A Hungarian firm, BAC Consulting, has been linked to the thousands of pagers that exploded in Lebanon on Tuesday, killing at least 12 people and leaving nearly 3,000 wounded.

The name of the Budapest-based firm first cropped up in a statement by a Taiwanese manufacturer, Gold Apollo, whose label appeared on the devices. Gold Apollo said it did not manufacture the devices and that they were made by its Hungarian partner, BAC Consulting.

"The product was not ours. It was only that it had our brand on it," Gold Apollo founder and president Hsu Ching-kuang told reporters at the company's offices in the northern Taiwanese city of New Taipei on Wednesday.

"We may not be a large company, but we are a responsible one," he said. "This is very embarrassing."

Gold Apollo said in a statement the AR-924 pager model was produced and sold by BAC, which it said was authorized to use its trademark for product sales in specific regions. "The design and manufacturing of the products are entirely handled by BAC," the statement said.

Hsu said there had been problems with remittances from BAC, the Reuters news agency reported.

"The remittance was very strange," he said, adding that payments had come through the Middle East. Hsu did not elaborate further, and didn't provide any proof of a contract with BAC showing that his company has had a licensing agreement for the past three years.

What does BAC Consulting do?

According to BAC Consulting's website, the firm develops "international technology cooperation among countries for the sale of telecommunication products." It adds that the cooperation involves "scaling up a business from Asia to new markets e.g. developing countries."

The company, which claims to have over a decade of consulting experience, lists telecommunication as one of its key areas of expertise, and says it integrates "the best past technological lessons and practices from different geographical areas."

BAC Consulting also lists the Nelkhael gold jewel collection as one of its businesses, saying it assists in the branding and marketing of the jewelry line.

According to the official company register in Hungary, BAC is involved in activities ranging from the manufacture of electronic medical devices and electronic components to the extraction of natural gas and crude oil. 

Meanwhile, Hungary has officially responded to the pager issue. Government spokesman Zoltan Kovacs said on social media platform X that BAC "is a trading intermediary, with no manufacturing or operational site in Hungary." He added that the pagers in question have never been in Hungary.

A shell company?

DW visited BAC's official address in Budapest, but didn't meet or see any employee from the firm. Nobody responded to the doorbell. An A4 sheet of paper with BAC's name printed on it is the only proof of the company's existence.

Residents of the house told DW that they don't know this company, and that they rarely see any correspondence sent to the address.  

According to data on CompanyWall business, which classifies and analyzes financial information and business information on firms, BAC Consulting posted a profit after tax of 18.3 million Hungarian forint (€46,400/$51,700) on revenue of 215 million Hungarian forint in 2023. The company posted a profit after tax of 5.8 million Hungarian forint in 2022.

On Wednesday, BAC's website first showed a login screen instead of the home page, and then eventually showed an error message, stating that "you don't have permission to access this resource."

The company's CEO is Cristiana Barsony-Arcidiacono, whose CV describes her as a "scientist using my very diverse background to work on interdisciplinary projects for strategic decision-making." She has been with BAC since March 2016 and lists business development, sustainability strategies and capacity development among her areas of expertise.

The official company register mentions 49-year-old Barsony-Arcidiacono as the sole owner of the company.

DW has reached out to BAC and its CEO, Barsony-Arcidiacono, for comment on the company's links to the pagers in Lebanon. Calls to the registered phone numbers were not answered.

DW also visited Barsony-Arcidiacono's apartment at her registered address, but nobody opened the door.

DW reporter Zsolt Bogar contributed to this report from Budapest.

Edited by: Uwe Hessler

Correction, September 18, 2024: An earlier version of this article misspelled the name of BAC CEO Cristiana Barsony-Arcidiacono. DW apologizes for the error.

At least nine people were killed and thousands more were injured after a number of handheld pagers exploded across Lebanon on Tuesday, the country's Health Ministry said.

Lebanese Health Minister Firas Abiad said the blasts "killed nine people, including a girl."

"About 2,750 people were injured... more than 200 of them critically," he added.

Hezbollah, a political organization and militant group in Lebanon, said at least two of its members were killed.

More than a dozen others were wounded in Syria, according to the UK-based Syrian Observatory for Human Rights.

"Fourteen people whose nationalities are unknown have been wounded in Damascus and its countryside after pagers used by Hezbollah exploded," the organization said.

Lebanon's Foreign Ministry condemned what it described as a "dangerous and deliberate Israeli escalation." Israel did not immediately comment on the incident.

The Foreign Ministry accused Israel of threatening to "expand the war towards Lebanon on a large scale."

Hezbollah vows 'just punishment' for explosions 

Iranian-backed Hezbollah also blamed Israel for the explosions.

"We hold the Israeli enemy fully responsible for this criminal aggression," Hezbollah said.

It added that Israel "will certainly receive its just punishment for this sinful aggression."

A Hezbollah official, speaking on the condition of anonymity, told the Reuters news agency that the incident was "the biggest security breach" the group had been subjected to in nearly a year of conflict with Israel.

Reports that Israel targeted the communications devices and was behind the detonations remain unconfirmed.

There have been near-daily cross-border exchanges between Israel and Hezbollah fighters since Hamas attacked southern Israel on October 7, triggering war in the Gaza Strip.

What we know about the incident

A Hezbollah official, speaking to Associated Press on condition of anonymity because he was not authorized to speak to the media, said the explosions were the result of "a security operation that targeted the devices."

"The enemy [Israel] stands behind this security incident," the official said, without elaborating. He added that the new pagers that Hezbollah members were carrying had lithium batteries that apparently exploded.

According to the German DPA news agency, the Bahman hospital in Beirut received more than 100 people. Some were said to be in critical condition.

The Lebanese Health Ministry urged all hospitals across the coutnry to be on alert. It also advised people to stay clear of devices that might pose a threat.

"The Ministry requests all citizens who own wireless communications devices to stay away from them until the truth of what is happening is revealed," the ministry said in a statement.

Iran's Mehr news agency reported that the Iranian ambassador to Lebanon, Mojtaba Amani, was among those injured.

Hezbollah is considered a terrorist organization by the US, Germany and several Sunni Arab countries, while the EU lists its armed wing as a terrorist group. It also operates as a major political party within Lebanon.

Why is Hezbollah using pagers?

A pager is a wireless telecommunications device that receives and displays messages. It was among the first compact mobile communication devices to reach the mass market, and although smartphones have largely supplanted it, some people still use this technology today.

The pagers use their own frequency and are therefore considered more reliable because they bypass cellular networks, which can experience interruptions, connection problems or interception of communications.

Makram Rabah, a lecturer in the history department at the American University of Beirut, told DW that he believes Hezbollah has purchased a large number of pagers because its landline network and even mobile phone operators have recently been hacked by Israel, which has driven them to a more low-tech fashion.

"By doing so they have been exposed to a new type of danger. And what happened today is proof of that," he said.

