Play the game USA!!

How could they NOT know?

who knows

and those that do dont blame it on that accursed euro but on multinational companies / large companies pushing small business..out of business

Here's the irony of it...we are able to spend billions on the war and still be better off than Germany....


Banks push Germany to the brink
Three years as one of the worst stock markets in the world doesn't mean Germany's troubles are almost over. Here's how its decline resembles Japan's-- and why things are likely to get worse.
By Jon D. Markman
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CNBC in Germany

The German stock market has been the worst performer in the developed world over the past three years, and most of the emerging world, as well. Yet it is possible that the worst is yet to come in Frankfurt, as this epic plunge in equity values has only recently begun to erode the creditworthiness of German stocks’ majority holders -- large banks at the country’s moldering core.

The slow-motion collapse has not induced the sort of public anguish in Germany that the bear market has engendered in the United States because relatively few of the nation’s citizens are shareholders. But bank failures -- in the unlikely event they’re allowed to occur -- could change that, since most German workers put their income in savings accounts and depend on an increasingly shaky latticework of bank-backed bonds for their retirement. And the damage would not be limited to the Continent, as German financial institutions own such U.S. market stalwarts as the Pimco and Scudder families of mutual funds, among others.

Risk on the Rhine has intensified in recent weeks, as the country’s break with the United States over the disarmament of Iraq has led to the possibility that the United States could close some of its military bases there and pull out a significant percentage of its 70,000 troops. These troops are a major source of revenue for local German governments and retailers, and a wholesale redeployment of U.S. troops to friendlier and lower-cost countries like Poland and Bulgaria could weaken an already extremely fragile economy. Last week, Bulgaria’s defense minister told reporters that his government had high-level talks with the Pentagon about the possibility of providing four or five bases to the United States.

How much has the stock market in Frankfurt already suffered?
Over the past three years, the benchmark measure of U.S. stocks, the Dow Jones Industrial Average ($INDU), has fallen 24%, from 10,400 to 7,890.

During the same time period, the benchmark measure of the German stock market, the Frankfurt DAX ($DEAX) has plunged 69%, from 7,960 to 2,547.

If the Dow had fallen as much as the DAX from its peak, it would be currently hovering around the 3,220 level.
What a comedown for a country whose economy not long ago seemed as formidable as Japan's -- and now seems a candidate to follow Japan down a decadelong rat hole.

Debt downgrade ahead?
The analogy is more apt than you might imagine, for the trap for both countries’ economic demise was set in a postwar system that allowed banks to invest heavily in the equities of companies to which they lent money. The problem was exacerbated in Germany in the early 1990s because the government encouraged banks to make ill-considered loans to bail out its Eastern Bloc cousins following the fall of the Iron Curtain. West Germany, as the country was formerly known, was expected to be the locomotive of growth for East Germany and, for that matter, the entire European Monetary Union. But that growth did not materialize, ruining hundreds of business plans. Additionally, in many cases, West German banks ended up lending millions of deutschemarks against real estate and state-owned businesses in the east that had far more political than economic value. These deals have come dramatically undone, leaving the banks with massive losses.

The crisis has essentially led critics to view Germany, in the extreme, as if it were a gigantic junk bond. Buying into the debt or equity of the country’s largest international firms, such as car maker DaimlerChrysler (DCX, news, msgs) or financial-services giant Allianz (AZ, news, msgs), at the right moment will yield enormous profits. But blow the timing, and you’re going to feel like a big, fat schweinhund.

Timing is growing trickier by the day, as little progress has been made since the sovereign debt-rating chief at Fitch Investor Services said in December that Germany's triple-A rating could "no longer be taken for granted." Likewise, Standard & Poor's at the same time pointed to the country's fiscal deterioration as an indication that it "has begun to fall behind its triple-A rated peers in terms of fiscal and economic indicators." The agency said its rating of German debt could come under pressure if the country did not adopt “a consistent long-term approach in addressing the challenges of eliminating structural budget deficits, increasing employment and growth, and putting the increasingly overburdened health and pension systems on a more solid footing."

