German debt will rise to alarming levels
In response to the closure of the economy due to the coronavirus, Germany has taken several costly measures to mitigate the effects of the crisis. Among other things, it took a reduction in value-added tax for half a year, decided to provide families with a one-time contribution of 300 euros for each child or a protective measure known as kurzarbeit subsidizes tens of billions of euros (hundreds of billions of crowns) to maintain employment.
Scholz, who has repeatedly warned that rescue measures will be costly, wants to present next year’s draft budget for next year and a financial plan for 2024. This year alone, the debt-to-economy ratio is expected to rise from 60 to 75 per cent last year.
“We will probably reach the level we were at last time,” said Scholz, comparing the current situation with the financial crisis in 2009. It is speculated that next year’s budget will increase Germany’s debt by about one hundred billion euros. As a result, Germany’s debt is set to climb to 80 per cent of gross domestic product.
The negative impact of the online world
Relations between America and China are intensifying. Relations between the world’s two largest economies are deteriorating, and recent technology companies have been feeling the same. The first catalyst was the imposition of additional tariffs on Chinese goods and the restriction of Huawei Technologies imposed by the government of US President Donald Trump.
China subsequently promised to draw up a list aimed at punishing foreign companies that it said threatened Chinese interests. Following this statement, it is beginning to be said that China is currently rapidly finalizing the blacklist of American technology companies. A competitor from the Chinese company Huawei, the American company Cisco Systems, will probably appear on the list.
The TikTok application, owned by the Chinese company ByteDance, is currently the subject of dispute. Similarly, the Trump administration has a penchant for the Wech social network, which is owned by the Chinese company Tencent Holding.
The negative impact of the online world
“The changes that are happening in the world around us have accelerated the changes we saw before COVID and we are quickly following some of our plans to deal with them,” said Patrice Louvet, CEO of Ralph Lauren.
During the coronavirus, Ralph Lauren’s e-commerce skyrocketed. The company also said it will invest in digital platforms in the future to support e-commerce operations, expand product personalization and add new features such as augmented reality.
During the first quarter, the luxury clothing manufacturer reduced its global workforce by 15% as part of a company-wide restructuring. It laid off 24,900 people in nominal terms and could lay off more than 3,700 jobs in the future, according to plans.
According to the company, the redundancies could lead to gross annual pre-tax savings of approximately $180 million to $200 million. He expects one-time pre-tax fees of approximately $120 million to $160 million in fiscal 2021.
Digital tax talks
Pascal Saint-Amans, head of the OECD’s tax, said the Paris organization would publish technical plans on October 12 to agree on how to tax large digital companies cross-border and a global minimum corporate tax. The global talks on updating international tax rules for the digital age now have a “solid foundation” that needs to be materialized if the US and Europe provide the necessary political leadership.
“We certainly think at the OECD that we now have a very solid basis for concluding the negotiations, with US leadership on the digital issue. When we have management from European countries, at least those that sponsor the global minimum tax, “said Pascal Saint-Amans from the OECD.
The plans to be discussed by the G20 finance ministers at their meeting on 14 October were originally aimed at reaching an agreement by the end of the year. However, this prospect, to reach an agreement in sight, due to the upcoming elections in the US, which have so far brought from Washington a reluctance to act in connection with the signing of a new international agreement. France, meanwhile, has accused the US of trying to disrupt talks between nearly 140 countries and urged Europe to prepare an EU-wide digital services tax early next year if talks are suspended.
Energy market consolidation
The French company Veolia has announced that it intends to submit a bid for the purchase of Engie’s share in the Suez group in the water and waste business. The first bid was 2.9 billion euros for a 29.9% stake in Suez last month.
Veolia wants to acquire a larger stake in the parent company Suez by buying more shares. Suez President Philippe Varin called Veolia’s offer “very hostile” and said Veolia’s plans for the deal were unrealistic.
Performance of the Veolia’s shares (Source of the graph: Tradingview)
Watch this week:
Thursday, September 24, 2020
The United States will publish applications for unemployment. A slight decrease in initial applications from 860 thousand to 843 thousand is expected.
Fed Chairman Jerome Powell testified before the Joint Economic Committee on the economic outlook and recent monetary policy measures.
Friday, September 25, 2020
The United States will publish the development of orders for durable products. Growth is expected to decline to 1.5% on a month-on-month basis in Augusta.
Source of the text: Investing, Zerohedge, Financial Times, Reuters, Tradingview