Analysts speculate that a Hezbollah supply chain has been infiltrated to cause the simultaneous explosion of hundreds of Hezbollah pagers. A source close to Hezbollah told the AFP news agency that "the pagers that exploded concern a shipment recently imported by Hezbollah of 1,000 devices," which appear to have been "sabotaged at source."

Meanwhile, Taiwan-based company Gold Apollo said it did not make the pagers involved in the blasts.

This comes after a New York Times report suggested the pagers had been supplied by Gold Apollo and shipped to Lebanese militant group Hezbollah.

How did others react?

The United States said it had no knowledge about the incident in advance.

"I can tell you that the US was not involved in it, the US was not aware of this incident in advance and, at this point, we're gathering information," State Department spokesperson Matthew Miller told reporters.

The blasts came after weeks of private diplomacy by the US to prevent an Iranian retaliation against the killing of Hamas political chief Ismail Haniyeh in Tehran in July, which Iran blames on Israel.

"We would urge Iran not to take advantage of any incident to try to add further instability and to further increase tensions in the region," Miller told reporters.

United Nations spokesperson Stephane Dujarric said the developments in Lebanon were concerning, especially given the "extremely volatile" context."

"I think we cannot under underscore enough the risks of escalation in Lebanon and in the region," Dujarric added.

Meanwhile, militant group Hamas — which Israel is fighting in the Gaza Strip and which counts Hezbollah as a key international backer — blamed Israel for the explosions.

"We... strongly condemn the Zionist terrorist aggression that targeted Lebanese citizens by detonating communication devices in various areas of Lebanese territory," Hamas said in a statement.

The organization also said the explosions did not distinguish "between resistance fighters and civilians."

Hamas is designated as a terror group by the US, the EU, Germany and others.

zc, rc/rmt, jsi (AP, AFP, dpa, Reuters)

The bad news on Germany's economic outlook continues to pile up.

On Monday, US chipmaker Intel announced it would stall plans for two chip factories worth €30 billion ($33 billion) in the eastern German town of Magdeburg for at least two years. 

But what is mostly seen as a cost-cutting measure at the chipmaker also highlights how the economic policy of Germany's three-party coalition government fails to kick-start investments.

Intel was planning to build a chip factory, creating some 3,000 jobs. The German government promised state aid worth €9.9 billion for the settlement, which it saw as a strategic asset to reduce dependence on semiconductors from Asian manufacturers, especially for Germany's all-important automotive industry.

Jens Südekum says sourcing chips for digitizing cars is a big problem for the industry here. 

"Intel wanted to get into the business of tailor-made customer chips which would have allowed the German car industry to secure exactly what they need for progress in digitization," the economist at Heinrich Heine University in Dusseldorf, Germany, told DW.

News of the delayed investment comes two weeks after German carmaker Volkswagen announced plans to close one, possibly two of its domestic factories due to lagging demand, especially for its electric vehicles (EVs).

Carsten Brzeski, chief economist at Dutch bank ING, thinks the two incidents point to a wider problem with investing in Germany. "What we're seeing currently is four years of de facto economic stagnation, and what ten years of deteriorating international competitiveness are doing to a country," he told DW.

Why Intel is postponing its plans in Germany

However, Brzeski also said that Intel has massive problems of its own that prompted it to stall its German plans.

And indeed, Intel chief executive Pat Gelsinger said that alongside the German factory, another one to be built in Poland will be paused, too. "We must continue acting with urgency to create a more competitive cost structure and deliver the $10 billion in savings target we announced last month," he said in a press release and letter to employees.

The Santa Clara, California-based chipmaker has been losing ground to rivals and seeing its technological edge slip. It no longer ranks as one of the top 10 semiconductor companies and is valued at less than $90 billion (€80.97 billion) — AI pioneer Nvidia, for example, now has a market capitalization of about $2.9 trillion.

Alexander Schiersch from the Institute for Economic Research (DIW) in Berlin says Intel has made ambitious plans that "didn't work out."

In an interview with DW he identified several key factors on which Intel's future would now depend: First, the company must attract more customers for its chips. Secondly, it must improve the effectiveness of its artificial-intelligence (AI) strategy, and finally, it must ensure that its cost-cutting efforts are successful.

After reporting a loss of $1 billion in the previous quarter amid shrinking sales, the company announced plans last month to slash 15,000 workers, find $10 billion in cost savings and suspend Intel’s dividend. 

Gelsinger's fortunes at Intel very much depend on plans to transform the company into a so-called foundry — a chipmaker that manufactures products for outside customers. Intel has been slow to find customers for the project, which is why his announcement on Monday of a partnership with Amazon Web Services centered around Intel-made AI chips represents a notable win.

Given Intel's current struggles, however, Schiersch estimates the likelihood of the US chipmaker one day following through on its plans for Magdeburg at "no more than 50%."

What will Germany do with €10 billion-worth in subsidies?

The postponement of the German factory is a blow to the European Union's chipmaking ambitions and is likely to reignite controversy with the German government over where to allocate the €10 billion it earmarked for subsidies.

Immediately after Intel's decision became public, Finance Minister Christian Lindner suggested using the money not spent to plug a gaping hole in the German budget. The Greens, which are also part of the three-party alliance, dismissed the intention and want to use the money for climate finance. Social Democrat Chancellor Olaf Scholz, meanwhile, has remained uncommitted so far.

People in the finance ministry with knowledge of the matter told DW that the ministry is currently exploring ways how to transfer the unused funding back into state coffers.

For ING chief economist Carsten Brzeski, government bickering over the Intel subsidy leaves questions about the governing parties' economic ambitions. "It feels like the German government does not really have a well-thought-through longer-term economic strategy," he said.

Edited by: Uwe Hessler

When China's youth unemployment rate reached a record high of 21.3% last year, Beijing did what authoritarian governments do whenever ugly truths emerge — it stopped publishing the data. After fiddling with its methodology for six months, China's National Bureau of Statistics excluded students from the data and Bingo! — by December, youth joblessness had dropped by nearly a third.

Massaging the data, as many China watchers suspect happened, doesn't make the problem go away. In July, after several months of small declines, the youth jobless figure rose sharply again — by a third to 17.1%.

Singapore-based Jiayu Li, senior associate at the public-policy advisory firm Global Counsel, told DW that even the previous data excluded millions of rural workers, who she said "face greater challenges in securing full-time employment," than those in urban centers.

"The official figures don’t accurately capture the true situation on the ground. Even after questionable methodological revisions, the numbers are still rising, highlighting the gravity of the problem," Li said.

While the Chinese economy may no longer be expanding at a double-digit annual rate, as it did in the early 2000s, the Asian titan is still projected to grow 5% this year, a figure most Western countries can only dream of. So, why can't China create enough jobs for the roughly 12 million graduates and millions more school-leavers that enter the workforce each year?

So much for Xi's promise of 'common prosperity'

Blame structural issues, COVID-19, the sluggish post-pandemic recovery and trade tensions with the West. But just as crippling for economic growth, as well as the employment prospects of many young people, was the far-reaching crackdown by President Xi Jinping on the technology, real estate and private education sectors in 2020/21.

