Diesel disaster for Hesse / Green rise continues
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October 19, 2018
Good morning
dear reader,
+  German-French tax reforms for the world  +  Diesel disaster for Hesse  +  Green rise continues
Market watchers sometimes speak of the German-French twin engine that is powering reforms in the European Union. This week, people are not just talking about it, they can hear it coming. According to Handelsblatt’s sources, German finance minister Olaf Scholz and his French counterpart, Bruno Le Maire, have potentially agreed to come up with a plan for a minimum corporate tax rate across all industrial countries in the OECD. Competition in taxation is OK, the plan indicates, but there need to be some minimums. Both countries have agreed to come up with a standard, confirms Pascal Saint-Amans, director at the OECD’s Center for Tax Policy. However, before any such plan can become a reality, the EU is still likely to establish a digital tax.  READ MORE  
He was listening to car owners who felt abused. But it seems the German states that host the biggest car makers in the country were not ready to listen to him. And that was the end of a plan proposed by Hesse’s state premier Volker Bouffier, a senior member of Angela Merkel’s Christian Democratic Union, to retrofit environmentally-unfriendly diesel vehicles. The plan suggested that retro-fitting the cars would be better than simply scrapping them. Bouffier, who is up for reelection at the end of the month, has even suggested using public money to help ease the pain of the diesel problem. His proposal was supported by the states of Berlin and Brandenburg and was supposed to be voted on in parliament today. However, the states that are home to Germany’s biggest auto manufacturers don’t want to play along. Bavaria (BMW and Audi), Baden-Württemberg (Daimler and Porsche) and Lower Saxony (VW) have slammed on the brakes. Sensing defeat, Bouffier withdrew the proposal. He still got support from his left flank though – his Christian Democrats are in a coalition with the Greens in Hesse. “Environmentally speaking, it is nonsense to scrap the cars and replace them with new ones instead of repairing them,” Green party head Annalena Baerbock argued.    
Just about anything Green party members say is getting a lot of attention these days, especially after the Greens’ recent successes in the Bavarian state elections. If Germany had a federal election today, polls indicate that 19 percent of voters would choose the Green party. That is the most popular the party has been since 2011. As for the so-called Grand Coalition, it gets less grand by the day – the current federal government is run by an unhappy alliance of the Christian Democratic Union, or CDU, the much smaller Christian Social Union, or CSU, and the rapidly shrinking Social Democrats, or SPD. According to the latest opinion polls by broadcaster ARD, the CDU would only get 25 percent and the SPD 14 percent if Germany went to the polls this week. Meanwhile around 16 percent would choose the far-right Alternative for Germany party, 11 percent would go for the neo-liberal Free Democrats and 9 percent would pick the Left party. Somehow the largest parties in the country have lost the respect of their constituents.  
Over the past few years we have come to realize that globalization has both advantages and disadvantages. It’s been the subject of popular protests as well as the source of profits and prosperity in Germany. And we have all become accustomed to the complaints. But now, as global economic growth slows and trade wars threaten, the cracks are really starting to show in the façade. Some of the biggest German companies have recognized this. Healthcare giant Fresenius and HeidelbergCement have both lowered their forecasts. Chemicals maker Henkel, Deutsche Post and auto industry stalwarts BMW, Daimler and Continental are also preparing for tougher times. “The air is getting thinner,“ says Martin Wansleben, executive director of the German Chambers of Commerce.  
The European Commission, which manages the EU’s day-to-day business, is giving the Italians only a little more time to sort out their proposed 2019 budget, which breaches EU rules. The Italians have until Monday to come up with a better plan. And that will be the only way to prevent Brussels from rejecting the budget, sources from inside the European Commission say. That ultimatum, plus the sharp tone of a letter sent to Italy by the Commission’s vice-president, Valdis Dombrovskis, and the Commissioner for Economic and Financial Affairs, Pierre Moscovici, are bound to enrage Italy’s ruling populists. The Italian budget’s deviation from EU rules was “unprecedented”, the letter said. As it currently stands, the Italian budget deficit sits at 2.8 percent of the country’s economic power anyway, not at 2.4 percent as the official proposal suggests. Neither of those numbers are anywhere near the 0.8 percent the EU wants. There’s only one Italian word you can use for this situation, and it’s one all of Europe understands: Basta!
Some say music can be dangerous and the state branch of the Office for the Protection of the Constitution in Mecklenburg-West Pomerania appears to agree. Officials there have designated the German punk band Feine Sahne Fischfilet as left-wing extremists. A concert the musicians planned there on November 6 has been cancelled by the venue for fear of having “political agitators and aggressors” on site. Right-wing groups were apparently mobilizing online against the band’s appearance. The concert’s organizers, public broadcaster ZDF, have accepted the decision and are searching for a new venue.
And how about that Sagrada Familia in Barcelona? Construction of the spectacular church, a Spanish world heritage site that draws millions of visitors to Barcelona annually, was started in 1882 by Antoni Gaudi and is supposed to be finished by 2026. But it turns out that this magnificent edifice never had a building permit for any of that work, spanning 130 years. Now the church is paying $41 million to city authorities over the next 10 years in compensation. In return, the basilica will receive official recognition from the city, despite its creative architecture.

I wish you a wonderful break – and don’t forget to file your application for building permission if you’re putting up a garden shed this weekend,
Hans-Jürgen Jakobs
Senior Editor / Handelsblatt Author
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