Newsletter July 2010
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| July 2010 – German Economy goes from Strength to Strength | ||
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As Germany’s football team continues to march forward during the World Cup, so does their economy. Despite recent major changes within the country – the new President, Christian Wulff, recently elected and the seeming unrest within Merkel’s coalition Government – the nation’s economy is going from strength to strength. Please click on the items on the left to read the content or scroll down to read the whole newsletter
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Positive Indicators |
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Draft budget released this weekGerman budget deficit smaller than thoughtGerman budget overspending is on course to be sharply lower than feared because of unexpectedly robust recovery from the economic downturn, a draft budget obtained by AFP on Monday suggests.
Germany’s federal budget deficit will amount to about 65 billion euros (81 billion dollars) this year compared to a previous estimate of 80 billion euros. Next year, the deficit will be 57.5 billion euros, nearly 20 billion less than feared, according to figures in the draft budget. “Overall, this is a timely chink of light with respect to fiscal woes,” said Padhraic Garvey from ING bank. The comments appeared aimed at heading off international criticism that German fiscal austerity would hit Europe’s growth prospects. In 2011, the deficit will be smaller than expected owing to lower overall unemployment benefits than had been forecast. In addition, a lower debt pile will reduce interest payments.
The German government has said it will try to cut at least 80 billion euros from the budget by 2014, including more than 11 billion euros next year. After its worst economic slump in more than 60 years last year, with output shrinking by 4.9 percent, Germany’s economy is enjoying an industry-led growth spurt, with engineers re-hiring workers and returning production almost to pre-crisis levels with economic fortunes turned around swiftly, driven primarily by exports. The stronger-than-expected growth and falls in unemployment were making it significantly easier for Germany to reduce its public sector deficit. The documents prepared for Wednesday’s meeting argue that Germany is setting “an example” within the eurozone and that there is “no alternative” to Berlin’s deficit-cutting plans: “For the stability of our currency and likewise for shaping our future, a solid finance policy is the central task in all EU member states.”
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Economic Success at Expense of Others? |
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Is Germany’s Economic Success at the Expense of other Eurozone Nations?
Because Germany derives such great benefit from the common currency, particularly in times of a weak euro, the Germans are now coming under growing pressure to do their part to eliminate the imbalances. Critics say that the Germans should increase wages and borrow more instead of saving. Merkel argues that nations with deficits bear at least as much of the blame as those with current account surpluses. People in countries with deficits, she says, have lived beyond their means for years, buying cars, houses and stocks on credit, while governments did nothing to slow their greed. The chancellor believes that, in light of demographic changes, the Germans should not be chided, but should in fact be praised for not being as wasteful, for saving their money and for providing for their old age. Besides, Merkel adds, the relative lack of pay increases in recent years, for which Germany is frequently criticized, is not the result of government economic policy. In Germany, as she points out, wage and salary increases are subject to negotiation between unions and employers’ associations, not government decrees. And in her view, Germany’s export successes are also not the result of government control. If German companies are successful abroad, says Merkel, this simply proves that they offer decent quality at reasonable prices. The government believes that the criticism of German surpluses is far too one-sided, because without the German surpluses, the balance of trade for the entire euro zone would not be almost level, as it is, but would be deeply in the red. By implication, this means that Germany’s export success contributes to the stabilization of the common currency. “Since we already have a common European domestic market, we should no longer be treated as an individual nation,” says Merkel. Merkel’s economic advisors are also convinced that Germany’s trading partners will benefit from the country’s export strength as the recovery begins. They argue that if the German economy grows by 2 percent this year, because it will benefit more and earlier from the global economic recovery, income and profits will increase, and Germans will spend at least some of the additional money on foreign products. Contact Us for more Information
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Currency & Finance |
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Interest Rate Decisions ThursdayExchange rate focus this week will be on Thursday’s interest rate decision from both the European Central Bank and the Bank of England. For the time being, the pound has remained strong against the Euro over the last month,with the price holding around €1.21. As has been the trend recently, the BoE is unlikely to offer too many surprises, but the ECB press conference should provide some insight into the level of unease in the eurozone. Meanwhile, elsewhere in the world, against the Euro, the USD it continues to sit around 1.23 USD and the AUD has slipped slightly over the last few days to 1.49 AUD. The Swiss Franc continues to increase in strength, now trading at 1.33 CHF and after a slight dip at the beginning of July, the Israel New Shekel continues to regain some of the ground it lost in the latter aprt of last year, back up to 4.88 ILS.
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Top 5 Mistakes by Real Estate Investors |
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And at number 5…Real estate investment is perhaps one of the most lucrative forms of investment today. But it is also equally risk bound especially when one is not well versed with the trends and nuances of the ‘foreign’ real estate market. If you want to invest in property, surely it is best to learn from the mistakes of others and not make the mistakes yourself? Knowing the most common mistakes made by real estate investors will help one steer away from making similar mistakes and ensures good return on investment. We at ProVenture have collated a list of the Top 5 tips to successful property investment and will count them down for you over the course of the next few issues. So to start us off – At Number 5: Not Planning AheadDo you think Admiral Lord Nelson’s legendary win at the Battle of Trafalgar was due to luck or a sudden change of wind direction? Or, after a full-on 10 year siege that amounted to nothing; would the Greeks have ever conquered the City of Troy without the ingenious plan of a Wooden Horse? No and No. Ok, so these are all war related examples but you get the gist. Lack of a proper plan is the biggest mistake made by novice investors. Finding a house after forming a proper investment strategy is the right way instead of looking for a house to fit the plan. Many make the mistake of buying a house because it seems to be a good deal and then try to see how they can fit it into their plan. What we at ProVenture love is when an investor comes to us with a clear strategy, for example; “I want to generate a passive income of 50,000 Eur/year”. With this clear direction, we can ensure we find you a good property that not only matches your investment model but also works out well with the numbers you have planned for. Number 4 in next week’s newsletter.
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Another great month for the team, 6 clients in town resulting in 6 Letters of Intent, and with some brand new and exciting properties now on the books, we expect July to be even busier. For our latest deals, please check out the properties below. Our Investment Guide is getting a refresh – watch this space!
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