China's tech giants, whose near monopoly was targeted by Xi's reforms, lost more than a trillion dollars in market value. The property sector collapsed, taking the life savings of tens of millions of people along with it. China's flourishing education-technology sector, which offered private tuition to an estimated 75 million students, was decimated. Mass layoffs inevitably followed and many of those affected were younger workers.

Online tuition platforms, for example, had grown in popularity for years, due to intense competition for university education among Chinese students and a cultural emphasis on high grades. In 2019, an estimated 10 million people were employed in China's private tuition sector, many of them recent graduates.

"Xi's crackdown sent a massive chill through this sector," Diana Choyleva, chief economist at the London-based Enodo Economics, told DW. "Although tutoring jobs did not dry up completely, they became much more unstable and unreliable, reducing one avenue that underutilized graduates had used to mitigate their diminishing economic prospects."

Young people shun blue-collar jobs

Another concern is the discrepancy between expectations and reality, as young people continue to shun blue-collar jobs to compete for high-paying white-collar positions.

Logic suggests that younger people would make up a large majority of the blue-collar workforce due to their fitness and agility. But Chinese media cited a 2023 study by Beijing's Capital University of Economics and Business that found that about half of the country's 400 million manual workers are above the age of 40.

"Vocational skills are often in high demand, but these pathways and jobs are seen as less desirable [by young workers]," Nicole Goldin, a non-resident senior fellow, at the Washington-based Atlantic Council think tank, told DW. While the Chinese government has introduced some incentives and reforms to the education system to address underlying structural issues, "it will take time to see any impact," she added.

More chips than workers needed?

As China's economy continues to rise up the value chain, Beijing has set its sights on global technological dominance. Huge investments in artificial intelligence (AI), chip production and green energy will help cut China's reliance on the West. But these sectors don't necessarily need a lot of new workers.

"The state's focus is on emerging sectors like AI and electric vehicles, which are small and not labor-intensive, offering limited job creation," said Global Counsel's Li. "This stifles innovation and technological breakthrough — ironically the very thing Beijing wants to rely on to drive future growth."

Li said the ongoing trade tensions with the West also put China's export industry under strain as it has to "replace high-value orders from a de-risking West with lower-value ones from the Global South," which has a knock-on effect on employment.

Hustle culture a hassle

Meanwhile, work in the gig economy, often facilitated by digital platforms for food delivery, ride-sharing or social-media influencing, has become oversaturated. Some 200 million Chinese make a living through these types of precarious roles, so many young people have given up trying to hustle.

"Wealthier youth may have opted for more education and many are choosing to 'lie flat,'" said Goldin, referring to a growing social movement known in Mandarin as Tang Ping, where young people reject societal pressures to overachieve and seek a less materialistic life.

She also described how a growing number of young Chinese are becoming "professional children or grandchildren," providing elder care for relatives — a function in growing demand due to an aging population and rising costs.

Chinese entrepreneurs are now risk-averse

By clamping down so heavily on the private sector, Xi has choked off investments in startups and the willingness of young entrepreneurs to take risks. The number of new Chinese startups has fallen by 97% over the past six years, the British business daily Financial Times reported this week — from over 51,000 in 2018 to some 1,200 last year.

Choyleva told DW that entrepreneurs and venture capital firms have become "extremely cautious" due to strict new regulations that have forced the private sector to align with Communist Party values, which she said was a "serious contradiction of the government’s agenda."

"How can the private sector drive innovation while entrepreneurs are unwilling to take the risk to start a business? Long-term you lose out on companies that could have spurred massive employment for young people, and the multiplier effects they would have had for the country," she said.

If China is on a path to potentially overtake the United States as the world's largest economy, young talent must play a critical role in driving that growth, Goldin agreed.

"[High youth unemployment] undercuts productivity and will complicate China's ability to compete globally. These young unemployed won't be able to earn their way into the middle class, which will hurt consumption and have potentially destabilizing societal implications that would further hinder growth," she warned.

Edited by: Uwe Hessler

Europe's auto industry has fallen on hard times: fewer of their cars are being sold than expected, and their new electric-vehicle (EV) models are struggling to find favor with customers. It's not just the continent's biggest carmaker Volkswagen that is facing potential factory closures — French carmaker Renault and Italy's 14-brand car group Stellantis are also producing significantly more cars than they can sell.

According to business data and research company Bloomberg Intelligence, one in three European factories of carmaking behemoths like BMW, Mercedes, Stellantis, Renault and Volkswagen is underutilized. In some of their plants, less than half of the vehicles that could theoretically be produced are actually being made.

The situation is particularly dire at the Stellantis factory in Mirafiori, Italy, where the fully electric Fiat 500e is built. Production there fell by more than 60% in the first half of 2024. Meanwhile, even the Belgium plant of premium automaker Audi, which produces the luxury Q8 e-tron model, is facing the risk of being shut down.

Sales problems are also dampening the mood at the Renault plant in Douai, northern France, and at VW in Dresden, Germany. The electric cars produced there are struggling to find buyers, and the manufacturers are incurring losses.

The chief economist at Dutch bank ING, Carsten Brzeski, sees the European car industry "in the middle of a structural transformation" which does not only affect VW but the entire automotive industry. "We're clearly seeing that the global trend towards more electric mobility is leading to more competition," Brzeski told DW.

Cut-throat competition in Europe

The pressure on European automakers is particularly strong from China. Despite EU tariffs on China-made EVs, manufacturers from the Asian powerhouse are determined to establish a foothold in the European market. In order to circumvent higher duties on their cars, manufacturers such as Geely, Chery, Great Wall Motor, and BYD even plan to produce electric cars in their own factories in Europe.

Carsten Brzeski says Europe's auto industry is currently struggling with many issues simultaneously, and that multiple problems are converging, such as intensified global competition and Europe's declining competitiveness.

Hans-Werner Sinn, the former president of the Munich-based Ifo Institute, dismisses widespread criticism that company managers have failed. "You can't say that anyone has slept through the market trend," he told DW.  The "failure" lies in not recognizing "how quickly and decisively [pro-EV] policies in China and Europe are being enforced."

As one of Germany's most renowned economists, Sinn argues that policies like Europe's Green Deal, an EU ban on combustion engines from 2035, and increasingly stringent fleet emissions standards have radically upset market conditions in a relatively short period of time. This has forced the industry onto a politically motivated transformation course that is leaving those companies on the sidelines that fail to adjust quickly enough. Moreover, VW's diesel-emissions scandal has put the entire industry on the defensive.

Sinn also said that China, and partly also France, have seen the ramp-up of EV production as an opportunity to break the dominance of German automakers in combustion-engine technology. Meanwhile, however, all carmakers in Europe would regard the Chinese as their primary competitors because they are currently benefiting the most from the transformation.

Brzeski blames the "back-and-forth" of political decision-making for the current problems as questions such as "What about the combustion engine? Is it staying or not? When is the phaseout happening? Will it be extended or not?" are causing uncertainty. A particularly "unfortunate decision," he added, was the German government's abrupt abolition of EV subsidy at the end of 2023.

