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Reuters
a day ago
- Business
- Reuters
German cabinet approves $52 bln corporate tax relief package
BERLIN, June 4 (Reuters) - The German cabinet approved a 46 billion-euro ($52 billion) tax relief package on Wednesday to support companies and revive its sluggish economy from this year through 2029, the government said. The package is the first in a series of expected measures from Germany's new government to boost the economy, which could be facing a third consecutive year of contraction for the first time in its post-war history. "After just four weeks in office, we are presenting the first important reforms to ensure new economic strength," German Finance Minister Lars Klingbeil said on Wednesday. "We are providing the economy with urgently needed planning certainty and creating strong investment incentives." The package includes measures such as favourable depreciation options of as much as 30% per year for three years to ease companies' tax burden. To encourage electric car purchases, buyers will be able to depreciate 75% of the purchase price in the year in which the vehicle is bought. "This new depreciation rule provides a welcome short-term stimulus for the manufacturing sector," said Deutsche Bank economist Robin Winkler. "However, its impact on facilitating the broader structural transformation of the German economy is likely to be limited." U.S. President Donald Trump's tariff policies are expected to hurt Germany's export-oriented economy and its new chancellor, Friedrich Merz, will travel to Washington to meet Trump on Thursday. The package also includes a promised one percentage point cut to the corporate tax rate each year over five years from 2028, bringing it down to 10% by 2032. The package shows the new government's capacity to act, as it moved "swiftly and without disruptive noise," German Mittelstand association DMB President Marc S. Tenbieg said, adding it "creates planning security for those who can currently invest." Economy Minister Katherina Reiche said there will be further measures to cut energy costs, reduce bureaucracy and speed planning and approval procedures. The measures will cut government tax revenue by 2.5 billion euros this year, rising to a reduction of 12 billion euros at the peak in 2028, the last year of office for the ruling coalition. The package still needs the approval of the lower and upper houses of parliament. Germany's parliament approved plans for a massive spending surge in March, throwing off decades of fiscal conservatism. Additional measures, including a 500 billion-euro infrastructure fund, should be brought to the cabinet with the draft 2025 budget on June 24 and the first draft of the 2026 budget on July 30. The German government is deploying huge amounts of capital into the topic of industrial resilience, Simon Pex, managing director at Carlyle Europe Partners, said. "The more positive political sentiment in the country might accelerate economic growth in a positive way," Pex said. "Germany could be a good place of opportunity in the next decade." ($1 = 0.8775 euros)
Zawya
29-05-2025
- Business
- Zawya
Germany's return as world's top creditor may be fleeting: Mike Dolan
LONDON - Germany is reprising its role as the world's biggest creditor for the first time since 1991 - but seismic global policy changes suggest it might not be back in the seat for long. As the United States has soaked up the vast bulk of global savings over the past two decades, the stability of ballooning global trade and investment imbalances has become one of the biggest market issues - especially now, as trade wars unfold. For everyone plotting the map, Japan's Ministry of Finance this week recorded a remarkable milestone. For the first time in 34 years, Germany overtook Japan last year as the biggest net provider of investment capital to the rest of the globe. While exchange rates had something to do with the ranking switch, Germany's unenviable top spot - borne of weak growth and a lack of investment opportunities at home - speaks volumes about the state of world savings, investment and demographics. The three top net creditors - Germany, Japan and China - have one major thing in common. They are all large aging economies where populations have already peaked and are set to decline over the remainder of the century - dampening domestic demand in the process and generating outsized savings pools. But, as Deutsche Bank Chief Economist Robin Winkler points out, the German and Japanese investment positions are quite different in nature. Much to the chagrin of U.S. President Donald Trump's new administration, both countries have run chronic trade surpluses with the United States and the rest of the world for years, relying on exports for growth amid depressed local demand. And they have both banked the lion's share of the resulting savings into overseas investments, mostly in the faster-growing America. In the process, these flows generated more than a decade of U.S. asset booms and dollar appreciation - something Trump's team claim had clobbered U.S. manufacturing