TheBigPond - spotlight on what South African business and business people have been up to in Europe. Edited by South African journalist Christo Volschenk from Stuttgart, Germany. Note: This blog has migrated to a new home at
    South Africa

   My new blog

Need an experienced web-editor, copywriter, or corporate newsletter writer? Christo Volschenk worked as a financial journalist in South Africa for 16 years, before moving to Germany in 2002. Go to his website ( for more on him, his rates and his skills.


Gratis bloggen bei


My apologies. is encountering problems with its software which makes it impossible for me to write and publish my stories. Very frustrating, but nothing I can do about it.

I'll try again later today.
1.7.05 11:24



The fact that the EU states have lost monetary policy as an instrument for navigating the ups and downs of the short-term business cycle to the European Central Bank (ECB) is disaster enough.

But this morning a new evil reared its ugly head here in EU land.

The name of this evil: Political interference in the interest rate decisions of the ECB.

Very bad. Very sad for a sophisticated place like the EU.

And something which would not happen in the young, (some might say) relatively unsophisticated, emerging economy of South Africa. In fact, just yesterday the Mbeki government demonstrated again that it understood the concept of ?central bank independence? and honoured it.

(I know, I know?..the independence of the central bank was written into that amazing document called ?The Constitution of the Republic of South Africa, 1996?. But, in practice the whole thing actually hinges on the relationship between the political leader, the head of the finance ministry and the president of the central bank. In South Africa these 3 guys have been playing the ?you-are-independent-game? like old pro?s - even though they?ve only been at it for 11 years. Shame on the EU parliament.)

What actually happened? There has been a hellavalot of pressure lately from individual EU states (including Germany) on the ECB to lower interest rates. Yesterday the EU parliament thought it fitting to make its own decision on where interest rates should be and to issue an official statement on the issue afterwards.

The EU parliament said they back the ECB view that rates should stay where they are. This morning newspapers reported the statement was issued in an effort to ?alleviate pressure on the ECB?.

But, what?s so bad about that, I hear you say.

In fact, its very bad. It created a precedent. Today the EU politicians issue a statement to alleviate pressure?.tomorrow they issue a statement to add pressure. One small step forward for EU politicians, one big step backwards for mankind.

To me, it demonstrates the EU politicians don?t understand the principle of central bank independence and the need for ?non-interference by politicians?.

But, the politicians in the individual EU states started it, I hear you say. They started it with their public requests for a lowering of rates.

Yes, there you are right, of course. Somehow German politicians (who would never have thought of putting public pressure on their own central bank for rate changes) now feel it?s OK to do it to the ECB.

That?s wrong. And maybe that?s where this rot should be stopped before it gets out of hand. Someone quite senior (maybe Tony Blair is the perfect person) in the EU should point this ?danger to the independence of the ECB? out to member states and ask politicians to desist from this kind of behaviour.

And further suggest that ?views? on where rates should be, be channelled via the central banks of states to the ECB. And not publicly.

And further remind the EU parliamentarians that it?s not their job to decide where rates should be, or even to add, or take away pressure from the ECB.

Sies, man.

5.7.05 10:40


Or something to that effect. But, you'll know what I mean.

Well, today the SPD demonstrated again it will never change its (bad) spots. And voters were reminded (subtely) why they fell out of love with the SPD and won't vote for it in September.

This is how it happened: Last Friday chancellor Schr?der admitted in parliament (in his no-confidence debate) that his party was split on the Agenda 2010 (the official plan for reform being implemented at this point) and that "left-leaning" members of the SPD have threatened to break-away and "undo" all which has been done in the name of the Agenda 2010 to date.

This threat must have been a real one, because Schr?der included it in his list of reasons for a confidence vote.

Three days later he stood on a podium in Berlin and said the election campaign programme (39 pages) of the SPD (published today) had the backing of the whole party and (important) it did not deviate from the Agenda 2010 - therefore he (Schr?der) also backed it.

Now, now. What is the truth?

Does it, or doesn't it deviate from the Agenda 2010? If it doesn't, what suddenly happened to all the dissidents in the SPD which had made it so difficult (no, impossible) to rule further....

No doubt, the media will reveal the truth behind the "truth" in coming days.

If, at the end of it, you are left with a bad taste in the mouth, remember the leopard's (bad) spots are forever.

5.7.05 19:00


Now, now.

What I warned against yesterday, happened while I was writing.

Unbeknown to me, the EU parliament decided yesterday with 296 votes to 287 votes NOT to support the European Central Bank's (ECB) view that interest rates should stay where they were.

By doing that, EU politicians increased the pressure on the ECB to drop rates when it decides on the issue in the next days.

Maybe I should add at this point that a survey of the top 10 banks (rated on their history of getting interest rate forecasts right) published on July 4, revealed a rare consensus amongst economists: All 10 thought rates should stay where they were.

