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09 December 2019

EU Update: Germany’s Manufacturing Downturn and Greece’s Non-Dom Tax Programme

Saul Fulda, Investment Analyst

According to official data released last week, Germany has narrowly avoided a recession. Germany’s industrial output dropped by 5.3% in October 2019 compared to 2018, illustrating that the industrial recession is far from over. To make matters worse, construction output fell by 2.8%. The German economy may have narrowly averted a recession in the third quarter – delivering growth of 0.1% in the three months leading up to September after falling by 0.2% in the previous quarter – but fears remain over the country’s declining manufacturing and industrial sectors.
 
Despite two consecutive months of positive data coming from the purchasing managers’ index, Germany, the backbone of the European Union, has witnessed a further slowdown in manufacturing. New manufacturing orders fell by 0.4% in October 2019, surprising economists, who expected a rise of 0.3%. Additionally, the Ifo Institute for Economic Research, a Munich-based think-tank, reported that order books shrank – with the relevant index falling from minus 4.0 to minus 9.3 points. The plummeting levels of domestic demand in Germany, which dropped 3.2% month-on-month, seems to be at the crux of the German industrial recession.  
 
On the day these figures were released, Greece announced the introduction of a new non-dom tax programme in an attempt to attract wealthy individuals from overseas to help propel its stalling economy. Greece, so often labelled the paragon of the European Union’s failings, is following in Portugal’s footsteps – another example of the failed European project between the years 2010 and 2014. Both cases illustrate a Europe attempting to correct past failings, and searching for answers to the low-growth, low-rates environment which has developed.
 
EU Update: Germany’s Manufacturing Downturn and Greece’s Non-Dom Tax Programme
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