Tag Archives: Germany

China Trade With EU

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I’m not very happy with the ‘US Trade Figures‘ post I put up last Friday. I think it’s a glorious mess. The key to the problem is that I tried to deal with two – interrelated but disinct – topics at once: the euro and China trade. So today lets ignore the euro (which has once more resumed the downwards drift, even as I write) and take a bit of a closer look at where we are – in trade terms – with China. (Btw: the planet has finally returned to its orbit, and Brad Setser has an analysis of the US trade data here).

The big item in this weekend’s news is, of course, the agreement reached with Beijing on textiles. The EU textile industry will now have three years to adapt, but since textile manufacturers don’t appear to have taken too much advantage of the ten previous years, it is hard to know whether this will serve any useful purpose. Doubly so, since it is not yet clear how the calculations will be made, and I have the distinct impression that much of the recent surge in imports will now, in effect, be consolidated.

Be that as it may, what about the broader issue?
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Germany: Exports and Inflation Revised Down

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According to NTCResearch:

Inflation in Germany rose less than previously thought in May, the Federal Statistics Office reported on Thursday. Germany’s harmonised index of consumer prices rose 0.2 percent month-on-month and 1.4 percent year on year, compared with initially reported rates of 0.3 percent and 1.5 percent, the Office said. Meanwhile, it was revealed today that Germany?s trade surplus narrowed in April as imports surged. After accounting for expected seasonal factors, the surplus declined from 14.7 billion euros to 12.6 billion. The smaller surplus reflected a 0.4 percent fall in exports and a 3.8 percent jump in imports, the data showed.

The downward drift in inflation needs careful monitoring. I’ve got a deflation alert call out on Germany remember. If Germany goes through the inflation wall, then the proverbial s*** really will hit the fan, since I can’t see the ECB doing non-conventional monetary policy. Come to think of it, maybe that’s what the meeting with Fels was all about.

Germany: An Optimistic Note From The IMF

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Michael Deppler, Director, European Department of the International Monetary Fund, said in a conference call on the economic outlook for the eurozone, that all was not as bleak as it seemed for the German economy:

“Then, you know, coming back to Germany, no question but that the past decade has been a very difficult one for Germany, but it’s one where it has registered strong improvements in competitiveness, and that you can see it clearly in the behavior of its exports. And just as, you know, strong improvements in competitiveness in France during–from the mid-eighties to the mid-nineties led to quite strong performance from the mid-nineties to now in France, well, basically we would expect the same thing to happen in Germany over the next five to ten years.

So in our view, the longer-term developments are, you know, not buoyant, but they’re certainly not things to be as negative about as seems to be the prevailing mood in Europe today.“

Heeding Henry.

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Joschka Fischer, the German foreign minister, may be coming out of the dog house – if only conceptually.

After even the left leaning German daily taz recently began publishing political obituaries for the man who more than anyone represents the political maturing (or not) of the generation of ’68 (following the affair about problematic political guidelines leading to criminal exploitation of German visa policies in Eastern Europe and in light of the looming federal election that will likely lead to a government without a Green party participation), Mr Fischer may have decided that it might be worthwhile to spend his remaining time in office not just by campaigning for a permanent German seat in the UN security council but by heeding Henry Farrell’s advice about the opportunities of a dieing European constitution and going back to his own foreign policy ‘roots’: In May 2000, he used a speech at Berlin’s Humboldt University to sketch out his ideas for ever closer union, “From Confederacy to Federation” (pdf available).
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Whew, What A Relief!

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The Bavarian cabinet is proposing a law allowing cars to be washed on Sundays and holidays. But only in the afternoons, you understand, so as not to interfere with church attendance. This is something like progress.

Now, since on average 7 percent of Germans attend services on Sundays, you may well ask what about the other 93 percent? And what of the residents for whom Friday or Saturday may be the week’s holy day? Well, you may well ask, but that doesn’t mean there are any good answers. But thank, er, Someone, for that old separation of church and state.

He Would Say That Wouldn’t He II

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In some ways I think this story may run and run over the months to come. Bloomberg have an update on their earlier article. According to the latest account:

1/. The German Finance Ministry have declined to comment on the Stern report that discussions took place last week between Finance Minister Hans Eichel, Bundesbank President Axel Weber and various economists on a possible failure of European Monetary Union.
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He Would Say That Wouldn’t he

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For those who are not old enough to remember, these are the immortal words of Mandy Rice Davies.
Now throwing a link quickly back across the Atlantic, Dave Altig at Macro blog picked up my ECB post and added a response from Hans Eichel.

But, the plot does thicken a bit.
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ECB: Just Look At This!

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I had promised a quiet day. I may have to eat my words. Look at this on the euro, and remember my post yesterday.

The currency also weakened after Germany’s Stern magazine reported German Finance Minister Hans Eichel and Bundesbank President Axel Weber discussed a possible failure of European monetary union. The euro is off to its worst start of a year since 2001, down 9.3 percent compared with the dollar.

“This is extremely bad timing and has undoubtedly compounded euro selling,” said Monica Fan, head of global foreign-exchange research at RBC Capital Markets Ltd. in London.

The euro retreated from as high as $1.2341 after the magazine said Eichel and Weber, who represents Germany on the ECB’s policy committee, discussed the euro’s potential failure with economists. The magazine quoted Joachim Fels, chief fixed- income economist at Morgan Stanley, who took part in the meeting. Fels declined to comment.

“We can neither confirm nor deny” that a meeting took place, said Bundesbank spokesman Wolf-Ruediger Bengs in a telephone interview. “We hope to issue a statement shortly.”

This is incredible stuff, and that it is breaking in the press must also be indicative of something. I go back to my post last week. It seems what I suggested is right: the ECB is deeply divided, and this ‘quietism’ and the policy of twirp is causing alarm in two important economies (Germany and Italy). This is not the end of the euro, but this discussion could mark the begining of the end. It all depends on how rapidly events unfold, and how long ‘ostrichism’ prevails in Frankfurt and Brussels.

Postscript: I am following the evolution of the Euro/USD over at our other page: A Few Euros More.

German Unemployment Remains At 11.8%

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Despite the recent surge in German GDP and export growth, and the ongoing structural reforms, German unemployment remains stubbornly high.

German unemployment was unchanged in May at close to a post-World War II high, dealing a blow to Chancellor Gerhard Schroeder’s chances of re-election.

The jobless rate, adjusted for seasonal swings, held at 11.8 percent, close to the postwar record of 12 percent recorded in March, the Nuremberg-based Federal Labor Agency said today. That was in line with the median of 31 forecasts by economists in a Bloomberg survey.

Angela Merkel The New Mrs Thatcher?

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It was inevitable I suppose. Comparisons between Angela Merkel and Margaret Thatcher are starting to roll. Such comparisons seem ludicrous to me, but I’d love to know what our German readers, who are undoubtedly a lot better informed than I am, think of it:

“Think of Angela Merkel as German chancellor and Nicolas Sarkozy as French president, and an intriguing notion arises – could Thatcherism belatedly arrive in Germany and France?

As soon as one imagines it, qualifications flood in. Ms Merkel has some characteristics of the former British prime minister – notably support for more radical economic reforms than previous CDU leaders – but not the same implacable force. She will probably tone down reformist zeal so as not to frighten the voters, and in any case faces internal resistance from conservatives, including the CSU sister party.“