Kurzarbeit achieved where Blitzkrieg failed!

All Bow to the Conquering Germans.

I wrote in June last year `The Elephant in the Room` which called for GERPEL (Germany to be Expelled). Of course this was just my silly acronym to counter GREXIT (Greek Exit). Why am I writing today? Germany has released its January employment data which shows unemployment has fallen to its lowest level in 20 years or since the Euro was formed. Now look at the rest of Europe. French unemployment is at a 15 year high and going higher rapidly. Southern Europe all time highs. Holland is at an all time high. The official number of unemployed in the EU is around 19 million people with a whole generation of young without a job and little if any prospects of getting one. Except that is, for the youth of Germany where the unemployment rate is astonishingly low. Let me give you two reasons why I think this has happened. First, KURZARBEIT, a reference to a system whereby German companies can temporarily lay off, idle or part-time use, at the expense of the Government. During the 2008/9 financial crash, 1.4 million workers were kept employed on this temporary basis (costing the Government Eur 5.1bn in 2009 alone) allowing German companies to cut costs dramatically but retain a skilled labour force. Stupid countries like the UK have never done such a thing (Nationalisation does not count), instead relying on fair play and economics to play there role allowing companies to go bust. Hence we have lost most of our manufacturing capability over the last 50 years. Admittedly, unions and poor management have played there role too. Nevertheless, during the recent downturn, the UK pledged support for the economy by doing such crass things as Cash for Clunkers. As most of our cars were imported, who benefited most from that policy? Leave it with you. We pledged billions of pounds on green projects making the UK the biggest global player in wind turbines (55% of the Worlds Capacity see `City of London Rapes Pensioners` for details) who do you think supplied most of them? Yes, you guessed it! Our attempts to reflate the economy during the crisis cost us dear but did no real good. Germany on the other hand, benefited from the collapse of the Euro. This helped keep there place at the top table of world exporters and subsequently lead to the re-employment of sheltered workers.

Now you would think that with this ultra low unemployment consumer activity would be growing dramatically. This would hopefully imply that Germany would be coming to the aid of its the struggling EU partners by importing vast quantities of goods. Wrong!!! German Retail Sales for December were also released today and they could not have been worse. Down 1.7% vs November, Down 4.7% vs December 2011 (although 2 less days) and 2012 was down 0.3% on 2011. Germany has no intention of helping the industrial capabilities of the rest of Europe, only itself! Its recent decision to exempt 1550 large industrial companies from the Green energy surcharge other countries are imposing, especially the UK, and put all the cost onto the public and small domestic economy focus companies, gives you one idea how they strengthen their export focused industry and restrain disposable incomes.

Japan has now decided that it wants to export more to the rest of the world whilst not encouraging consumption. In fact the finances are in such a mess that consumption is the last thing that is going to happen in Japan. The budget proposals which will raise spending via public works and corporate tax brakes, lowers welfare spending and raises taxes for the rich in both income and inheritance. With little oil reserves of its own, the near 20% fall in the Yen (since November) will have a huge impact on consumer activity. With Zero wage growth and a budget designed to raise the tax take, lets face it they need to, disposable incomes are going to be squeezed. Of course, we should not forget, Japan has its own cliff. The Consumer Cliff. From 2014 consumer taxes are due to rise by 100% (in two stages). The good news just keeps on coming. The World is in just too much debt and all the Central Bank hype in the world cannot change that. The risk is just shifting from the people via Government Debt to the people via Central Bank balance sheets.

For the next blog I am thinking of Sweden which I believe is extremely exposed to global industrial competition in its very narrowly focused exports. I started thinking more cautiously about this country, which incidentally I love with a passion, back in September Swedish Macinery. Even earlier and since proved totally correct `Hazard Warning Lights for Volvo, Scania and Man`. I will be arguing for Volvo, (who did, as I said they would, a deal in China last week to cement there global leadership) to spin off the Industrial/construction machinery division and merge it with Atlas Copco. Or just buy Atlas Copco and spin the division into it. More later






Thursday, January 31st, 2013 Euro, Predictions, Yen

2 Comments to Kurzarbeit achieved where Blitzkrieg failed!

  1. […] I still think the only way out of this mess is GERPEL see Kurzarbeit achieved where Blitzkrieg failed! […]

  2. Cyprus vs Rhode Island, New England. | Finance Reaper on March 18th, 2013
  3. […] China is taking a similar of attitude to employment over profit in other industries. Solar panels, Aluminium and more importantly Shipping. In a way it is a grander version of Kurzarbeit see Kurzarbeit achieved where Blitzkrieg failed!. […]

  4. Amazing Performance: Part 1 | Finance Reaper on April 5th, 2013

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