competitiveness and eliminated good-paying jobs in the process. Trade tariffs will help to redress the imbalance, according to Trump, and so too would a weaker dollar. FICKLE OR STICKY? But Winkler points out that much of the rise in Japan's surpluses over the years has been in direct investments - company acquisitions, new overseas plants and job creation. Unlike Japan, Germany's trade surpluses have been mostly recycled into portfolio investments such as stocks and bonds - making them far less "sticky" and easily reversed. For Germany, this could be a double-edged sword. "It makes Germany more susceptible to criticism that its trade surpluses vis-à-vis certain countries have not directly generated jobs in these countries," Winkler wrote, adding this could be a problem in trade talks under way. "On the other hand, the low share of direct investment makes Germany's net asset position more liquid and fungible than Japan's," he added. "This should be an advantage at a time of geopolitical fragmentation as it is easier to reallocate or even repatriate foreign assets quickly should it become necessary." Of course, the flipside of Trump's trade and diplomatic wars in Europe this year has been a transformative fiscal boost in Germany aimed at both re-arming and rebuilding the economy - changing its domestic growth trajectory as well as potential choice of investment destination for its savers. Capital needs in Europe are rising fast and incentives for savers and investors to stay at home will come with that. This creates substantial risks for Wall Street - and not just dollar depreciation, which the administration appears to be encouraging. While Japanese investors make up the single biggest group of overseas investors in U.S. government bonds, Europe was the source of $7 trillion of overseas equity investment since 2012. As the past week revealed, the stakes in U.S.-European trade talks - which now only have six weeks to square numerous thorny issues - are very high on both sides of the Atlantic. The opinions expressed here are those of the author, a columnist for Reuters (By Mike Dolan; Editing by Lisa Shumaker)
Yahoo
03-03-2025
- Business
- Yahoo
Bond Yields Rise as Defense Promises Ripple Around the World
(Bloomberg) -- Bond yields rose on Monday after European leaders gathered to support Ukraine and discuss improved security measures for the continent, prompting investors to prepare for a surge in defense spending. Cuts to Section 8 Housing Assistance Loom Amid HUD Uncertainty Remembering the Landscape Architect Who Embraced the City NYC Office Buildings See Resurgence as Investors Pile Into Bonds Hong Kong Joins Global Stadium Race With New $4 Billion Sports Park NJ Transit to Deploy Customer-Service Teams After Record Delays The rate on German 10-year bonds rose two basis points to 2.43%, while defense stocks buoyed European indexes and the euro strengthened. The move helped boost global risk appetite, which has been on the rise since late Friday amid US equity gains and an advance for crypto over the weekend. US yields also rose. The latest moves follow reports that Germany's probable next government is considering setting up two special funds for defense and infrastructure spending which could amount to hundreds of billions of euros, according to Reuters. 'It would be a fiscal regime shift of historic proportions,' said Robin Winkler, chief German economist at Deutsche Bank AG, in a client note. 'If reports over the weekend proved correct, the two funds would add up to a significant fiscal impulse.' One pressure valve that is sensitive to changes in the supply of German debt — the bund swap spread — fell to a record low, reflecting the concern among investors who will be tasked with absorbing more sales. 'Defense spending looks like it will be both on a national level and on an EU level - but there is no doubt that defence spending will increase significantly,' said Jens Peter Sorenson, chief analyst at Danske Bank. 'There will be more issuance in the long end of the curve so investors want to have risk premium.' The euro rose 0.3% against the dollar to $1.0403 as a gauge of the greenback pulled back from a two-week high. Germany's benchmark stock index rose as much as 0.9%, led by a surge in defense stocks and outperforming euro area peers. 'If Russia wins this war, there is no euro,' said Timothy Ash, senior EM sovereign strategist at RBC Bluebay Asset Management, on Bloomberg TV. 'This is an existential threat to the euro, it's like Covid, it's about our security and national defense. We need to find the money.' The yield on US 10-year debt rose three basis points to 4.24% ahead of the publication of US ISM data for February. --With assistance from Alice Atkins and Naomi Tajitsu. Rich People Are Firing a Cash Cannon at the US Economy—But at What Cost? Trump's SALT Tax Promise Hinges on an Obscure Loophole Walmart Wants to Be Something for Everyone in a Divided America Warner Bros. Movie Heads Are Burning Cash, and Their Boss Is Losing Patience OXO Fought Back Against the Black Spatula Panic. People Defected Anyway ©2025 Bloomberg L.P.
