uncertainties Appear

A sharp fall in German business activity overshadowed an easing slump in France in April, surveys showed on Tuesday, and lifting concerns over a further economic contraction in the euro zone.

Markit’s flash euro zone services PMI, an early gauge of business activity each month climbed to 46.6 in April from 46.4 in March, below the 50 line that divides growth from contraction however matching the predicted of economists.

Survey compiler Markit cautioned against taking the increased as a clear sign the region’s recession has bottomed out, pointing to a surprise turn down in German companies that form the backbone of the euro zone economy.

Chris Williamson, chief economist at Markit said that formerly we’ve seen Germany expand while other countries have contracted – notably Spain, France and Italy.

Currently it seems those contractions are being accompanied by a recession in the largest economy, Germany, and that will no uncertainty act as a drag on growth.

Williamson stated officials at the European Central Bank, which meets coming week to decide monetary policy, may be relieved to see the euro zone PMIs at least did not signal a promote deterioration this month.

The forward looking indicators suggest there are risks to the weakness for the contraction to gather pace. The euro zone economy contracted 0.6 percent quarter on quarter in the previous three months of 2012.

Comments by European Central Bank policymakers on Monday stressing declining inflation and poor growth prospects in the euro zone suggest the ECB may be leaning towards an additional cut in its main interest rate.

Confidence in services companies concerning the coming year slipped to the lowest level this year, with the business expectations index fall to 55.7 from 56.2 in March.

Consumer morale in the euro zone improved in April, the European Commission stated on Monday, however remained well below the currency area’s long-term average.


German Court to Hear Case Against ESM, ECB bond-buying in June

Germany’s Constitutional Court said on Friday that it would hold a public hearing on complaints against the euro zone’s bailout fund the European Stability Mechanism, and the European Central Bank’s bond buying program on June 11 and 12.

The seven complaints in total, reflect German unease regarding the mounting costs of dealing with the three year debt crisis and fears that the ECB bond buying program may violate the taboo against direct central bank financing of state budgets.

The court based in Karlsruhe southwestern Germany, ruled in a preliminary verdict previous September that the ESM did not violate German law and could go further on, while it insisted on veto rights for the German parliament.

The ECB has not yet trigger the program as struggling euro zone states, previously implementing tough austerity measures, are reluctant to recognize the onerous conditions of the program, however the pledge alone has been enough to bring down their borrowing costs over recent months.

Gunnar Beck, constitutional law expert said he did not expect Karlsruhe to support the complaints, given its precedent record on not blocking moves towards European integration, despite the legal worries over the bond buying program.

There is no doubt that the EU contract, rule out bond purchases whenever they might facilitate state financing through the printing press and permit indebted states to obtain enhanced rates than they would otherwise.

There is no significant precedent where the German constitutional court has directly challenged the German government over an issue of European policy.

He added, I have no doubt the court will present to the government’s wishes in one form or another when it comes to the ECB bond purchases.

Political analysts say a decision is unlikely earlier than Germany’s September election when Chancellor Angela Merkel, her popularity enhanced by what voters see as her competent handling of the euro zone crisis is expected to win a third four year term.


Cyprus Bank Particulars Heavy Losses for Major European bank Customers

Foremost depositors in Cyprus’s largest bank will lose about 60 percent of savings over 100,000 euros, sharpening the terms of a bailout that has surprised European banks however saved the island from bankruptcy.

preliminary signs that huge depositors in Bank of Cyprus would take a strike of 30 to 40 percent the first time the euro zone has made bank customers added to a bailout had previously unnerved investors in European lenders this week.

The strength of the conditions sends a clear signal that the bailout means the end of Cyprus as a center for offshore finance and could accelerate economic turn down on the island and bring steeper job losses.

Banks reopened to relative calm on Thursday following the imposition of the initial capital controls the euro has seen since it was launched a decade ago.

Tryfonas Neokleous, owner of a clothes shop on a cobbled street in the center of the city said that the Europe should not have allowed this disaster to happen here. Cyprus was heaven and they have turned it into hell.

He further said that he didn’t except business to pick up even now that the banks were open again following an approximately two-week shutdown.