How can the car industry turn things around?

For ING Chief Economist Brzeski, there is no doubt that the decline of the auto industry in Germany and Europe will threaten the region's prosperity. In Germany alone, the auto sector — including suppliers, vendors, and other companies depending on the sector — accounts for 7% to 8% of the country's annual economic output.

In order to preserve the industry in Europe and, most importantly, its thousands of well-paying jobs, Hans-Werner Sinn proposes a so-called climate club aimed at leveling the playing field for all carmakers operating in the global car market.

First floated by German Chancellor Olaf Scholz, the idea is to convince developed and developing countries — notably the biggest CO2 emitters such as the EU, China, India, Brazil and the US — to cut support for and the use of fossil fuels.

Anything else would be "the darkest form of central planning, which has no place in a market economy," Sinn told DW. Aligning European economies, including their carmakers, with sweeping climate goals may be "well-intentioned," but will "put the ax to our prosperity," he warned. Any attempts at "overriding market principles" will "ultimately ruin" Europe's economies.

"You can see the public outcry on these issues, and now it's intensifying with [the troubles at] VW. It's already showing in election results," said Sinn, referring to a far-right shift in recent elections in eastern Germany.

Frank Schwope, a car-industry expert at the University of Applied Sciences for Small and Medium Enterprises (FHM) in Hanover, Germany, is convinced though that VW will be able to ride out the current sales slump.

"The truth is, Volkswagen is making very substantial profits," he told German regional radio station NDR, and pointed to the carmaker's operating profit of €22.6 billion ($25.14 billion) in 2023, and an expected operating profit of €20 billion this year. In his opinion, VW's management has created a doomsday scenario aimed at suppressing current wage demands and pushing for new state subsidies for EVs.

Italian manufacturer Stellantis is indeed hitting the brakes due to its sales crisis. At its Mirafiori plant near Turin, production of the Fiat 500e will be halted for a month, the carmaker has announced.

Hans-Werner Sinn isn't so sure about the industry's ability to ride out the crisis. VW is only "an early victim," he told DW, adding that "there's more to come."

This article was originally written in German.

Why has UniCredit bought a stake in Commerzbank?

Germany's government, which bailed out Commerzbank after the 2008/09 financial crisis by taking a 16.5% stake, tipped off potential buyers last week that it wanted to sell part of its holdings in the country's second-biggest lender. 

On Wednesday, Berlin confirmed that UniCredit had outbid other hopefuls to land a nearly 4.5% stake in Commerzbank for about €700 million ($771.3 million). Germany's Federal Finance Agency said UniCredit had "significantly outbid" all other offers.

The Italian lender also quietly bought up another 4.5% of Commerzbank shares on the open market in recent weeks, bringing its total acquisitions to around €1.4 billion.

Although the German state remains Commerzbank's biggest shareholder, the sale of just over 53 million shares reduces the government's stake to 12%.

UniCredit is now also one of Commerzbank's biggest shareholders, and the share purchase paves the way for a potential takeover. UniCredit chief executive Andrea Orcel told Bloomberg on Thursday that he was considering that option.

Any takeover would create an entity that would surpass Deutsche Bank as Germany's biggest lender. Deutsche Bank explored a merger with Commerzbank in 2019, but it ended without agreement.

Bloomberg reported on Thursday that UniCredit is believed to have €10 billion in cash for potential acquisitions. However, financial market regulations prevent Berlin from selling any further stake in Commerzbank for the next three months.

What's been the reaction in Germany?

The swoop for Commerzbank surprised financial markets, Commerzbank's management and German politicians alike.

Unions have warned a merger would be harmful for commercial clients and for jobs. Verdi, the services sector union, called on the German government to "oppose" a merger and not to sell further shares to UniCredit.

Commerzbank is one of Germany's few major privately owned banks and a big lender to the country's so-called Mittelstand, or medium-sized companies, which are the backbone of the German economy.

Some lawmakers and business leaders think a tie-up between UniCredit and Commerzbank would be unwelcome competition for Deutsche Bank, which was weakened by the financial crisis and the eurozone debt crisis but avoided a German government bailout.

A source in the German government told Reuters news agency Friday that ministers were not against a tie-up in principle, but it was up to the two banks to decide.

Commerzbank said in a statement its board would "continue to act in the best interests of all our shareholders, employees and customers."

Reuters reported that the German lender had rushed to appoint Goldman Sachs to act as its defense adviser.

An anonymous source told Reuters that Commerzbank held an urgent board meeting on Wednesday to discuss how to remain independent and explore strategies to resist a potential bid from UniCredit.

What is UniCredit and why is its CEO Andrea Orcel so key?

UniCredit was formed in 1998 from the merger of several Italian banking groups, including UniCredito and Credito Italiano. It has since acquired several other Italian and European banks. It is headquartered in Milan.

UniCredit is the world's 34th largest lender by assets and is considered a systemically important bank — whose failure might trigger a financial crisis.

CEO Andrea Orcel is known as one of Europe's most experienced dealmakers. He is a controversial figure — often criticized for his abrasive management style.

Orcel orchestrated the merger that created UniCredit, then performed a similar maneuver in Spain that created BBVA and helped Banco Santander to buy the UK's Abbey National.

Just before the financial crisis, he was headhunted by the Royal Bank of Scotland (RBS) to help it buy Dutch lender ABN Amro. The UK government was later forced to bail out RBS due to the credit crunch.

In 2018, Orcel was tapped for the CEO role of Banco Santander, but the offer was rescinded as the Spanish lender couldn't meet his pay demands. He sued Santander, and in 2021, he was awarded €68 million in compensation.

UniCredit's share price has quadrupled since Orcel's arrival as CEO in April 2021, valuing the lender at €59 billion ($65 billion), far bigger than Commerzbank's €18 billion.

What would a takeover mean for banking in Europe?

Unicredit's stake purchase in Commerzbank has reignited speculation about consolidation in Europe's fragmented bank sector.

European regulators have long favored reducing the number of banking players due to the sector's low profitability.

They could include several Italian lenders, France's Societe Generale, Portugal's Banco Comercial Portugues, and the UK's Standard Chartered, Bloomberg reported Thursday, citing JP Morgan analyst Kian Abouhossein.

However, banking executives say cross-border mergers are almost impossible at present due to fragmented markets and tight regulation.

Orcel said Thursday he would now seek approval from the continent's banking chief regulator, the European Central Bank (ECB), for UniCredit to potentially increase its stake in Commerzbank beyond the 10% currently allowed.

The ECB was kept informed over the summer about UniCredit's possible move on Commerzbank, Bloomberg reported.

 

When the West imposed sanctions on Russia over its full-scale invasion of Ukraine, it choked off the Kremlin's ability to trade in US dollars, euros and other currencies. Russian banks were blocked from the SWIFT international payment-messaging system and the central bank's foreign currency reserves were frozen. That forced Moscow to shift its remaining reserves to currencies not controlled by the West, including the Chinese renminbi (RMB) of which its principal unit of measurement is called the yuan.

