They do not expect the German economy to pick up again until next year at the earliest.

Trump’s all-purpose weapon: what you need to know about punitive tariffs and free trade. (Source: t-online.de)

Worsening of the customs conflict

In a statement, the Chinese central bank attributed the latest development to protectionist tendencies, which can be seen as a paraphrase for the trade dispute with the USA. The US government is unlikely to be happy about the yuan’s devaluation. Trump, together with Europe, has repeatedly accused China of devaluing its own currency in order to gain advantages in international competition. 

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Trump announced further punitive tariffs of 10 percent on Chinese goods worth $ 300 billion a few days ago. In the event of an expansion, all Chinese imports into the USA would in fact be subject to punitive tariffs. Trump had justified his announcement with the fact that China would not – as actually promised – buy more agricultural products from the USA.

Sources used: Reuters news agency, dpa

The economic outlook in Germany remains subdued, announced the Ministry of Economic Affairs in its economic forecast. Employees in the industrial sector in particular have to be prepared for cuts.

The federal government expects sustained headwinds for the German economy. “The domestic economy is still intact, but the export-oriented industry is going through a dry spell,” says the Ministry of Economic Affairs’ monthly report. After the significant growth in gross domestic product in the first quarter of 0.4 percent, the prospects for the second remained subdued for the time being.

“Industrial weak phase” continues

“The noticeable decline in incoming orders in industry since the beginning of the year as well as the business climate, which continued to deteriorate until May, signal a continuation of the industrial weak phase,” emphasizes the ministry. However, employment and income are likely to continue to grow noticeably, as is construction investments.

“The labor market is showing the first skid marks,” write the ministry experts. “With the increase in employment, the lower dynamics solidify.” Unemployment increased in May not only due to special effects. In view of the cooling economy, the Federal Employment Agency is already preparing for an increase in short-time working in industrial sectors, as the head of the employment agency Detlef Scheele reports.

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The federal government expects economic growth of only 0.5 percent in 2019 due to trade conflicts and risks such as Brexit.introduction paragraph for to kill a mockingbird In 2018 it was still 1.4 percent.

Sources used: Reuters news agency

With the dirty cum-ex deals, banks and traders cheated the tax authorities out of billions. Employees from Deutsche Bank may have been involved – even from top management positions.

The public prosecutor’s office in Cologne has significantly expanded its investigation into Deutsche Bank in connection with controversial cum-ex tax transactions. According to a media report, current and former board members now also belong to the group of suspects – including ex-bank boss Josef Ackermann.

As a spokesman for the money house explained, the authority, which has been investigating two former employees of Deutsche Bank since August 2017, has initiated new investigations “against other former and current employees and board members”. It is about cum-ex transactions of certain former customers of the bank.

According to a report by the “Süddeutscher Zeitung”, NDR and WDR, vice-chairman Garth Ritchie and at least two former board members, including ex-bank boss Josef Ackermann, have now been targeted by the investigators. A total of around 70 current and former employees of Deutsche Bank would be investigated.

The bank said that the prosecution’s measure had procedural reasons, so that a limitation period should be interrupted. The bank does not assume that the public prosecutor’s assessment of the facts has changed. “This has not changed the bank’s assessment of the facts either,” said the spokesman.

In the case of cum-ex transactions, investors took advantage of a loophole in the law that has now been closed and had capital gains taxes paid back several times. As a result, billions escaped the tax authorities. According to “SZ”, NDR and WDR, banks have now also been included in the new investigations, which should not have operated such deals themselves, but should have been involved in their processing. 

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 Josef Ackermann ran the bank for ten years. In May 2002, the investment banker was the first foreigner to take over the top position at Germany’s leading financial institution and polarized from the start. In the Mannesmann trial in 2004 he showed the victory sign in the courtroom, in 2005 he cut thousands of jobs and at the same time announced a return target of 25 percent. Under his aegis, Deutsche Bank became one of the world’s leading investment banks and steered it through the financial crisis without government aid.

Sources used: Reuters news agency “Süddeutsche Zeitung”: Justice is targeting Deutsche Bank

The economic downturn is also showing its mark on the labor market: Compared to July, the number of unemployed increased by 44,000 in August. The unemployment rate also rose. 

The number of unemployed in Germany rose to 2.319 million in August. That was 44,000 more unemployed than in July and 31,000 fewer than a year ago, as the Federal Employment Agency announced on Thursday in Nuremberg. The unemployment rate rose by 0.1 percentage points to 5.1 percent.

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The number of unemployed in July was 2.275 million, 49,000 less than a year earlier. 

Sources used: dpa news agency

Under pressure from US President Donald Trump, the EU wants to give American beef producers better market opportunities in Europe. Other US products are also to be promoted.

US beef is to be preferred in the EU in the future. According to the EU Commission, parts of the global EU import quota of 45,000 tons annually are to be reserved for US suppliers. Within seven years, the US supply share could increase to 35,000 tons per year.

Only 10,000 tons would then come from the other main supplier countries Argentina and Uruguay. According to information from Commission circles, they have so far been able to share around two thirds of the import quota.

Meat deal defused trade conflict

The EU’s relenting on the issue is one reason why Trump declared himself ready last summer to let the trade conflict with the EU rest for the time being and also agreed not to introduce any further special tariffs on cars or other goods from the EU for the time being. The deal negotiated at the time also provides for the EU to promote the import of soy and liquefied gas from the USA.