He don’t anticipate anything and he don’t expect for anything anymore. People are going to spend their money on food and the whole thing else they have been depressed of the last 15 days.

There are no symbols for now that bank customers in other struggling euro zone countries like Italy, Greece or Spain taking fright at the precedent set by the bailout.

German Finance Minister Wolfgang Schaeuble informed German mass selling daily Bild that savings accounts in Europe are safe Cyprus is and will remain a special one off case.

European representatives have worked hard this week to stress that the island’s bailout was a exceptional case following a proposal by Euro  group chairman Jeroen Dijsselbloem that the rescue would serve as a model for potential crises rattled European financial markets.


Cyprus settled A Final Deal With International Lenders To Close Bank, Force Losses

Cyprus settled a final deal with international lenders to pack up its second greatest bank and caused serious losses on uninsured depositors including wealthy Russians, in return for a 10 billion euro  which is equal to $13 billion bailout.

The contract came hours prior to a time limit to prevent a collapse of the banking system in fraught discussions among heads of the European Union and President Nicos Anastasiades, the International Monetary Fund and the European Central Bank.

Rapidly authorized by euro zone finance ministers, the plan will spare the Mediterranean island a financial render down by twisting down the largely state owned admired Bank of Cyprus which is also known as Laiki, and switching deposits lower than 100,000 euros to the Bank of Cyprus to create a good bank.

Deposits over 100,000 euros in both banks, which are not assured under EU law will be frozen and used to determine Laiki’s debts and recapitalized Bank of Cyprus through a deposit/equity exchange.

Jeroen Dijssebloem, Eurogroup chairman said that the attack on uninsured Laiki depositors is expected to lift 4.2 billion euros.

Bank of Cyprus will effectively be shuttered with thousands of job losses. Representative stated senior bondholders in Laiki would be wash out and those in Bank of Cyprus would have to make an input.

An EU presenter stated no across-the-board tariff or tax would be imposed on deposits in Cypriot banks, even though the strike on large account holders in the two major banks is probable to be far superior than originally planned. A first attempt at a deal previous week distorted when the Cypriot parliament discarded a proposed levy on all deposits.

Christos Stylianides, Cyprus government presenter said that they prevent a uncontrollable bankruptcy which would have directed to an exit of Cyprus from the euro zone with unforeseeable consequences.

Wolfgang Schaeuble, German Finance Minister said that the Cypriot officials would not require to vote on the new scheme, as they had previously passed a law setting procedures for bank declaration.

The IMF and EU required that Cyprus lift 5.8 billion euros from its banking sector towards its own financial rescue in return for 10 billion euros in international loans. The head of the EU rescue fund stated Cyprus should obtain the first emergency funds in May.

IMF chief Christine Lagarde stated that the agreement was a credible and comprehensive plan that concentrate on the core problem of the banking system. This contract provides the basis for returning trust in the banking system, which is key to following growth.


Gold Traded Near 3 week High On Cyprus Bank Crisis

Yellow metal traded on a stable rate during the Wednesday’s trading session, holding close to a three week’s high as Cyprus’s rejection of bailout terms triggered doubts regarding a default, supporting safe haven demand in precious metal.

Cyprus’s parliament tremendously rejected a planned levy on bank deposits as a condition for a European bailout on Tuesday, throwing international efforts to rescue the current victim of the euro zone debt crisis into disarray.

Revolutionary build US homes climbed in February and allow for construction rise to their maximum level since 2008, signs the housing market revival is gathering condensations.

German investor and analyst reaction edged up in March in an additional sign that Europe’s greatest economy bounce back in the first quarter however the ZEW cautioned that there was an augmented risk the euro zone debt crisis was worsening.

Spot gold float on little changed rate at $1,612.26 per ounce by 0026 GMT, close to a three week high of $1,615.16 per once strike during the Tuesday’s trading session.

US gold traded almost flat at $1,611.70 per ounce.

Gold futures rise on Tuesday to compute a fourth straight session addition as doubt’s surrounding a future tax on bank deposits as part of a bailout plan sustained to brighten .

Gold futures for April delivery rose $6.70 or 0.4%, to reconcile at $1,611.30 per ounce on the Comex division of the New York Mercantile Exchange.


