EZA 798 Consultancy Note:

02 July 2007

Germany
German central labour office – rising surplus The German labour office will record a larger than expected surplus this year; the Kiel economic institute (ifW) forecasts a surplus of € 5.5 bn (0.2% of GDP) after 0.4% last year. The main reasons are the cut in active labour policies, lower subsidies for business startups and declining unemployment benefit payments. Chancellor Merkel will fight off demands for cross-subsidy to public health care; instead aiming for debt reduction and lower contributions next year.

Asset conclusions: dependent on the use of the expected surplus funds, but most likely option – CDU proposed cut in unemployment contributions - would be positive both for bonds and equities.

© Graham Bishop