4
adopting EU rules in the field of justice and home
affairs – read more in the
Denmark section .When Mrs. Merkel granted visa to all Syrian refugees in
August, she may have read sentiments correctly in
Germany; but the Chancellor underestimated the
reaction in the majority of other EU-countries. Indeed,
Berlin’s single-handed response to the refugee crisis
has reignited nationalist sentiment in a number of
European countries. In Eastern Europe,
not least in Poland ,Chancellor Mrs. Merkel’s “wir schaffen dass”
has been answered with “…..aber nicht mit uns!”
Indeed, Europe has plunged into the worst crisis since
WWII. The situation is worsened by the fact that Berlin
is now threatening countries not willing to take their
“fair share” of an increasing number of refugees with
economic and legal consequences – read the Spiegel
Online article,
Streit über Flüchtlingsverteilung: Steinmeier droht EU-Partnern .Ironically, at the same time as more European countries
see Mrs. Merkel as a destabilising factor, the
Financial Timesand
Timenamed Mrs. Merkel “person of the
year”. In Russia, the president, however, could not care
less; what matters to Mr. Putin is that Mrs. Merkel’s
spontaneous decision-making has provided a highly
unusual political comeback to a cornered Moscow –
read also the article,
Seehofer und Stoiber besuchen Putin; CSU stellt Russland-Sanktionen infrage .USA – First interest rate hike since 2006; more
tightening in the pipeline
On December 16, the
US Federal Reserve decided to raise policy rates by 25 basis points .This was a widely
expected and long overdue move. Policy rates are
expected to be raised again in March 2016. A valid
question is of course why the Federal Reserve should
raise policy rates? Inflation is absent and the
manufacturing sector appears to be in recession .Furthermore, the leading
national manufacturing sentiment index(ISM) fell in November to 48.6 from
50.1 in October, which was the lowest level since June
2009 (below 50 means contraction).
The answer is simple. First of all, monetary policy
remains excessively loose, which is predominantly to
the benefit of “useless” asset price inflation. In
addition, the manufacturing sector accounts for less
than 15% of GDP. The far more important non-
manufacturing sector (service sector) is still relatively
strong although the headline index in the
leading service sentiment survey (ISM) has shown some