Overview: 1. A recession is coming now? 2. What is the role of the car industry? 3. What are the government plans? 4. Got to Spend the state’s money? 1. A recession is coming now?
It looks like Germany was rammed for the time being just past it. Economists speak of a recession, if the economic performance of a country declines for two quarters in a row. In the third quarter of last year, the German gross domestic contracted product (GDP), in fact. Official data for the fourth quarter are published only in February, after all, what is known so far, is not the economy shrank after that, however. Thus, the technical preconditions for a recession are not met.
is A quite different question, what follows from it. The growth rate in a quarter is not says, in fact, taken by itself, is still very much on the economic situation in a country. Unemployment, for example, generally increases even if the economy does not increase performance over a longer period of time, only slightly, even if it drops the same. And conversely, it has little impact on the labour market, when the GDP shrinks for a few months, but then increases again.
Of the latter scenario, the majority of Economists currently expect. To do this, you must know that the economy has recently lost, mainly due to a special effect force: In the autumn of a new exhaust emission test procedure for cars was introduced, and some of the major car manufacturers have throttled in the context of the conversion of the production. According to estimates by the Institute for the world economy in Kiel alone, this has dampened the rate of growth in the third quarter by about 0.3 percentage points. This means that The manufacturer will try in the coming months, the production losses to compensate for – the would rates then in correspondingly higher growth. And The drought of the summer months has affected the ship traffic on the Rhine, with the result that the there is a large number of established chemical companies were able to their Goods not as usual. Some of them even had to temporarily stop the tapes. These failures can be recovered.
to be Added: There is also positive news. Never before have so many people in Germany were in employment as at present. Employment has reached 44.8 million people, a new high. Because wages increase, most people have more money to spend. And give it also. In the past year, private consumption increased by 2.6 percent. Based on the economy, say those who believe that it is not going to come so bad. Finally, Germany had one of the longest upswing phases of the post-war period, since it is only normal that the economy is now a little weaker.
This article dates back to the TIME no 04/2019. Here you can read the entire issue.
However, there are now more and more experts who do not share this assessment. Finally, the economic momentum in the United States and China, two key export markets for German companies. And within Europe, it doesn’t look much better: The riots in France are a burden on the economic climate, in Italy there may be a new financial crisis, and the threat of Brexit charged to the business relations with the British.
last year, exports increased only half as strong as the year before. Foreign trade, long the engine of the German economy, currently, only a few impulses for the economy. Overall, the economy in 2018 by only 1.5 percent – the lowest level in five years and compared with 2017, a decrease of 0.7 percentage points. If the global trade escalate disputes, it could go in this year, you still need to continue to the bottom.
conclusion: It is by no means certain, that for nearly ten years, lasting economic recovery in a real economic downturn with job losses, Tax losses and a change of Mood in the company is – but it is for the first time in a Long time, also not completely unlikely.
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2. What is the role of the car industry?
A key. The historically long upswing is mainly due to the fact that the car manufacturer – by far the most important industry have earned branch in Germany – in spite of various exhaust scandals strong, and more people hired. Of the sales records for BMW, Daimler and Volkswagen, are also large suppliers such as ZF, Continental and Bosch benefited. The heavier weighed the news that Bosch degrades due to the diesel crisis, 600 in drive technology. At the end of last week Ford announced job cuts in Europe, previously General Motors had announced a savings program.
Quite so pessimistic as the Germans are not. The German Association of the automotive industry (VDA), spoke of a positive annual balance in 2018. Some 3.4 million cars were alone method approved in Germany – despite the problems with the new Exhaust. For the Association’s President, Bernhard Mattes, the German car market is “very robust”. For the current year, the signs were “more on growth”. One reason: The manufacturers are introducing a variety of new models and have the more stringent emission controls, month-to-month is better in the handle.
And yet the industry is changing tremendously. So VW and other manufacturers have to behavior is the threat of diesel driving bans, changing customer needs and invest in a fleet of many billions in the construction of a Electric. The race for the electric cars have not lost the German manufacturer for a very long time. For this year, Porsche and Audi first pure electric vehicles have been announced, with the flagship model S, the American manufacturer Tesla. Next year, VW will follow up with the ID in the compact class. Thus, the U.S. market is to be conquered.
Nevertheless, all of this is a “huge challenge”, as stated by the Volkswagen group works Council chief Bernd Osterloh. For example, while a few years ago, 50 percent of vehicles from Wolfsburg, had a diesel engine, order it today, only 15 percent of customers with a self-igniter. This trend is turning so suddenly hardly cope, because the suppliers must for gasoline engines other parts than for Diesel.
