Mark Lamb | Wednesday, 18 March 2009

Europe’s Iron Lady

Weekly international investment round up to 17 March 2009

• 2 April will prove to be a pivotal date for battered investors

• Will Mrs Merkel be ‘Frau Nein’ or ‘Frau Ja’?

A crucial date together with the pivotal person which could finally spark the beginning of the end of the economic slump for battered and bruised investors may now have emerged in the shape of 2 April and Angela Merkel.
If more precision was needed, London should provide the backdrop to this important event while no doubt with a little further research even the actual timings of certain focal statements could now accurately be predicted. Together with a little good fortune and a huge amount of political will these events could finally offer the investment markets hope that the darkest days of the crunch could actually be over.
After the disappointment following the recent meeting in Rome between seven of the world’s most important finances ministers, frantic preparations have been held to prepare the groundwork for the meeting in April between twenty of the most powerful leaders on the planet with Germany’s chancellor set to take centre stage.
With recent hopes shifting between the leaders of the UK, France and America to offer a shining a path through the current economic turmoil, what is now becoming clear is that without Angela Merkel’s agreement there is unlikely to be any cohesive action and the global downturn could continue for quite a while longer. The question is will Mrs Merkel be ‘Frau Nein’ or ‘Frau Ja’?
Reluctantly, Germany has followed the lead of other major nations by introducing a fiscal stimulus package of their own and has committed itself to injecting more than €50 billion into its economy over the next two years including huge infrastructure projects such as the building and renovation of schools and hospitals. But with the Americans calling for a massive new global stimulus package in order to drag the world out of recession, and no doubt eyeing April’s G20 conference to rubber-stamp the deal, Germany seems unconvinced and Mrs Merkel iron heels are becoming more firmly dug-in.
Mrs Merkel is also building important allies and with France they are likely to prove formidable opponents to any US led initiative that they feel is ‘reckless’.
Germany’s financial mind-set is quite different from their Anglo-Saxon trading partners. The country has been rebuilt over the last half-a-century based on the principle of monetary stability with even its citizens having an aversion to over-borrowing when compared to their British and American counterparts therefore, the thought of remortgaging their children’s and probably their grandchildren’s future wealth does not sit well.
Mrs Merkel, Germany’s first woman Chancellor, grew up just outside Berlin in what was then the communist east. She earned a doctorate in physics and worked as a chemist, then worked as a government spokeswoman following the fall of the Berlin Wall. Importantly, she has developed Germany’s links with Eastern Europe and its exports to the EU’s 10 eastern states easily surpassed those to the US last year.
In September this year, Mrs Merkel faces re-election - therefore April’s G20 conference provides the ideal place to kick-start her own domestic campaign and the title ‘saviour of the world financial system’ is surely not a bad election slogan.



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Europe’s Iron Lady


18 March 2009

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