A downgrade, if it comes, would be a huge psychological blow to Germany at the same time it would make borrowing much more expensive. From a financial standpoint, the country would be forced to shrug off its mantle as a financial superpower and join the likes of Canada, Spain and Sweden among the world's somewhat flimsier AA+ credits -- a humiliating step down from AAA. The good news, according to Fitch managing director Fred Puorro, is that a downgrade would probably finally force Germany to consider deep structural change just as the United States did after its savings-and-loan crisis in the 1980s. A key improvement, he said, would be a consolidation in the number of banks from 2,700 to more like 1,500.

Conflicts of interest
To explain why the fit between the declines in Germany and Japan is so apt, we turn to Christopher von Schirach-Szmigiel, a finance professor at Penn State University and an authority on the subject.

Von Schirach-Szmigiel said in an interview that the similarity starts with the two countries’ patterns of saving. In both Germany and Japan, most workers put their money in banks, not the stock market. The banks then take workers’ money and put it to work in the debt and equity of corporations.

You would probably imagine that the banks would wisely invest workers’ funds in a diverse cross-section of industries, but events have proven that notion naïve. Both German and Japanese banks have been heavily involved in the ownership of their countries’ major corporations since 1946, when relationships between a handful of leading families and businesses was replaced with a relationship between a handful of government-controlled banks and businesses. As a result, Deutsche Bank (DB, news, msgs), Dresdner Bank and others are not just lenders to companies, but also to their majority owners -- an often-toxic conflict that has led repeatedly to misallocation of capital.

Exacerbating this problem are German banking rules that permit loans to companies whose capital structure consists of as little as 8% to 10% equity, with the rest composed of debt. And Von Schirach-Szmigiel says that banks regularly circumvent this regulation by allowing clients to issue stock at times when the balance is in danger of being breached. This compares to a worse practice in Japan, where banks may lend to companies at which equity makes up just 5% of the capital structure. In both cases, instead of forcing companies to solve their problems with responsible growth plans, banks keep throwing workers’ hard-earned money at them, hoping the problems go away. By contrast, a U.S. bank would generally be nervous about lending to a company if it had less than 20% of its own funds on its balance sheet, and 15% is an absolute non-starter.

Because there are so many interlocked relationships between German banks and their families of industrial customers, diminished equity values at the companies will ultimately lead to huge problems in the country’s overall financial structure. Commerzbank (CRZBY, news, msgs), Germany’s third-largest bank, lost a quarter of its value in a single week in October after a number of its borrowers failed to deliver on payments and a liquidity crisis was feared. The incipient collapse was staunched when the federal Bundesbank hinted it would back the bank's credits and provide liquidity. But after a brief recovery it is in danger of sliding back into the abyss. "German banks have by far the lowest margins of any industrialized country in the world," Commerzbank chief Klaus-Peter Mueller said last month.

Things will worsen for Germany
Isolation from the United States under the leadership of Chancellor Gerhard Schroeder is not going to help. U.S. fund managers have cut their exposure to German equities; the growing rift could lead to a boycott of German goods or increased tariffs. Said Mark Anderson, a technology newsletter publisher who keeps close tabs on both the Japanese and German economies because of their prominent role as buyers of U.S. software and hardware: “It looks like the first chapter of an economy in decline, not something near the end.” Germany's gross domestic product grew just 0.2% in 2002, its slowest rate in nine years. The government expects growth of 1% this year, a view widely considered overly optimistic. There’s just too much debt to support the low level of economic activity. Whereas AAA-rated countries like the United Kingdom and United States have kept public debt to around 38%-45% of gross domestic product, Germany’s debt is around 70% of GDP. (For comparison, AA+-rated Canada is at around 75%, Italy is at 100% and Japan is at a staggering 140%, says Puorro at Fitch.)

Where this ends is anyone’s guess. Japan has not figured how to end its cycle of recession, anemic recovery and deflation more than a dozen years after its stock market began to collapse. Presumably, economic allies in the European Union will help Germany to wriggle out of its crisis a lot sooner.

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Ah...Unemployment...Social Welfare.....maybe you guys need to give up some of those day spas and massages?

German welfare system is crumbling

Generous social programs are strangling German economy
A line formed in front of a public labor office in Berlin early in January. German unemployment stands at about 11 percent, and social programs like heath care are in danger of collapse.

By Tom Costello
CNBC

BERLIN, March 6 — Germany’s economic growth is dead last in Europe, unemployment is surging, and its notoriously generous social welfare system is crumbling. It’s a system Germans feel entitled to. But the system is strangling Germany itself.

