Germany industry vs. China / Rivals VW and Ford to cooperate
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August 18, 2019
Good morning,
dear reader,
+  Crisis, what crisis?  +  German industry vs. China  +  Rivals VW and Ford to cooperate
The bestseller that former German economics minister, Ludwig Erhard (pictured), published in 1957 – “Prosperity For All” – is still relevant today. After all, economics is still 50 percent psychology. And Peter Altmaier, the German minister of economics, has not forgotten this. The country’s finance minister, Olaf Scholz, a Social Democrat, has been warning Germans that the boom is over. But speaking to Handelsblatt recently, Altmaier, a member of the conservative Christian Democrats, argued strongly against the idea that a crisis is brewing. “We shouldn’t keep maligning Germany,” he said. “We have a huge international reputation, the economic mood is good here, a lot of order books are full. Germany is not heading for the beginning of a recession.”  
Speaking of Mr. Scholz, he has not had a very good week. First of all, he came under fire from his own party for his somewhat surprising suggestion that he might be a good candidate for chancellor in the next elections. And then his coalition partners – the Christian Democrats and the Christian Social Union – torpedoed his plan to reform property tax in Germany, saying his proposed changes were unfair and overly complicated. The country’s highest court has said that property tax must be reformed by the end of 2019. Scholz is going to have to come up with some improvements.
Meanwhile inside Angela Merkel’s CDU, the new party head has come to an agreement with her former rival for the top job. Annegret Kramp-Karrenbauer has decided on an appropriate role for financial expert and former stockbroker Friedrich Merz (pictured). He will be a member of an expert committee on the social market economy and help create a new manifesto for the CDU. So Merz has gone from potential party leader and possible minister – he made his desire for a cabinet job clear but Merkel turned him down – to political adviser. That must burn. And it’s also a lost opportunity for the CDU because Merz’s candidacy for the top job showed just how divided the party is.  
US President Donald Trump says he won’t be flying to Davos, Switzerland, this year for the World Economic Forum. He made the announcement on Twitter, saying he would be cancelling “my very important trip” due to the Democrats’ refusal to accede to his multi-billion-dollar plans to build a huge wall along the US-Mexican border, a plan that most experts have already said is impractical. The fight between the Democrats and Trump’s Republican party has now seen the US government shut down for more than two weeks. However, making the Democrats responsible for his Davos cancellation is perfidious. Another US president, Dwight D. Eisenhower, explained it best when he said: “The search for a scapegoat is the easiest of all hunting expeditions.”  
Industrial espionage, price dumping, technology transfers: The misgivings that German businesses have about working with China are growing just as fast as their optimism did previously, about the economic opportunities there. Industry association BDI has now called for tougher anti-trust rules around Chinese takeovers. And they’re right to do so. China has gone from being seen as a good potential partner to a rival that pursues nationalist interests above all. Germany – and the rest of Europe – really need to take a more aware approach to Chinese business. READ MORE
The way that US carmaker Ford is dealing with millions of dollars’ worth of losses in Europe is tough: Production of unprofitable models will stop and thousands of jobs will be lost, most likely also in Germany. One glimmer of hope comes with a planned alliance between Volkswagen and Ford in several sectors, including commercial vehicles, electric mobility and autonomous driving. The cooperation will be outlined officially over the next few weeks. In the auto industry at least, the huge challenges that companies face has resulted in a surprising turnaround, where former competitors become the best partners.

And on that note, I’m wishing you a harmonious and relaxing weekend,
Sven Afhüppe
Handelsblatt Editor-in-Chief
Top Story:
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