EU Agriculture Commissioner Phil Hogan referred to the agreement that had now been reached that only the import of hormone-free beef was allowed. The quality and safety of beef imported into the EU will not be changed.

There has been a dispute between the US and the EU over beef for decades. The core was the EU import ban on hormone-treated beef, which the USA considers to be incompatible with WTO rules. As a compromise, import quotas were finally introduced for non-hormone-treated beef. So far, however, they have also ensured that other countries have been able to do very good business in the EU. 

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 The agreement negotiated by the EU Commission with the USA now has to be approved by the governments and the EU Parliament.

Sources used: dpa news agency

The World Bank sees the coming year as positive. However, economic growth is not expected to be the same in all countries. Some are even in “dangerous waters”. 

The World Bank has raised its forecast for global economic growth this year by one percentage point to 2.5 percent. Trade and investment should increase globally in 2020 and strengthen the economy, said the World Bank. The economies of the industrialized nations are expected to lose some momentum in 2020 and grow by only 1.4 percent. In contrast, growth in emerging and developing countries is expected to increase from an expected 3.5 percent for 2019 to 4.1 percent.

Warning of a new wave of debt 

After a growth of 2.3 percent forecast for 2019, the US economy is only expected to grow by 1.8 percent this year due to the effects of the trade conflicts and increased uncertainty. The World Bank lowered its growth forecast for the eurozone by one percentage point to 1.0 percent compared to the previous year due to a weakness in the manufacturing sector.

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At the same time, the Washington-based World Bank issued an urgent warning of a new wave of debt in emerging and developing countries that are currently in “dangerous waters”. Low interest rates in large parts of the world since 2010 have led to significantly higher levels of debt in many countries, according to the World Bank report. These countries should now work on strengthening their budgets and financial systems in order not to slide into a crisis when interest rates rise again. Because of the high level of debt, states could hardly cope with possible external shocks, it said.

Sources used: dpa news agency

There are increasing warnings that the German economy, after falling in the second quarter, has also shifted into reverse in the following months. Is the largest economy in Europe headed for a sharp recession with a drastic rise in unemployment?

According to leading economists, the German economy is clearly losing momentum and is likely to contract in the third quarter as well. Research institutes also justified the weak economic dynamism with political risks such as Brexit and trade conflicts. They do not expect the German economy to pick up again until next year at the earliest. The trades, on the other hand, reported that business was still good.

The Kiel Institute for the World Economy (IfW) expects a minus of 0.3 percent in the third quarter compared to the previous quarter. The RWI-Leibniz Institute for Economic Research in Essen is not quite as pessimistic for the months of July to September: “In a short-term forecast, we expect minus 0.1 percent,” said Vice-Economic Director Torsten Schmidt. In the second quarter, the German economy had shrunk by 0.1 percent compared to the previous quarter.

This is a “technical recession”

If economic output falls for two quarters in a row, economists speak of a “technical recession”. In this case, however, it is only a very mild recession. It would look different if economic output for the year as a whole shrank compared to the previous year. However, this is not currently expected. This was last the case in 2009 as a result of the global financial crisis; since then, the German economy has grown continuously, with some strong growth rates. On November 14, the Federal Statistical Office will publish data on German economic performance in the third quarter.

“A sharp recession in the true sense of the word, that is, clearly falling below the capacity utilization in companies with a drastic rise in unemployment, is currently not in sight,” said IfW President Gabriel Felbermayr to the newspapers of the Funke media group. However: “A noticeable recovery in the economy can be expected in the course of the coming year at the earliest.” In 2018, the German economy grew by 1.5 percent.

This is the forecast for the full year

For the full year 2019, Kiel-based IfW economists and RWI believe that the largest economy in the euro zone will only grow by 0.4 percent. The RWI expects growth of 0.9 percent for 2020, and 1.3 percent for 2021. The IfW researchers are assuming an increase of 1 percent for 2020, and economic output should increase by 1.4 percent in 2021. From the perspective of the RWI, the unemployment rate will probably be 5.0 percent this and next year and drop to 4.9 percent in 2021. The IfW is forecasting an increase in the rate over the next two years to 5.2 and 5.3 percent.

“There are increasing signs that the weak phase is continuing and that the economy in Germany is going into a downturn,” warned the RWI. Similarly, the German Institute for Economic Research (DIW): “Germany’s economic foundation is crumbling worryingly.” The production output of the industry specializing in exports has been falling significantly for a year. Above all, there is a lack of demand from other European countries, above all from Great Britain and Italy. So far, there has been strong domestic demand. That is why the DIW is expecting economic growth of 0.5 percent this year.

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Companies are clearly feeling the global economy cooling down

The DIW again called for more state investments. “In these difficult times, Germany needs an anchor of stability through a long-term investment program by the federal government,” said DIW President Marcel Fratzscher. “Instead of complaining about the low interest rates, politicians should see them as an opportunity to invest wisely in the future.”

According to the German Chamber of Commerce and Industry (DIHK), many companies are feeling the cooling of the global economy. “Brexit is also having a negative impact on the economy across Europe,” said DIHK boss Eric Schweitzer to the Funke newspapers