The Kremlin's energy deals with China, to offset the income loss from missing European buyers of Russian oil and gas, have since helped international transactions in the yuan to a record high, the British business daily Financial Times (FT) reported recently, citing data from China's State Administration of Foreign Exchange (SAFE).

A third more yuan transactions

The number of bilateral transactions using the Chinese currency grew by a third in July to 53% from 40% in the same month in 2021. In 2010, 80% of outbound Chinese trade was conducted in dollars, the FT reported, but that figure has halved since Western sanctions on Russia went into effect. Over the same period, outbound trade in yuan has grown from almost zero to more than half of all transactions.

"Trading in yuan is convenient for both Russia and China," Maia Nikoladze, associate director at the Atlantic Council think tank's GeoEconomics Center, told DW. "Russia does not have too many other currency alternatives, while China benefits from exerting more economic influence over Moscow, and also makes progress towards internationalizing the yuan."

Globally, however, the yuan is used for less than 7% of all foreign-exchange transactions, versus 88% for the dollar, according to the Dollar Dominance Monitor by the Washington-based Atlantic Council. The tracker found that 54% of export invoicing is still done in dollars, versus 4% for the yuan.

Other BRICS nations watch China-Russia trade

Yuan trade is benefitting from bilateral deals between Moscow and Beijing that led to Russia increasing its holdings of the Chinese currency, as part of its foreign exchange reserves. A currency swap agreement allows Russian banks to access yuan liquidity. Russian financial institutions have also started to issue yuan-denominated bonds.

Other countries, particularly those of the world's fastest-growing BRICS economies, are watching the increasing yuan transactions with interest. BRICS leaders have mooted the idea of a shared currency, to create a multipolar financial system and be less reliant on the dollar,

Hanns Günther Hilpert, senior fellow at the German Institute for International and Security Affairs (SWP), said that many countries in the Global South are "concerned" about Western moves to freeze Russian reserves.

"Maybe they will have a problem with the United States in the future and their reserves could also be frozen. So these countries are shifting away from the dollar," he told DW.

US Republican presidential candidate Donald Trump sees dedollarization as such a huge threat to US hegemony that he threatened at a recent campaign rally to slap countries that shun the currency with 100% tariffs.

"Many countries are leaving the dollar. They not going to leave the dollar with me. I’ll say, you leave the dollar, you’re not doing business with the United States because we’re going to put 100% tariff on your goods," he said.

Saudi, Brazil and Argentina follow Russia

Beijing has sealed deals with several other countries to conduct more trade in yuan. Saudi Arabia, one of the largest oil exporters to China, signed a three-year currency swap with Beijing last November worth the equivalent of $6.93 billion (€6.26 billion).

That deal marked a significant potential shift in global energy markets, which have been traditionally dominated by the US dollar, hence the term Petrodollar. While a complete move to yuan pricing for all Saudi oil sales is unlikely in the short term, the arrangement allows both countries to test the waters without disrupting existing trade practices.

"Saudi Arabia is selling oil and gas to China. They get renminbi, which can be used to buy Chinese goods or to invest in China, which the Saudis have already done. It's a barter trade," said Hilpert.

The likes of Brazil, Iran, Pakistan, Nigeria, Argentina and Turkey have also agreed to conduct more yuan trade. In Iran's case, heavy Western sanctions have forced Tehran further into China's sphere of influence. Chinese refiners bought 90% of Iran's exported oil last year, tanker-tracking data from trade analytics firm Kpler showed. Iran receives payments in yuan for its oil via small Chinese banks.

Argentina, which has been dealing with a brutal economic crisis, faces a severe shortage of US dollars to pay for imports, servicing debt, and stabilizing the Argentine peso. By settling more of its trade with China in yuan, the Latin American country can conserve those dollars and reduce the pressure on its other foreign currency reserves.

Capital controls stop yuan's ascent

Despite moves by Beijing to internationalize, the Chinese currency is not yet fully convertible with other global currencies, which experts say is vital for it to become a reserve currency. Beijing maintains capital controls that restrict the free flow of capital in and out of the country.

As well as a threat to the Communist Party's iron grip on power, Chinese leaders are concerned about a repeat of the 1997/8 Asian Financial Crisis, which saw Wall Street bet against several Asian currencies, due to the heavy indebtedness of their respective countries, sparking a massive flight of capital.

Hilpert thinks that becoming a fully convertible currency "comes with a price tag" which will be political and economic instability. "The renminbi would then be subject to currency speculation, which the Chinese are afraid of. They saw what happened to Thailand and South Korea," he said.

At the peak of the late 90s Asia meltdown, the Thai baht and Korean won lost more than half of their value against the dollar and both countries, along with Indonesia, were forced to seek a bailout from the International Monetary Fund (IMF).

"Beijing has not signaled a willingness to lift capital controls, which would be a key factor in enabling the yuan to realize its potential as a currency for global trade," Nikoladze said.

Another benefit of Beijing's curbs on the yuan is having the flexibility to devalue the currency to boost exports during slowing economic growth. Chinese leaders did this most recently in 2015 and again during the COVID-19 pandemic. There's speculation that another sharp devaluation may be on the cards.

Xi wants China to be a 'financial power'

While the dollar's role as the world's reserve currency is seen as secure in the short and medium term, Chinese President Xi Jinping in January restated his ambition for China to become a "financial power," noting that his country's system was "distinct from Western models."

Asia's largest economy faces many challenges as it seeks to move the world toward a multipolar currency system. They include high levels of corporate, household and local government debt, a worsening real estate crisis and an opaque shadow banking system that helped support high property prices. Ongoing trade and geopolitical tensions with the West and Asian neighbors also threaten China's relatively sluggish recovery from the pandemic.

Hilpert thinks that China is not really integrated with the global financial system because it has "many inefficiencies," including state-owned enterprises which are highly subsidized, and a crude [domestic] financial system. "If you want to become a great economic power, this is not the right strategy," he added.

Edited by: Uwe Hessler

As Chinese companies increasingly seek expansion opportunities abroad amid rising trade tensions between Beijing and Washington, Laos is trying to present itself as a prime location for these firms to set up their manufacturing units.  

Amata, a Thai developer known for its industrial parks in Thailand and Vietnam, recently announced the launch of a significant project in Laos, aimed at drawing manufacturers looking to relocate from China.

In an interview with Nikkei Asia last month, Amata's founder and chairman, Vikrom Kromadit, underlined the importance of overseas expansion, saying it's a potential "lifeline" for these companies.

In its 2024 brochure, Amata listed incentives such as tax exemptions that investors in the Laos project would enjoy.

The move also signals a possible shift in regional manufacturing dynamics.

A promising location?

Jimmy Chen, vice president of the Thailand-Taiwan Business Association, said Laos is a promising industrial location for Chinese manufacturers.

