Business confidence back to pre-crisis level

The mood among Germany’s top companies is as good as it was before the financial crisis, the Ifo economic institute announced Tuesday.

Business confidence back to pre-crisis level
Photo: DPA

In their June business climate index, the Munich-based economic analysts found that business sentiment in Europe’s biggest economy ticked up to 101.8 points from 101.5 points in May. This was the best result since May 2008.

The survey of 7,000 corporate leaders appeared to show optimism about the effect of austerity measures on growth prospects. German Chancellor Angela Merkel recently unveiled an austerity plan which foresees more than €80 billion in spending cuts between next year and 2014.

The confidence measure was better than the 101.0 points predicted by analysts polled by Dow Jones Newswires.

A separate measure of business expectations in the six months to come showed that executives were slightly more reserved, with the index slipping slightly to 102.4 points, compared with a forecast of 102.8 points.

“Companies see business development in the next half-year slightly less optimistically, for the second month in a row,” Ifo president Hans-Werner Sinn said in a statement.

“Nevertheless, companies continue to be confident. The economic recovery is continuing.”

He said that exports, the German economy’s chief growth motor, are not expected to maintain their recent rate of increase, particularly in the manufacturing sector.

And retail consumers, the chief Achilles’ heel of the German economy, remain the most wary about the future.

Critics in Germany and abroad have warned the belt-tightening could stifle economic growth.

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US investors buy up north German state bank hit by financial crisis

Two German states said Wednesday they would sell troubled maritime lender HSH Nordbank in the first full privatisation of one of the regionally-owned "Landesbank" lenders hit badly by the financial crisis.

US investors buy up north German state bank hit by financial crisis
Photo: DPA

Leaders from Hamburg and Schleswig-Holstein states said at a news conference they would sell their 95-percent stake for one billion euros to investors led by two US funds, J. Christopher Flowers and Cerberus capital.

The European Commission ordered a change of ownership in exchange for its approval in 2009 of a €13-billion-euro rescue – one of two taxpayer-funded bailouts for the north German bank since the 2007-2008 financial crisis.

That rescue plan helped cover risky investments amounting to €60 billion, most of them in real estate and the shipping sector, which HSH built up in the pre-crisis years.

“Today we've reached an important milestone on the way to selling the states' holdings in HSH,” which had over the years proved “very costly to the taxpayer,” Schleswig-Holstein state premier Daniel Günther said.

Wednesday's deal must still earn a green light in a further competition probe by the Commission and from banking supervisors at the European Central Bank.

If it goes ahead, “the privatisation means that we can limit the damage to the states that has resulted from the bank's irresponsible strategy of expansion between 2003 and 2008,” Hamburg mayor and future federal finance minister Olaf Scholz said.

The sale was immediately criticized by Sahra Wagenknecht, leader of Die Linke (the Left Party), who described it as a gift to “the finance mafia.”

“Future profits will be privatized, tax payers will lose multiple billion euros and jobs are at risk – whoever calls that a success doesn't deserve to be finance minister,” she wrote on Twitter.

Hamburg and Schleswig-Holstein have taken on a portfolio of HSH's bad loans, meaning taxpayers could face a bill of up to €7 billion when they are eventually sold to private buyers.

The contract for Wednesday's sale also provides for HSH's payroll to be halved, to around 1,000 workers.

HSH's departure into the private sector leaves just five of the “Landesbank” lenders standing after a series of post-crisis interventions.