It’s only been a couple of weeks since British voters decided to leave the European Union in a referendum, but they are already starting to feel the consequences.
Away from Westminster — where apparently nobody anticipated nor prepared for the “wrong” outcome — local governments are bracing for years of financial hardship, the Financial Times reports:
Many fear that the billions of euros from EU development funds channeled into some of the most deprived areas of the country will not be replaced by Westminster, just as the slowing British economy is set to hit council budgets that are already stretched.
The newspaper cites estimates of £8.6 billion in regional development funds being lost between now and 2020. Read more
Reading Bloomberg Businessweek‘s interview with Barack Obama, I get the sense the president understands the big economic and social challenges of our time but still underestimates the impact of regulation on businesses. Read more
German businesses are largely dissatisfied with Chancellor Angela Merkel’s immigration policy.
In a survey conducted for Handelsblatt by the Forsa Institute, 68 percent of managers said they were unhappy with Merkel’s open-door policy against 32 percent who support it.
The owners of small and medium-sized companies are the least satisfied whereas 45 percent of executives are large corporations agree with Merkel’s approach.
Business leaders big and small nevertheless blamed her resistance to more stringent measures for the rise of the Alternative für Deutschland, an anti-immigrant party that made gains in state elections this weekend.
The survey, coming on the heels of a disappointing election result, is a wake-up call for Merkel, whose Christian Democrats rely heavily on the support of businesses. Read more
Are there another people in Europe so determined to shoot themselves in the foot as the Greeks?
Against all the advice of other euro states, they elected — twice — in recent years leaders who vowed to reverse what little progress had been made to liberalize the Balkan nation’s economy. Labor market reforms came undone last year. Privatizations were canceled or pushed back.
The country only agreed to sustain reforms in return for a third, €86 billion bailout this summer when it, once again, teetered on the brink of default.
Now promises have already been broken and targets missed. Greece is typically slow to implement the economic policy changes it commits to undertake. Yet there seems to be no holdup in policies that make things worse. Read more
The bosses of large German companies see dark clouds on the horizon as the world economy slows down this year.
Handelsblatt cites Heinrich Hiesinger, chief executive of the steel giant ThyssenKrupp, saying there is “massive overcapacity” in the steel market. Kurt Bock, chairman of the BASF chemicals group, said that “key markets are not growing as fast as expected.” And Wolfgang Büchele, head of the industrial gas company Linde, has complained that customers are afraid “to sign new contracts.”
These three companies are part of a wider trend, according to the business newspaper. The thirty companies that make up the DAX index were expecting sales of €80 billion but will make just €63 billion in 2015, down 5 percent from year before. Eighty of the 306 companies listed in the Prime Standard segment of the Frankfurt Stock Exchange have reduced their profits or sales.
The last time the situation was this bad was in 2009, when the German economy shrank by 5 percent during the financial crisis.
Much of Germany’s woes can be attributed to a slowdown in emerging markets, especially China.
Cheap oil, while beneficial to consumers, is also hurting the shale gas industry in the United States, which affects German companies like Siemens and metals trader Klöckner. Read more