German business confidence on the rise; German cabinet split over budget cuts; prosecutors to look into WestLB dealing and the Cologne-Bonn airport sees growing profits.
The German business community is becoming more confident about the future.
German Ifo index rises
German business confidence, as measured by the closely watched Ifo index, rose higher than expected in June. The Munich-based Ifo economic institute on Wednesday said the index, which measures sentiment of 7,000 German executives, rose from 87.6 in May to 88.8 in June. The German news agency DPA said economists had only expected the index to rise to 88.0 in this month. The June reading means German business confidence had reached its highest level since February. The increase comes against the backdrop of a recent rate cut in interest rates by the European Central Bank and as hopes grow that German Chancellor Gerhard Schröder can push through desperately needed economic reforms. Ifo chief economist Gernot Nerb said the rising Ifo index could be the first sign of a turnaround in the German economy, which has struggled to remain on a growth path since the Sept. 11, 2001, terrorist attacks, according to DPA.
Cabinet split over budget details
German Finance Minister Hans Eichel
German Finance Minister Hans Eichel (photo) has had to delay presenting his 2004 budget to the cabinet due to resistance from Health Minister Ulla Schmidt, who is opposed to billions of euros in cuts to the country's social system. Eichel has said he needs to slash €15 billion ($17.3 billion) in spending to be able to present a budget that meets constitutional requirements for next year. For a German budget to be constitutional, new borrowing has to be lower than the sum of all investments. The government is planning to meet this weekend at a retreat outside of Berlin to hammer out remaining differences and decide upon whether to bring forward tax cuts slated for 2005 to next year. Some hope the accelerated cuts would help spark Germany’s stalled economy, but Eichel does not want to exceed European Union budget rules, which require a country’s deficit to be under 3.0 percent of gross domestic product. The cabinet is expected to vote on the budget on July 2.
Prosecutors to investigate WestLB
German prosecutors have decided to investigate the financial dealings of state-backed bank WestLB. The bank said on Wednesday that authorities in Düsseldorf will look into the bungled efforts to fund a British consumer-electronics company. Germany’s financial regulator, BaFin, became concerned with WestLB’s finances once losses totaling €430 million ($495 million) relating to a deal with British television rental company Boxclever were discovered in April. A BaFin report highly critical of WestLB’s risk assessment and control procedures was delivered to the bank’s supervisory board on Friday and WestLB Chairman Jürgen Sengera resigned on Monday. One of WestLB’s principal owners is the German state of North Rhine-Westphalia.
Cologne-Bonn airport takes off
The Cologne-Bonn airport has managed to buck the downward trend in the industry so far this year. The airport has managed to book increasing profits this year, according head of the Cologne-Bonn Airport's management board, Michael Garvens. Whereas the airport made only profits of €300,000 last year, Garvens told DPA he expected total profits of €4 million in 2003. He said discount airlines Germanwings and Hapag-Lloyd Express would be largely responsible for causing the amount of airport passengers to jump by an estimated 40 percent to 7.5 million this year.
Compiled by DW staff from wire reports.