Tomorrow belongs to me?

Tomorrow belongs to me?
Tomorrow belongs to me?

This month’s blog has something of a Germanic feel. I have recently returned from a first visit to Vienna where the grandeur of the buildings, the culture, and the immense wealth generated through the power and influence of the Hapsburg Empire is very evident.

A history textbook in the flat I was staying proved very useful in helping to fill in gaps about the alliances that dominated the politics of 19th century Europe culminating in the First World War.

Fast forward to 2013 and to the current state of Europe. Once again the continent seems to be at a turning point. The vision of post-war leaders of locking Europe together initially among 6 countries, but today extending to 27, is becoming unsustainable. The birth of the euro has created an outer and inner core creating major problems. Firstly within euro-zone countries but increasingly between the euro-and non-euro countries, led by Britain, and to a growing demand for reform.

While much of the European financial crisis has revolved around the banking problems in Greece, Ireland, Portugal, Italy, Spain – all euro area members, and may yet spread to the Netherlands and France – the strength of Germany in the inner core and strength of the UK in the outer core represent the two key and largest players around which the future of Europe will revolve.

A recent presentation at the Society of Business Economists examined the growth of uncertainty as a driver in decision making, and how the use of the word in the media to describe today’s economic and increasingly political climate, creates a negative feedback loop in people's minds.

The near-record monthly jump in consumer confidence in November following the announcement that the UK was out of recession on the back of the Olympics spend was followed by a similar slump in December, as a result of uncertainty following the slating by the media of the autumn statement.

Last week’s UK council elections added political uncertainty to the economic uncertainty that has undermined confidence among consumers and businesses. Pressure on household budgets was a factor in the poor showing of the coalition – an assessment of the Budget shows a net 18% will be negatively impacted with confidence among those most affected down to struggling Euro-zone country levels of -50 (compared to -27 overall).

While the General Election is 2 years away the issue of Europe that so split the Major Government is set to re-run, while in parallel the German public have their own general election on September 22nd.  

In the German polls Angela Merkel retains a strong lead in seeking her third term of office, not unlike the position of Mrs Thatcher in the 1987 election, when her strong handling of international affairs resulted in a Tory Government winning an outright victory over all other parties.

The economic strength of Germany should help to boost the vote for the leading German party (CDU/CSU) with growth of 0.9% in 2012 and 0.5% expected in 2013, higher than most other recession-bound Eurozone countries. As in Britain, employment is at record highs and unemployment is at 6.9%, compared to 7.9% in the UK.

Consumer confidence in Germany is expected to reach a 5 ½ year high in May on the back of low unemployment and rising incomes and comes despite Eurozone headwinds impacting on exporters. As in the UK, consumers have reduced saving and feel more like spending. While around 70% of Germans believe the euro should be kept, the debate in the run up to the General election will be shaped by the debate among the political parties.

The emergence of the Alternative for Germany (AfD) party will be a major test for the ruling CDU / CSU and for the entire German political landscape. The party has among its goals to see an orderly dissolution of the Euro-zone and the re-introduction of national currencies or smaller and more stable common currency areas.

A recent poll by Infratest Dimap shows the huge potential of the party – 24% of respondents could in principle vote for the party – and as for UKIP, support comes from both right and left. The more the UK debate intensifies over Europe the more likely it may gain traction in Germany.

Unlike in 2012 the UK public has less to look forward to this summer. Compared to April 2010 when optimism was at a 3-year high, the public’s mood has had to adjust priorities as the double dip recession took effect. More households are now making do (52%) than saving (34%). Mintel’s 2013 British Lifestyles report found that the top financial priority for consumers was keeping up with the bills.

At the same time people have adjusted to the ‘new normal’ by becoming more financially careful and savvy when shopping. The remarkable shift away from profligacy to prudence has resulted in young people becoming far more aware of the need to build up savings to help family finances.

The shift in expected consumer spending in the next 5 years shows a country becoming more conservative and in need of cheering up. Non-alcoholic drinks, in-home food and beauty and personal care lead the sectors expecting most growth. The surge in growth in technology and communications in recent years will slow sharply with Mintel forecasting just a 5% rise.

Experiences are something people value highly. Last summer the Olympics made the country united and proud. Brand Britannia ruled. In the final medals table Team GB finished 3rd, well above Germany (6th) and was the leading EU sports country.

At this year’s BT Sports Industry awards there was constant reference to the Olympics with a number of awards given to 2012 themed promotions – notably by British Airways, Channel 4 and BskyB. German firm adidas won ‘Sport brand of the year’ and ‘Best integrated sports marketing campaign’. Sadly there was no award for any of the Games makers, whose contribution to the success of the games was immense.

This summer other sports such as cricket may get a chance for some glory – especially with the start of a back-to-back Ashes series and the Champions Trophy. In football, while the singing of ‘Abide with me’ will stir a strong feeling of Englishness at the FA Cup Final, the challenge from the German Bundesliga to the Premier League will be all to clearly shown on May 25th at Wembley Stadium in the Champions League Final between Bayern Munich and Borussia Dortmund. Here ‘Deutchland Uber Alles’ will reign supreme.

And finally on the Anglo-German theme a recent feature on Radio 2 involving a Rhine walk played ‘Die lorelie’ – a famous German folk song about the Rhine. This sounded much like the spellbinding ‘Tomorrow belongs to me’ from Cabaret about 1930s Berlin. Plenty to consider this May when forward planning.

Read more from John Gilbert.
 

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