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ECONOMY

From high finance to Hartz IV

With world financial markets gone mad, Roger Boyes, the Berlin correspondent for British daily The Times, weighs in on Germany's witch hunt for wicked bankers.

From high finance to Hartz IV
Photo: DPA

One of my wisest decisions at school was never to take mathematics seriously. The latest financial crisis has proved me right yet again. The United States recently announced a $700 billion rescue plan for its banks. Why $700 billion? Why not, say $480 billion? Or $720 billion? A US Treasury spokeswoman confirmed my suspicions when she admitted: “We just wanted a really big number.”

Well, that’s the kind of maths I understand.

The same goes for Bavaria’s Hypo Real Estate, or hypno-bank as I prefer to call it. The government agrees to a rescue package of €50 billion, but now it’s first in line for another €15 billion assistance and says it actually needs much more. Meanwhile I am having problems getting my German bank to lend me a few thousand euros to pay a tax bill. The numbers business has gone mad.

Even the Financial Times – the Bible or perhaps the Kama Sutra of the banking world – seems to have been taken by surprise by this hole mess. Its quaintly named magazine “How to Spend It” was dedicated to advising bankers how to burn their fat bonuses. One suggestion – I kid you not – was a belt that automatically tightens or expands depending on whether you have eaten goulash and dumplings or have fasted for a day. It is called the Dunhill Mechanical belt and can be bought for only ₤5,962.

Ten days later, the same newspaper’s Agony Aunt was asked by a banker whether he should lie about his profession at dinner parties. He was tired of being insulted or ignored. One answer was: pretend you’re an unpublished novelist.

Especially in Germany these days, bankers have become pariahs. Ordinary people have become spooked by the numbers. If you get your maths wrong in the classroom, you are punished. If you get your figures wrong in real life, you are helped out with money that comes from the taxes of people who actually pay attention to their bills. The bailouts help only creditors not debtors. That is, the banks, but not homeowners or companies. It takes two to create debt, but only one side is being helped. So, naturally people are angry with bankers.

Björk, the strange Icelandic pop singer, said the other day that the bankers on her island have gone into hiding. It’s not quite that bad in Berlin’s posh Grunewald district. Sometimes you see someone with a brown paper bag over his head climbing into a Mercedes C-Klasse and you think: Dresdner! Or: Commerzbank! But it doesn’t happen very often. Usually nowadays they take the S-Bahn. The S7 from Nikolassee – even in the old days this used to be known as the Bankierbahn – in varying degrees of camouflage. The other day I even saw one with a surf board. In November.

The real problems will start in May when – okay if – Peter Sodann gets elected president of Germany. The actor who used to play a cop on TV is the hopelessly doomed candidate of the hard-line socialist Left party and he’s said he’d like to arrest a few of Germany’s top bankers.

But if there were a popular vote for Germany’s ceremonial head of state, he might well have won. Look at it this way: a Tatort commissioner watched by millions on Sunday nights backed by an anti-banker party against the incumbent Horst Köhler, who made his name at the International Monetary Fund wining and dining bankers. Sadly, German presidential elections do not operate in this way, meaning Sodann won’t be personally putting handcuffs onto the wrists of bankers next to their silver Rolexes any time soon.

And before it gets to that stage I would like to say: stop this hate campaign now! Do not marginalise the banking profession! Everyone deserves a second chance and there is no reason whatsoever that a banker cannot be useful to society. Prison, Herr Sodann, is not the answer for these often misunderstood people.

Current estimates are that there will be 250,000 people unemployed from the European banking sector by this time next year. A quarter of a million: at a time when more and more households need childcare, sensibly priced cleaners, and healthcare workers. Give these men – I’m afraid most of them are men – new opportunities. They can be trained to change the sheets underneath elderly Auntie Elfriede or scrub those difficult-to-reach windows.

Got a problem with some mould down in the basement? Call a out-of-work banker. Just make sure he doesn’t fiddle with little Leon’s piggy bank. And make sure he pays his taxes. There’s too much taxdoging going on in Germany as is.

For more Roger Boyes, check out his website here.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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