"Due to Laos sharing the [border] with China, I believe it will definitely attract Chinese manufacturers. Also, Thailand has higher manufacturing costs as compared to Laos due to the higher standard of living there," he told DW.

"Both China and Thailand have heavily invested in the development of Laos as well, as they also see great potential there," Chen added.

Tim Scheffman, a German national living in Vientiane, is the CEO of LTS Ventures, a Laos FinTech company. He said he is optimistic Laos can become a manufacturing hub in the coming years.

"Laos has the potential to become a manufacturing hub in the region. It has a great strategic, central location in the heart of Southeast Asia,” he told DW, pointing to its membership of the Association of Southeast Asian Nations, the 10-member bloc that has over 660 million people.

But he added that a limited human resource capacity and an inefficient banking sector could present hurdles. "If an investor is willing to bring automation, training and flexibility, then Laos can be a great place for manufacturing," Scheffman said.

Laos faces a raft of economic challenges

A landlocked country of about 7.5 million people, Laos is rich in natural resources.

But the nation's economy has been struggling with a raft of problems in recent years.

It has massive foreign debt, a depreciating currency and soaring inflation, which is hovering at about 25%.

Laos has also become increasingly dependent on China for investment and loans in recent years, with major infrastructure projects being financed through Chinese loans. 

Bilateral ties have deepened with the construction of Chinese-funded hydroelectric projects as well as the building of a $6 billion (€5.43 billion) high-speed railway that links to railways in southwest China's Yunnan province and eventually will be connected with a line running to Bangkok and the Gulf of Thailand.

But the debts resulting from these projects have been a heavy drain on the country's resources.

Experts say Laos is facing debt distress, with payment obligations surpassing $1 billion a year and total borrowing amounting to about 125% of its economy, with half owed to China.

No comparative advantage?

Laos, which has a per capital GDP of around $2,000, wants to integrate more with the regional economy to overcome the challenges.

But questions remain as to whether the single-party communist state can pull it off.

Zachary Abuza, a professor at the National War College in Washington who focuses on Southeast Asia, said Laos has "very little in the way of comparative advantage compared to countries it is surrounded by: China, Vietnam and Thailand."

"To be a manufacturing hub you need a few things, such as an educated and trained work force, macro-economic stability and a steady supply of energy. Laos only has the latter," he added.

Another issue facing investors when they consider investing in Laos is corruption.

"Laos is plagued with rampant official corruption," said Abuza.

"While that is the case in many other countries, companies usually think that the economic benefits they offer, such as market access, make it worth it. But I just don't see that happening in the case of Laos, whose total economy is worth under $20 billion — it is a paltry market."

Edited by: Srinivas Mazumdaru

Volkswagen's warning last week of job cuts and potential production line closures in its home market for the first time in its 87-year history sent shockwaves through the country.

The storm clouds for Germany's largest carmaker have, however, been forming for several years, due to soaring production costs, a weaker domestic economy post COVID-19 and intense competition from China. VW's faltering electric-vehicle (EV) strategy is adding to the company's revenue woes.

The automaker must make some €10 billion ($11.1 billion) in cost savings over the next three years, which could mean thousands of job losses and the likely shutdown of some of its 10 German assembly lines.

VW said Tuesday it had formally terminated a three-decade-old job security deal with unions, opening the door for compulsory redundancies. The state premier of Lower Saxony, where several of VW's German factories are located, was due to meet with staff representatives over the job cuts on Wednesday.

Meanwhile, the announcement of a massive recall of 1.5 million vehicles by fellow German carmaker BMW added to the problems facing the automotive sector on Tuesday. BMW's shares dropped 11% on the news.

Germany's rivals catching up

VW's painful reforms can be seen as part of the broader challenges facing Germany's €4.2 trillion economy, where supply chain disruptions, the energy crisis — particularly due to the reduction in Russian gas supplies — and loss of competitive edge have hurt growth.

"Volkswagen represents the success of German industry over the last nine decades," Carsten Brzeski, ING bank's chief economist for Germany, told DW last week. "But this story tells us what four years of economic stagnation and 10 years of deteriorating international competitiveness can do to an economy. They make investments less attractive."

Germany's economy contracted 0.3% last year, according to the national statistics agency Destatis. Three leading economic institutes have forecast a 0% increase in gross domestic product (GDP) in 2024. This contrasts with the 10 consecutive years of growth that Germany experienced before the coronavirus pandemic — its longest period of growth since reunification in 1990.

Are German industry's days numbered?

VW's bombshell, alongside negative news about other German industrial giants — including BASF, Siemens and ThyssenKrupp — has helped push a narrative that Germany's best days may be behind it and that economic decline is inevitable.

"The VW announcement is certainly a symptom of a broader malaise across German industry, rather than an isolated case," Franziska Palmas, senior Europe economist at the London-based Capital Economics, told DW, noting how industrial production in July was almost 10% below its level at the start of 2023 and how industrial output has been on a 6-year downward trend.

As well as the issues affecting Germany's auto sector, Palmas spoke of a "permanent loss of production capacity in energy-intensive industry" since the 2022 energy crisis, fueled by Russia's full-scale invasion of Ukraine. Capital Economics expects the industrial sector's share of Germany's GDP to "continue to decline in the coming decade."

Rise of populism obstructed reforms

Sudha David-Wilp, director of the Berlin office of the German Marshall Fund think tank, thinks the country's troubles are a result of a reluctance by successive governments to push through necessary but painful reforms. Among the reasons, she said, is the rise of parties like the far-right Alternative for Germany (AfD) over the last decade.

"The Merkel years were quite comfortable, and Germany was wealthy enough to navigate through the COVID crisis," David-Wilp told DW. "But with the rise of populism, the established parties want to make sure Germans feel secure economically, so they don't fall prey to parties that fear-monger." 

This kind of strategy only puts off the inevitable, however, as economic headwinds from lower-cost competitors continue to eat into Germany's share of the global economic pie. Worsening geopolitical issues, meanwhile — particularly between the West, Russia and China — threaten to further roll back globalization, of which Germany has been a major beneficiary.

VW reforms a 'final wake-up call'

"The world is changing, and our sources of economic growth are changing," ING's Bjeske said. "[VW's problems] should be the final wake-up call for German policymakers to start investing and reforming so that the country can again become more attractive."

How quickly these reforms can happen remains uncertain, as Germany's so-called debt brake — which restricts annual structural budget deficits to 0.35% of GDP — and infighting between Chancellor Olaf Scholz's coalition partners over the 2025 federal budget, means there is little room for more fiscal stimulus.

Despite the stream of negative news, Germany remains a key location for international investments. In the past 18 months, the likes of Google, Microsoft, Eli Lily, Amazon and Chinese automaker BYD have announced big spending plans. 

Berlin has set aside subsidies of around €20 billion to boost the domestic semiconductor sector, particularly in eastern Germany, backing investments by Taiwanese chipmaker TSMC and Intel.