Dangerous anything else, it could be for the large German manufacturer. China suffers increasingly under the trade conflict with the United States. For this year, the Center for Automotive Research expects 22 million new car sales of around two million less than two years ago. At the same time, the factory has grown capacity is tremendous, so the manufacturer will try, with discounts, their cars get rid of. A recession in China would thus be felt in Wolfsburg, Stuttgart and Dingolfing.
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3. What are the government plans?
The government does not exist in this case, because the Union and the SPD to pull different rates of consequences from the lower growth. From the point of view of the Union, the coalition should respond to the weaker economy with a comprehensive tax relief. Specifically, the leading Union politicians, including business Minister Peter Altmaier, the solidarity surcharge is to be abolished in this legislative session complete. Background: In the coalition agreement, it was agreed that the special levy to the financing of the German unity only for the bottom 90 percent of taxpayers to abolish that top earners need to pay him accordingly. The Argument of the supporters of such an approach: If the state reduces taxes, and can spend more money supporting the economy. And: Because in Germany a whole series of smaller companies – so-called people, companies have to pay the solidarity surcharge, would also be relieved of these and could invest more.
The SPD, however, insisted that the coalition is adhered to the contract. The German Finance Minister, Olaf Scholz, don’t believe that tax help relief for top earners in the economy. He argues that workers are not sectors with a high income, a large part of their earnings, which is why they are spending more money, if the state will lower the taxes. In the SPD, you think more likely to increase in the event of a downturn, the public investment or the company by more favourable tax Credits. But above all, the social Democrats say that it was a discussion about possible measures to support the economy too early. So is not yet clear whether the downturn has really come.
the engagement party-political considerations play at least as important a role as economic ones. For both coalition partners, the change in the economic situation is a Chance to distinguish themselves. In the Union, the new CDU-Chairman, Annegret Kramp-karrenbauer has to make sure that she holds the pendant of her in the Board elections, defeated rival, Friedrich Merz, in a good mood. Merz wanted to score points with a more liberal focus, and called for a complete abolition of the solidarity surcharge, which is mainly in business-oriented party circles very arrived good. The economy is politically charged reaffirmation of this claim, therefore, also serves to secure the internal peace of the Union.
In the SPD, in turn, it is believed that an expansion of public investment, with voters from the social democratic camp arrives better than tax cuts for top earners. And you want to be the subject of the Union to take away. Finally, Scholz was Federal Minister of labour, one of the architects of the economic stimulus package, the big coalition reacted almost exactly ten years ago to the severe recession as a result of the financial crisis. Under his leadership, among other things, the short-time working was extended to money, what is considered today as an important contribution to Overcoming the crisis.
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4. Got to Spend the state’s money?
no. The Federal government has generated in the past year alone a budget surplus of 11.2 billion euros. The money is earmarked already. So, the government intends to increase in the coming years, among other things, the expenditure for defense and development aid, research and development in the company, for tax purposes, and promote the production of battery cells, using public funds to push. This is likely to consume the Surplus.
In recent years, special wishes could be financed in the rule anyway, because the Federal government took because of the good economy, always more taxes than initially estimated. If the economic performance is weakening, this will not be the case. The government is expected by the end of January their own growth forecast – which is correct, the basis for the estimate of tax revenue – down significantly. Maybe not at the end, but even less money than planned. In one of the Union faction in the Bundestag, wrote a list of the main budget items is even talk of a looming “funding gaps” in the budget.
: Still not in the budget planned expenditure such as a complete abolition of the solidarity surcharge, or also new investments in the current environment will, in all likelihood, only be possible if the coalition sweeps for other spending. After all, it would cost annually about ten billion Euro in addition to free also the top earners from the solos. To is a counter-financing by spending cuts, the government is not prepared. You could alternatively also make a new debt, but this would mean that for the first time in five years, the objective of a balanced state budget is to be abandoned. That would just be for the Union to convey politically difficult to, finally, the CDU and the CSU are to guarantee sound public finances.
And even if the CDU leader, Annegret Kramp-Karrenbauer would enforce a change of course: The debt brake in the basic law is constructed in such a way that puts the public borrowing in the good times. The idea is that If the economy is growing, it needs no government boost. Specifically, the Federal government is expected to currently, according to estimates from government circles less than three billion euros in the year to borrow. Only when the gross domestic from developing product significantly, higher loan amounts possible. Therefore, it is unlikely that the state transacts high expenditures for the economy – unless the downturn really comes.
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