SIRENS RACING through the street signal a medical emergency in downtown Berlin. But today, it’s the entire German social welfare system that’s in need of life support.
“The largest time bomb at the moment in Germany is the healthcare system,” said Klaus Zimmerman, an independent economist in Berlin.
Germany’s surging unemployment rate means fewer people are paying into a system of socialized medicine that covers everyone. Last year, it lost $2.7 billion.
“I would say the German medical system is excellent,” said Dr. Rom Levi, an ear nose and throat specialist in Hanau, Germany. “The doctors are very, very good and they are working very hard. [But it’s] running out of money and we don’t know what to do.” Levi is now struggling to pay his own office staff.
“Not only me, but also the specialists have lost 30 percent of their income per patient,” he said.
In fact, thousands of doctors have gone on strike — protesting government plans to cut costs, introduce competition, and, even more revolutionary, force patients to cough up out-of-pocket deductibles.
For 82 million Germans who are used to unlimited doctor visits, free trips to spas, even massages and sun cream, it’s a tough pill to swallow.
And it’s just one very visible sign of a society under strain. Until the problem is fixed, it may be impossible to turn the world’s third-biggest economy around. The country’s unemployment benefits are so generous, workers can quit a job — even turn down offers — and still collect compensation for years.
“It’s even financially more attractive to stay unemployed than to re-enter the labor market,” said Stefan Schneider, chief international economist at Deutsche Bank. “For some people, at the very low end of the pay scale, it’s very attractive.”
And with employers forced to pay social welfare contributions that add another 50 percent to a worker’s salary, companies are refusing to hire. German unemployment is now at 11 percent.
“The problem is that the population is getting older and older,” said Rainer Guntermann, and economist at Dresdner Kleinwort Wasserstein. “And in about 20 to 25 years time, we will have a ratio of pensioners to working staff of about 1-to-1.”
That means there won’t be enough workers to pay for the pensioners.
“The system is so expensive, and it will explode so much that we will not be able to bear the cost in a few years,” said Zimmerman.
None of this is lost on Germany’s political leaders. For 20 years, they’ve studied ways to reform the system. But so far, there’s been little action. Now, Labor and Economics Minister Wolfgang Clement is leading the attempt at reform.
“We will have to take necessary steps together, which also counts for the economy in general and unions — for business and unions,” he said. “I expect that something like a great, unified effort will happen.”
Clement is full of optimism. But he faces stiff resistance from unions who reelected Chancellor Gerhard Schroeder. And they oppose reform that would take away any of their job protection or social benefits.
“And that is the problem,” said Schneider. “We always try to solve something with a consensus, which means it will always be solved with the lowest common denominator.”
Some Germans complain that the country’s social systems worked well until they had to absorb nearly 20 million East Germans — many of whom remain out of work.
“I think the general public has to acknowledge that the financial burden by these systems is becoming by far too large and is inhibiting the success of this economy — and thereby undermining the stability of the systems,” said Michael Heise, chief economist at insurer Allianz.
Zimmerman believes Schroeder has “has avoided the tough decisions so far. But I think that at this time now he has no other chances.”
For Germans accustomed to a cradle-to-grave social welfare system, the choices are not easy. But from both the left to the right, there is at least now some acknowledgment that something has to change.

aaaaaaaaanh totally unbiased then!

but remember kiddies we're going to "plunder all of iraqs wealth from it's oil" so the US and UK are sorted financially for some time to come or so the hippies would like to make you believe.

rock on brother!

that you've seen too many movies!

That wouldn't happen to hm all the time if he was in Chirac (example)'s position. The '94 government fll apart after he was given notification of a corruption trial against him at the G8 meeting in Naples....that some 5 years later turned out to be based on sand castles. In the meatime the opposition had gone to power... This is thanks to the fact that they scrapped immunity after 1993. If I'm not mistaken Italy is the onlty country in the UN where prominent political figures can be legally prosecuted while in charge.

I think u just need to substitute the word Schroeder with the word Bush,
& the word Germany with America to get an alternative view!

what exactly do you mean?

Is this the time to get into the discussion of America's less than stellar Government, or even your own disatrous economy? Bush used the war to deviate attention away from his own shortcomings in solving the problems within your own country. Well, now that the war is over...what is your excuse for him now?