World Shares Slipped On Italy vote, German Bunds Grow

Italy’s uncertain election outcome’s sparked a sell-off on world equity markets on Tuesday and sent safe haven German bond yields harshly lower as investors feared a revival of the euro zone debt crisis.

The euro temporarily touched a seven week low verses the greenback to trade near $1.30 following no clear majority emerged from the vote, lifting the outlook of weeks of political doubts and potentially another election presently in the year.

Alessandro Tentori, Citigroup’s head of global rates said that this is the worst probable conclusion from the market’s point of view.

Yields on 10-year Italian government bonds climbed 45 basis points to 4.82 percent as Italy’s main stock market index. FTMIB fall five percent with shares in some of the country’s major banks down over 10 percent.

Holger Schmieding, chief economist at Berenberg Bank said that the very close consequence and the stalemate among the two houses of parliament point to a non trivial threat of new elections, accumulating there was also a small risk that new elections could direct to a referendum in Italy on the euro.

The euro stable at about $1.3080, climbed about 0.15 percent following declining as low as $1.3039, its lowest since January 10.

The spotlight will now be on an Italian treasury bill auction afterwards, when Rome’s borrowing costs could increased.

Further on of the auction investors were screening a clear predilection for protection, with the yield down 8 basis points at 1.5 percent on 10-year German bonds, as riskier Portuguese and Spanish bonds were coming under heavy selling pressure.


Spanish And German Jobs, To Have And Have-not

Everyone required a New Year reminder of the split that has been threatening to tear apart the 17-nation euro zone need only look at Thursday’s Spanish and German jobs data.

The figure of Germans jobless were actually climbed for the ninth month running in December, dazzling some of the damage of the euro zone debt crisis on Europe’s major economy.

Germany’s jobless figure rises and remains close to a post reunification low. Spain’s development was based approximately entirely on temporary holiday jobs. About one-in-four Spaniards are out of work.

The prospect for 2013 from analysts is jobs growth in Germany and additional joblessness in Spain.

The labor accomplishment in Germany  unemployment rate about 6.8 percent, is moderately thanks to years of wage command and structural reforms undertaken in the mid-2000s.

Spain, the euro zone’s fourth major economy only passed a labor reform in February 2012, under European Union stress to meet budget deficit targets.

Mariano Rajoy’s, Spanish Prime Minister said that jobs reform has shaken up working regulations to make it easier to fire people, leading to enormous lay-offs at big companies.

Enduring hiring in Spain has yet to pick up despite efforts to make the structure more flexible.

According to labor ministry figures, Although the amount of people out of work in Spain knock down by 1.2 percent in December typically thanks to the holiday hiring, analysts were not hopeful for a change in trend in the damaged job market.

IHS Global Insight analyst Raj Badiani, predicting a further labor shake-out by saying that we anticipate renewed job losses at the start of 2013, with the current lead indicators suggesting the economy is set to tolerate further output losses in the first half of 2013.


U.S Election affects on ECB & BoE

Essential U.S and global policy areas have been deadlocked ahead of the US Presidential and Congressional elections. Following Tuesday’s vote the political impasse will be announced and an upward movement is expected in markets, instability as risk premiums move to show a more sobering reality. The most probable results are a bit defensive and strengthen dollar, particularly as the Euro-zone again intimidates to implode over Greece. Market satisfaction over narrow forex ranges is also likely to be whacked, especially with concerns that liquidity levels have been critically compromised.

Recent ECB meeting, on Thursday, is doubtful to verify euro positive and the market is expected to refocus on Europe, after being sidelined by the US over the past quite a few weeks. During the current trading session services PMIs were all in contractionary area, with the Euro zone’s at 46; German and French PMIs were notably weak (48.4 and, respectively). Weak factory orders for Germany wii be announced today, a conspicuously unstable series; however it is difficult to disregard the weakness of  -3.3% m/m.

While markets will now look to Thursday’s BoE for domestically driven movement, expect the GBP to trade on broader market sentiment given the near term, two-way risk arising from US politics.   The outlook for BoE policy remains supportive of the GBP, however the recent disappointment in PMIs and now IP may add to a renewed desire for measures to ease the burden of ongoing structural adjustment.