Power vacuum in London

Good morning, dear readers,

When media professionals wanted to illustrate the relentless shortness of breath in the world out there, they used to use the number of HSV coaches who were worn out in a certain period of time. But the second division club from Hamburg has had the same coach for over a year now – a new standard of comparison is needed.

How about this: In his four and a half years as the main author of the Handelsblatt Morning Briefing, my colleague Hans-Jürgen Jakobs has seen three British Prime Ministers. And if Hans-Jürgen had handed over the official business of this newsletter to me just one week later, it would probably have been four.

As of today I am your new morning host and may first inform you about the turbulent events in London: There, the conservative party of the Tories is looking for a successor for short-term Prime Minister Liz Truss.

There had long been speculation about a comeback attempt by Boris Johnson. But late yesterday evening, the Truss predecessor surprisingly announced that he would not be competing after all.

This afternoon, the intra-party candidates must announce whether they have the required number of 100 Tory MPs behind them. Ex-Finance Minister Rishi Sunak has already crossed that threshold. Also in the running is Penny Mordaunt, Conservative majority leader in the House of Commons. However, with only 24 supporters so far, it is far behind.

If only Sunak reaches the 100 mark today, he would automatically become the new party leader and prime minister. If Mordaunt also makes it over the hurdle, there would be an online runoff among the approximately 180,000 Conservative members.

What the Brits are currently performing seems like a heavy metal festival of democracy: loud, chaotic and at times like a parody of their own genre. And yet I prefer the London version of the political power struggle a thousand times over than the ghostly choreography with which the new conditions were cemented in Beijing over the weekend.

At the local Communist Party (KP) party conference, stewards led former party leader Hu Jintao out of the meeting room, apparently against his will. Many observers see the action as a demonstration of power by the old and new party leader Xi Jinping. State media, on the other hand, explained the incident with the “discomfort” of the 79-year-old Hu.

The nice thing about both justifications: one does not have to exclude the other. After all, anyone who falls out of favor with Xi has every reason to be uncomfortable.

As expected, the CCP Central Committee yesterday voted for a third five-year term for 69-year-old Xi as general secretary. The party’s new leadership suggests Xi wants to stay in power even longer. According to our Beijing correspondent Sabine Gusbeth, two observations speak in favor of this: Due to their age, none of the six men from the new KP leadership is suitable as Xi’s successor. At the same time, the new leadership consists exclusively of Xi followers.

Federal Minister of Economics Robert Habeck is in the Handelsblatt interview no illusions about the economic situation in Germany: “Inflation is high and we will be in a recession in 2023. It’s a toxic mixture.” It’s about “getting the good substance of our economy through the crisis and maintaining its ability to invest, also so that the transformation can be tackled.”

Habeck hits a sore point: Many companies should now actually invest what the corporate coffers give. After all, there are three acute entrepreneurial challenges to be mastered:

• To become independent of expensive fossil fuels.
• To counter the labor shortage with more automation and rationalization.
• And at the same time not neglecting the search for new business models that still promise growth even in a digitized world economy.

However, growth is currently evident above all in the liabilities of German groups. According to Handelsblatt calculations, the net financial debt of the more than 150 listed companies in the Dax, MDax and SDax (excluding banks and insurance companies) rose by EUR 85 billion to EUR 533 billion within a year. That’s more than ever. The turnaround in interest rates by the central banks is also causing the costs for new loans to rise drastically: according to Bundesbank statistics, corporate bonds are currently yielding an average annual interest rate of 4.3 percent. Just over a year ago it was 0.7 percent.

With net financial liabilities, i.e. total debts less cash holdings, of 145.8 billion euros (and rising). Deutsche Telekom has the highest debt. Telekom and 24 other companies in the Dax, MDax and SDax now have more net debt than equity.

No wonder that company leaders are currently finding it difficult to recognize the opportunity that is supposed to be hidden in every crisis. Mainly because of the high energy prices, more and more companies are instead cutting investments or even entire business areas. That is the result of a survey by the Munich Ifo Institute among 1060 companies. 25 percent of them state that they are reacting to the stress by cutting jobs. Six months ago it was 14 percent. 17 percent want to give up their energy-intensive business areas in Germany. Six months ago, eleven percent had planned to do this.

And then there is the small festival of democracy that around 90,000 people from Tübingen celebrated yesterday. The re-election of long-term Lord Mayor Boris Palmer with 52.4 percent of the vote is less reminiscent of political heavy metal than of the marginal genre of folk punk – dissonant and rebellious. Palmer, whose membership of the Greens is currently suspended due to various verbal abuse, had been confronted with an opposing candidate by his own party. She was unsuccessful.

I mean, regardless of what one thinks of Palmer, such regional resilience to party democracy is a testament to real popular rule. Rating: worth preserving.

I wish you a day with the right amount of dissonance.

Best regards

Her

Christian Rickens