Germany's new direction emerges

Biotech, green technologies, artificial intelligence (AI) and defense are other growing sectors for the German economy, David-Wilp told DW, which the government could support further as it carves out its new industrial strategy.

"It's not all doom and gloom. There are pathways ahead for growth," she said. "Things need to get bad before they get better, and this sense of innovation needs to be rekindled."

Those reforms, however, will likely have to wait until after the next federal elections, scheduled for September 2025, which could see Scholz's coalition — made up of the center-left Social Democrats, the environmentalists Greens and the liberal Free Democrats (FDP) — replaced.

The current anguish is a reminder of Germany's economic malaise in the late 1990s and early 2000s, where the country was nicknamed the "Sick Man of Europe." 

Finance Minister Christian Lindner (FDP) denied that the monicker was appropriate this time, telling delegates at the World Economic Forum in January that Germany was instead a "tired man" in need of "a good cup of coffee" of structural reforms.

Edited by: Uwe Hessler

This story was updated on September 11, 2024, with details of how VW is ending a job security plan, as well as details of a large vehicle recall by BMW.

If anyone was in doubt about the key issue in the US presidential election, the opening 15 minutes of last night's debate between Donald Trump and Kamala Harris laid it bare.

Amid discontent in the US over the state of the economy, both candidates dished out blame for inflation and outlined some of their core economic policies.

Harris opened the debate by describing plans to "build up the middle class", something she repeatedly returned to. She revisited pledges she has signaled in her campaign, such as aid and tax relief for home buyers, childcare and small businesses.

Within seconds of speaking, Trump mentioned China, lauding the tariffs he leveled against Beijing during his first term and vowing to beef them up if re-elected.

He fiercely attacked the Biden administration for its economic record. "We've had a terrible economy," he said, claiming the inflation crisis was the "worst ever" in the country's history.

Inflation — the central issue?

Trump attempted to tap into possible voter nostalgia for the pre-Covid economy of 2019, when he was in office. "I created one of the greatest economies in the history of our country and we're going to do it again," he boasted.

However, Harris countered Trump's accusations that the Biden administration was to blame for the inflation crisis that struck much of the developed world in 2021 and 2022. "What we have done is clean up Donald Trump's mess," she said.

The state of the US economy and which candidate voters believe is better equipped to manage it is a crucial question in the 2024 election.

Polls show that a clear majority of Americans are unhappy with the economy; inflation in particular remains a dominant theme. A YouGov/The Economist poll in July found that the issue of price rises is by far the most important for US voters.

Inflation has been falling, and while it has been difficult to tame in 2024, some experts believe the issue remains potent due to the shock of its dramatic rise in the aftermath of the pandemic.

"It's one of these odd issues where I think public opinion has not caught up with economic reality," William Reinsch from the Center for Strategic and International Studies in Washington told DW ahead of the debate.

"The public is very concerned about inflation. All the indicators suggest that inflation is declining and has declined significantly. Not all prices, and certainly not all food prices, have gone down. But the public still seems to be in the mode of 'this is all terrible,' when objectively it isn't."

Adam Posen, president of the Peterson Institute for International Economics, says while "in some cosmic sense" it may be unfair that Harris is held responsible for past inflation, it's only to be expected. "If you're a president or you're part of the administration, you're always going to be judged by what the inflation and growth overall conditions are," he told DW.

Tax and trade

Posen says there are five key areas where the candidates' economic differences matter most — namely on taxation, tariffs, migration, regulation and the role of the Federal Reserve.

While Harris has pledged tax cuts for the middle class, Trump's tax cut promises are to extend the cuts he made for businesses when he was president in 2017.

"Harris seems to be much more focused on policies that will help the poor and the middle class," says Reinsch. "Trump's tax credits primarily benefit the wealthy."

Trump mentioned China several times during the debate. He has vowed to increase the tariffs introduced in his first term significantly but economists say those plans would see costs passed on to consumers.

"If Trump does what he says he wants to do and further restricts trade with China, it will be inflationary, it will be bad for productivity growth, it will distort all kinds of things and lead to blowback from around the world," says Posen.

However, the Biden administration largely carried on with Trump's protectionist trade policy and Harris, if elected, is likely to maintain existing tariffs.

"If Harris leaves in place the tariffs that already exist, which she would do unfortunately, and at least draws the line at no more general tariffs and limits it to tariffs on China, the damage is a fraction of what Trump would do," says Posen.

Immigration

On the topic of immigration, which Trump repeatedly returned to, Posen says there is a huge difference in how the candidates' approach would impact the economy.

He says Trump's plans to deport millions of migrants would be "stagflationary for the US" as the country's economy is so dependent on foreign labor. "It would probably cause a recession in select sectors of manufacturing, agriculture, hospitality, and retail, residential construction, while raising inflation significantly," he said.

While regulation did not feature heavily in the debate, Posen says Trump's plans to heavily deregulate sectors such as antitrust, compared with Harris' plans to intervene on price controls, point to sharp policy differences.

On the Federal Reserve, Posen says Trump has made clear that he would put more pressure on the US central bank to take certain actions on the dollar or on interest rates, whereas Harris has spoken of the importance of respecting the Federal Reserve's independence.

Both Reinsch and Posen say that the clearest evidence of the difference between the two candidates' visions for the economy can be seen in how their policies would impact the US budget deficit. 

Various models show that Trump's plans would increase the US federal government deficit by several trillion dollars over a decade, multiples of how much Harris' plans would increase it by.

The economy, stupid

While last night's debate moved on to issues such as abortion, the Israel-Hamas war and the war in Ukraine, the importance both candidates — Trump in particular — placed on the economy was clear.

Towards the end of the debate, during a discussion on race, Trump suddenly pivoted to focus on the Biden administration's economic record.

"They're destroying our economy, they have no idea what a good economy is," he said. "And remember this: She is Biden, she's trying to get away from Biden. The worst inflation we've ever had, a horrible economy."

Harris countered by returning to the policy plans she had outlined at the start of the debate. The moment was a stark illustration that Trump believes the economy is the issue he must focus on the most if he is to win back the presidency in November.

Edited by: Ashutosh Pandey

In a much-anticipated report on the 27-nation EU's economic competitiveness, originally due in June, Mario Draghi has called for joint borrowing and much more collaboration among member states to compete with Washington and Beijing. The former prime minister of Italy and ex-president of the European Central Bank (ECB) also urged EU leaders to invest €800 billion ($883 billion) annually to boost growth.

Released in Brussels on Monday (September 9), the report has demanded "radical change" amid growing concern over a massive productivity gap with the United States, where since 2000, incomes have grown twice as much as in the EU.

"This is an existential challenge," Draghi said during a news conference following the report's release, raising the alarm on declining productivity. "We have said many times, growth has been slowing down in Europe, but until two years ago we ignored it, because things were going well."

Europe's weaknesses identified

Draghi's findings, drafted with the aid of the European Commission, come just days before its President Ursula von der Leyen is due to set out the duties of the Commission for her next five-year mandate.

