German Markets Hope for Turn-Around | Business| Economy and finance news from a German perspective | DW | 21.09.2002
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German Markets Hope for Turn-Around

German stock exchanges have been rocked by a mix of Middle East tensions, an insolvency epidemic and a struggling U.S. economy. The federal election is unlikely to succeed in turning things around.


The German stock exchange continues to suffer heavy losses

Disappointing economic figures from the United States and Europe last week sent the already downward trend on the German stock market even further into the basement, where the benchmark DAX index had lost almost 9 percent in the week’s trading.

To compound matters, the looming possibility of a US-led attack on Iraq has caused traders to become more cautious with investment. The overall tendency is to hold back on buying and sell when you can.

Technology branch hit hard

In the midst of this general slump, the German technology branch, the hardcore of the DAX, has suffered especially high losses. Recent figures published by the German Association for Information Technology, Telecommunications and New Media (BITKOM) show that the industry is at the lowest point in two years.

BITKOM had initially expected the sector to grow in 2002, but software and IT services are no longer driving economic expansion. Instead, the figures indicate an overall decline of 1.3 percent.

"Germany is internationally at the bottom of the field," Bernhard Rohleder, director of BITKOM, announced on Friday upon releasing the latest numbers. The situation is not much better in other countries. "But France, Italy and Scandinavia are at least reaching growth of about two percent" while Germany slides into the negative digits. Nearly every sector is in the red, he said.

As a result of the decline, for the first time since the early 1990s, the number of jobs in the IT branch has gone down. The technology group fears that if the trend continues some 28,000 IT sector employees in Germany may lose their jobs.

What’s needed now, BITKOM says, is a political framework that encourages the development of the IT and communication sector so that it can achieve its full potential in Germany.

Election has little impact on markets

But most market observers say the outcome of Sunday’s election is unlikely to result in new economic impulses. It’s not uncertainty over a change in government that is causing the stocks to slide and investment to slump; it’s the poor economic conditions around the world.

"Whether it’s a red-green [Social Democrats and Greens] or a conservative coalition, the problems remain," Christian Recker, director for trading at Merck, Fink & Co., told DW-TV. "When we see the first policy statements of the next government, we’ll have an idea of what’s in store."

Nonetheless, there’s a saying among traders in Frankfurt that politicized markets have short legs. In other words, politics rarely have a lasting impact on the ups and downs of the stock exchanges.

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