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Page Background Insight Perspectives

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 Times

and

Time

named 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