The deputy editor-in-chief’s weekly recap

Good morning everyone,

I don’t know about you, but my pulse doesn’t automatically beat faster when we say in the conference: “Today we are doing something about the inverted yield curve.” I feel more like I’m back in the lecture hall and confronted with the infinite depths of finance, which I haven’t always been able to explore to the bottom.

The inverted yield curve is worth a look, it signals an impending recession – in the USA, the largest economy in the world. And it is considered one of the most reliable post-war indicators of an economic slump, writes my colleague Leonidas Exuzidis, referring to the chart below.

One speaks of an inverted yield curve when the yields for shorter maturities on the bond market are higher than those for long maturities. This is rather the exception, but has been the case with US bonds for some time now. Given the recent crisis of confidence in the banking sector the US Federal Reserve now also considers a “mild recession” in the USA to be likely, as the minutes of the Fed meeting at the end of March show.

Despite the turbulence, US banks are surprisingly strong. This is shown by the quarterly figures from America’s largest bank, JP Morgan Chase, Citigroup and Wells Fargo. The Wall Street institutes opened the reporting season for US banks on Friday.

The International Monetary Fund, on the other hand, warns of “challenging years” for the entire world: “The global economy is in an extremely uncertain situation,” says the “World Economic Outlook” published by the IMF on Tuesday. The forecast for Germany in particular is bleak. According to the IMF, gross domestic product is expected to fall by 0.1 percent this year.

The bleak prospects immediately called the Minister of Finance into action. The IMF is very cautious, said Christian Lindner in Washington on the fringes of the IMF conference. This does not correspond to the forecasts of the federal government, which are more optimistic. At least in the first quarter, GDP should have increased slightly, the Ministry of Economic Affairs announced on Friday and spoke of one “economically favorable start at the beginning of the year“. However, also from the many risks for the economy in the coming months.

Handelsblatt chief economist Bert Rürup is less optimistic, he states: Contrary to the announcements of the federal government, the German economy has not come through the double crisis of pandemic and Ukraine war well – and there is no improvement in sight.

Let’s still hope for the best for Germany, the USA and the world!

What else kept us busy this week:

1. China’s diplomats gave Foreign Minister Annalena Baerbock an unusually friendly welcome. But at the press conference with her Chinese counterpart Qin Gang, Baerbock showed that she was not impressed by the charm offensive – at least not for the time being. Above all, she addressed the critical points with regard to China and exchanged blows with Qin. In turn, he railed that what China needs least is “a teacher from the West”.

2. Let’s stay in China: With a wide range of plug-in hybrids, VW, Mercedes-Benz and BMW wanted to build a “bridge” from the combustion engine to the electric drive. But business in Germany has stalled since the subsidy for partially electric cars was canceled at the beginning of the year. In China, on the other hand, the plug-in boom is just beginning – but without the German car manufacturers. Our car team explains why.

By the way, the Shanghai Auto Show, the most important auto show in Asia, starts next week. The German automakers will all be there, Tesla will not, reports Bloomberg. Nevertheless, Tesla is on everyone’s lips in China, and not only there. The electric car maker has lowered prices worldwide – and analysts are expecting new discounts this year.

3. EY kept us busy again this week. After the historic penalties that the auditor oversight body, Apas for short, imposed on EY in connection with the Wirecard scandal, the auditor is now stopping the planned split. Actually, the 13,000 partners should vote in April on the separation of the lucrative consulting business. But nothing will come of it. The plan, which cost more than 100 million dollars, failed for the time being – to the disappointment of German society.

4. There has not been a US intelligence affair of this magnitude since the Snowden revelations – and new details emerge every day. Secret documents from US agencies (allegedly from the CIA and the Pentagon) on the Ukraine war have been circulating on the Internet for weeks: information on arms deliveries, assessments of what is happening in the war, but also details on alleged US spying operations against partners. A 21-year-old national guard is said to have distributed the secret documents on the Discord video game platform. The FBI arrested him.

However, the damage caused by the Pentagon affair is far from being repaired with the arrestcomments our Washington correspondent Annett Meiritz.

5. Two opposing trends characterize the market for apartments and houses in Germany: At the end of 2022, purchase prices fell for the first time in years. However, rents have continued to rise. We will show you which cities are particularly affected and what to expect if you are looking for a new place to live or want to sell your property.

The reason for the fall in real estate prices is the sharp increase in interest rates on loans, because they make financing more expensive for buyers. And they alarm politicians. Owners whose loans are about to expire must be prepared for significantly higher burdens when it comes to follow-up financing. Now the first voices are bringing state aid for real estate buyers into play who are in financial difficulties because of rising interest rates.

6. “There’s just nothing left.” When I read these words in our interview with Hans-Joachim Ziems, renovator and interim boss of the ailing auto supplier Leoni, I inevitably had to think of Maike Schlecker. You remember? The infamous “There is nothing left” sentence at the press conference after the bankruptcy of the drugstore chain? Unlike Schlecker, Leoni was saved, but the rescue ended in a total loss for most shareholders, which Ziems is now defending. Without an agreement with the creditors and the investor, bankruptcy threatened, he clarifies.

7. Is the pot with the 100 billion euro special fund finally emptying? For years, the Bundeswehr has been slow to order new equipment, but now the federal government is stepping up the pace.

“All in all, 70 to 80 procurement orders could be submitted to Parliament by the end of the year, each with a volume of more than 25 million euros,” says the head of the partially state-owned armaments company Hensoldt, Thomas Müller, in an interview. “That would be an absolute record.” The number corresponds to the information that is also available to the budget holders of the Bundestag.

8th. On Saturday, April 15, 2023, the time has come: Germany ends the nuclear power age, at least to the extent that the last three remaining nuclear power plants are shut down. A majority of Germans are against the nuclear phase-out.

What has led to the fact that, after much argument and discussion, the last German nuclear power plants, “Isar 2”, “Emsland” and “Neckarwestheim 2”, are now going off the grid? Why did the dream of “unlimited and cheaply available atomic energy”, as the technology historian Frank Uekötter describes it, “collapse like a soufflé”? Our author Anna Gauto answers these and other questions in her report.

And our energy team deals with the question of all questions: does nuclear energy have a future? After all, nuclear research continues despite Germany’s nuclear phase-out.

9. This month India will overtake its rival China to become the world’s most populous country. So it’s time to devote a weekend title to the country seen as a beacon of hope for the global economy. Although India has repeatedly disappointed in the past, as our correspondent Mathias Peer writes, it still wants to become the third largest economy by 2030. The plan could work – and not only change India, but the whole world.

Have a nice weekend.

Best regards
Her

Kirsten Ludowig

Deputy Editor-in-Chief Handelsblatt

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