Back to the story.....This morning German newspapers said "withdrawal of EU parliament support for the way the ECB managed monetary policy had weakened the ECB massively."

A German representative told the Financial Times Deutschland (FTD) he expected the Euro to suffer under the decision.

I think this representative has reason to be worried. Should the ECB drop rates when it next decides on the issue, it will immediately be interpreted by the markets as a sign that the ECB had capitulated to political pressure and....yes, the Euro will take a dive.

The Euro might (or might not) recover soon thereafter, but the ECB will have lost its "practical independence" for a long time, maybe forever. At least in the eyes of the markets.

(Of course, the ECB will still be "legally independent", but as said before, whether a central bank is truly independent depends on the relationship between the politicians of the day and the head of the central bank.)

Suddenly the upcoming rate decision of the ECB had gained extraordinary importance. Maybe, one could even say (at the risk of being labelled a drama queen) the Euro faces one of its biggest tests to date.

And all of this, because EU politicians fail to see the danger inherent in publicly critisizing the ECB.

But, the story gets even gloomier. This "freedom to interfere in the decisions of the ECB" might (I'm not sure) even be written into some EU law somewhere - maybe even the Maastricht Treaty.

Because the FTD commented this morning: "For the first time since the Maastricht Treaty was signed, there was no majority support in the EU parliament for the ECB's handling of monetary policy."

And even the journalists at the FTD saw no evil in the idea. They carried their report under the heading: "EU parliament lets ECB down".

Well, now.

I'm obviously from another part of the world. Where I come from politicians understand the importance of non-interference in the decisions of the central bank.

Postscript: Yes, this was another example of South Africa doing it better than the EU. And, yes, it did give me a kick.

6.7.05 10:48


Everyone expects a daily financial newspaper to critisise an election program which might impact negatively on business.

Because 90% of the readers of daily financial newspapers are businessmen and shareholders. And (not to be under-estimated) 100% of their advertising income is earned from businesses.

But, when a newspaper critisises an election program and quotes another political party to prove its point - as the Financial Times Deutschland (FTD) did this morning when they quoted chancellor Schr?der in their CDU story - one can only ignore the whole story and think: "cheap shot".

The FTD critisised the planned increase of the value added tax (VAT) rate from 16% to 18% by the CDU and said it would put a brake on growth next year.

Take all that was written with a pinch of salt.

Firstly, all over the world it is accepted by tax experts that a tax on consumption is a better tax than a tax on income. The CDU thinks Germany should rely more on consumption tax and less on income tax (they want to drop the lowest and the highest personal income tax rates).

In principle there is absolutely nothing anyone can say against that idea. All the more so, since Germany's rate of 16% is one of the lowest (if not the lowest) in Europe.

Britain's VAT rate is 17.5%, France stands on 19.6%, Italy is at 20% and Denmark at a staggering 25%.....which shows how much headroom there still is for this kind of "switch" from income to consumption tax.

Secondly, the statement that the tax changes envisioned by the CDU will brake growth next year....

It is always very dangerous to isolate a few growth-influencing factors and then calculate what impact they will have on growth. For the simple reason that "the economy" is a whole. And "the whole" might react in a different way than the parts.

This is how I see the impact of the CDU program on the economy next year: It has the potential to boost growth. Not spectacularly. Not so much that it will make a noticable dent on unemployment in the first year, but still, growth might end up higher than the currently forecasted 1.4% for 2006.

Not lower, as the FTD suggested this morning.


Firstly, because of a statistical effect. This year's real growth rate is going to turn out lower than the 0.8% most (still) expect. That will make next year a better year (statistically) than the 1.4% most expect. (Calculating from a lower base...)

Secondly, because the people are not stupid. They know the country is in trouble and they know (and accept) they'll have to buckle down for a while to get out of trouble.

In the circumstances they'll go for the election program which seems to have the best chance of getting the country out of trouble.

At this point there is only one: the election program of the CDU. It's a serious attempt at tackling the problems, has a (relatively) good chance of succeeding and is honest to boot. (It doesn't shy away from saying the country is in trouble. It calls a spade a spade.)

In short: It is the only election program which is not only a list of "things to do". It's the only one which actually "hangs together" somewhat. With some concept behind it.

So, when this "serious attempt" wins the election, a collective sigh of relief will, in fact, be heard through-out Germany and an almost simultaneous improvement in the consumer and business confidence levels will be measured - despite the tax changes still to hit consumers and businesses and despite other reforms waiting in the wings to hit the pockets of consumers.

All of this, because for the first time in a long time there will be some focus again in economic the people the feeling they are going somewhere.

Many might not be able to judge whether the direction taken is the correct one, but all will feel relieved to be back on the road again.

This boost to confidence will make all the difference next year. The actual structural reforms implemented next year will make a difference in the years after 2006...

12.7.05 10:44

 [eine Seite weiter] s

Verantwortlich für die Inhalte ist der Autor. Dein kostenloses Blog bei! Datenschutzerklärung