Daily briefing

Winterkorn's Swiss bank accounts

FC Augsburg v FC Bayern Muenchen – Bundesliga
Winter is coming. Source: Getty

Spare a thought for Martin Winterkorn. As boss of VW, he used to prance around Germany as a master of the universe. Then the Dieselgate scandal broke, and one of the big questions remains what Winterkorn knew, and when. He says he found out about his firm’s emissions cheating in September 2015. A lot of other people believe he must have been in on the whole thing a lot earlier. Prosecutors are after him in Germany and the United States.

Now his trouble appears to be getting even worse. Apparently, Winterkorn spent the last two years moving a lot of his money around to make it harder for the courts to get. In all, he seems to have transferred some €10 million ($11.6 million) to Swiss bank accounts in 2016 and 2017, including one in the name of his wife. Such a “gift”, however, could have been taxable. So now he may be on the hook for tax evasion as well. Oh, how the mighty are falling.

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Germans just aren’t used to heat such as this. Cooling off this weekend at Krumme Lanke, one of Berlin’s many lakes, I overheard several bathers fretting that this was climate change wreaking its havoc at last. The scorching temperatures are now searing the German economy too. Some rivers are becoming too shallow for large boats to navigate, delaying coal shipments and thus threatening bottlenecks at some power plants.

The aridity is an even bigger problem for German farmers. They worry that they might lose an average of 20 percent of their harvests this year; in Brandenburg, the region around Berlin, they could even lose 70 percent. Angela Merkel’s cabinet will convene on Wednesday to talk about whether the federal government should step in with direct crisis aid. The potato industry, for one, is already sure that its bad yields will make the price of French Fries go up.

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No sign of an end to the fallout from the tragedy of Mesut Özil, which we’ve been covering for over a week now. It started a long-overdue debate in Germany about the racism and bigotry that minorities face in everyday life. The debate has become so loud that Heiko Maas, Germany’s foreign minister, has even begun fretting about Germany’s reputation as an open-minded place.

A 25-year-old Turkish German named Ali Can has now started a new meme. Inspired by the #metoo movement against sexism, he launched the hashtag #metwo, where Germans are sharing their experiences with prejudice. Maybe it will change German society the way #metoo changed parts of American culture.

The debate certainly won’t make Recep Tayyip Erdogan any less controversial in Germany, however. Recall that Özil’s trouble started when he posed with Erdogan, the Turkish president, in London for a photo. Erdogan is popular with a lot of German Turks, even as mainstream German society regards him as an anti-democratic tyrant who jails journalists and political opponents and tramples on human rights, while trying to meddle in Germany’s domestic scene.

Nonetheless, it appears that the German government long ago extended an invitation to Erdogan to visit Germany this autumn. Should he or shouldn’t he? That’s what the pols in Berlin are now fighting about. Turkey, meanwhile, merely remarks drily that a visit is “likely”.

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Many Germans have long considered the European Central Bank’s low interest rates to be the root of all evil. Mainly, that’s because they’re German and think about money differently than do people in other cultures. That said, the low and sometimes negative rates really are causing some big problems.

The trust funds of Germany’s social-security and welfare systems, for instance, labor under all sorts of moronically restrictive investment restrictions, which leave them putting their money only in short-term cash. But without decent interest payments, those assets are now actually making losses — minus €49 million on the €34 billion reserves of the social-security trust fund, for instance.

But maybe that’s not the biggest story about interest rates that we should be paying attention to. Instead, let’s ponder the “flattening yield curve” in America, threatening to turn into an “inverted yield curve”. That jargon refers to the relationship between short-term and long-term interest rates. Normally, long-term rates should be higher, reflecting the premium investors demand for locking up their money longer.

Right now, however, long-term rates are not higher. That could suggest that investors think another recession is looming, when the Fed, which has been raising rates, must start cutting them again. But this stuff is complicated, so nobody knows. One one hand, an inverted yield curve has predicted America’s three last recessions. One the other, one is reminded of the late Paul Samuelson, Nobel-laureate in economics: “The stock market has predicted nine of the last five recessions.”

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