It was no longer possible to ignore the urgency, Draghi said, as "China is competing with us on global markets," and the bloc had lost its "main supplier of cheap energy," in reference to Russian gas supplies.

The report, first of all, recommends closing the innovation gap with the US and China, especially in advanced technologies. "The EU is weak in the emerging technologies that will drive future growth. Only four of the world's top 50 tech companies are European."

During the news conference, Draghi told reporters that since 2008, 30% of European "unicorns" — that is, startup companies valued at over $1 billion — have left the bloc for the US.

In addition, the 400-page report calls for a "coherent plan" to link decarbonization efforts with industrial competitiveness in a way that builds a greener planet and yet ushers in benefits for businesses. The EU has set a target of net-zero carbon emissions by 2050 and member states have vowed to transform their economies to achieve the goal.

Draghi warned that if EU member states failed to coordinate policy, "there is a risk that decarbonization could run contrary to competitiveness and growth.”

The third plank of Draghi's vision is what the report calls an "EU foreign economic policy" aimed at reducing dependencies on China for critical minerals that power modern life. The EU should pursue diplomacy with an eye on economic security and securing key supply chains. "The EU will need to coordinate preferential trade agreements and direct investment with resource-rich nations, build up stockpiles in selected critical areas, and create industrial partnerships to secure the supply chain of key technologies."

EU de-risking strategy in the making?

Experts hope the report will set the tone for the next EU Commission and infuse the urgency needed. "By identifying strengths and weaknesses, it provides a comprehensive and honest picture of the EU's challenges for the decades to come, if it wants to at least prevail in the position it is in today," Filip Medunic, an expert at the Berlin-based think tank German Council on Foreign Relations, told DW. Especially the focus on innovation and global competitiveness was crucial for the next decade, he added. "There's a trade-off between greening the economy and not losing green technologies to global competitors for a lack of funding and scalability."

But other experts are more skeptical, citing the rise of far-right parties in Europe on demands of less decision-making in Brussels. Jacob Funk Kirkegaard, a senior fellow at the Brussels-based think tank Bruegel described this as a "political challenge."

"There are political parties who want fewer common projects, more national determination, who want the EU to have less say," he told DW. "Draghi believes you cannot pretend that you can compete with the US or China if you don't want to make macroeconomic decisions," that generate economies of scale, Kirkegaard said.

Common debt to finance Europe's funding needs

Europe needs to mobilize at least €750 billion to €800 billion a year — equivalent to about 4.5% of the bloc's annual GDP — to keep pace with competitors, according to Draghi's report.

"Delivering this increase would require the EU's investment share to jump from around 22% of GDP today to around 27%, reversing a multi-decade decline across most large EU economies" the report reads, stressing the need for common funding along the mobilization of private investment.

Joint funding for investment in key European public goods, such as breakthrough innovation, defense procurement or cross-border grids, will be necessary, Draghi said.

However, the idea will likely run into opposition from several member states, including Germany, who have so far rejected calls for more debt and subsidizing poorer EU partners. "Member states can say no, and the opposition will be from the so-called frugal countries like the Netherlands, the Nordic countries, even Germany," said Simone Tagliapietra, another senior fellow at Bruegel, and added that Italy and some EU members in the east will most likely "say yes."

And Kirkegaard added that common funding is a "euphemism for Eurobonds," meaning debt backed by all EU members, and could be opposed by wealthier states on the grounds that such debt could be "wasteful, or subject to fraud."

"But the real reason that few admit is a deep-seated inhibition that borrowing must be carried out only if needed, and only for national priorities," he said.

Draghi's ideas, outlined in the report, are sure to face resistance. But the former ECB chief has an influential supporter in EU Commission President von der Leyen who already said that common funding "will be required for certain projects." All she would have to find now was enough "political will" among member states.

Edited by: Uwe Hessler

Artificial intelligence chipmaker Nvidia last week said sales had reached a higher-than-expected $30 billion (€27.03 billion) in the last quarter, though added that growth was slower than the furious pace seen in previous quarters.

Still, shares in the company dipped about 5% in after-hours trading following the report. Even though sales and profit, which hit $16.5 billion in the period, more than doubled from a year earlier, investors showed nervousness that Nvidia's extraordinary growth, spurred by the AI frenzy, may be showing signs of easing.

"Such a massive amount of money has gone to tech and semiconductors in the last 12 months that the trade is completely skewed," said Todd Sohn, an ETF strategist at Strategas Securities, in a note to investors.

The sums of money currently being invested in AI companies are enormous. US investment bank Goldman Sachs expects an AI investment volume of around $158 billion this year, with about half of that amount going to the United States. In a June research report titled GEN AI: Too much spend, too little benefit? Goldman said "tech giants and beyond are set to spend over $1 trillion on AI capex in coming years." 

These funds would flow into significant investments in data centers, chips, other AI infrastructure and the power grid. Whether these massive investments will ultimately generate returns beyond the current "picks and shovels" phase, however, remains unclear.

AI developing at a breakneck pace

But for major tech companies, withdrawing from the AI race is not an option. During the presentation of the latest financial results of Google parent company Alphabet, CEO Sundar Pichai said "the risk of underinvesting in AI infrastructure is dramatically greater than the risk of overinvesting."

Facebook parent company Meta appears to view AI's potential in the same way, as its spending on the technology also remains high, rising to over $24 billion last quarter. Meta expects AI spending of between $37 and $40 billion this year, and is preparing investors for a "significant" increase in 2025," German news agency dpa reported.

Leopold Aschenbrenner, a former employee of AI pioneering company OpenAI who was fired for disclosing classified company documents, wrote in a June 2024 research paper that the boom is "investment-led," but that it is taking time to train AI, build chip factories and develop energy infrastructure. Profits will come later, he wrote, but companies are already generating good revenues now.

Currently, about 27% of companies in Germany use AI, said Klaus Wohlrabe, head of surveys at Munich-based Ifo Institute. Some 17% plan to use AI in the coming months. "The trend is likely to pick up more speed," he told DW.

Wohlrabe, however, also said the think tank's surveys "do not show the extent to which business processes are fundamentally changed by generative AI," and that "this is just beginning."

Waiting for 'killer' applications

Christian Temath from an initiative called KI NRW, which seeks to promote AI use in the German state of North Rhine-Westphalia, said practical applications that lead to greater efficiencies in companies and large-scale productivity gains have yet to emerge.

"I don't think every billion currently being spent on computing capacity in the US will be recouped one-to-one," he told DW.

Rita Sallam, an analyst at US market research firm Gartner, believes that following last year's AI hype, executives are "impatient" to see returns on AI investments. "Yet organizations are struggling to prove and realize value. As the scope of initiatives widen, the financial burden of developing and deploying GenAI models is increasingly felt," she said.

 Gartner predicts that at least 30% of AI projects will be abandoned after proof of concept by the end of 2025, due to "poor data quality, inadequate risk controls, escalating costs or unclear business value."

Jim Covello of Goldman Sachs has also warned that despite its high costs, the technology is far from being useful. "Over-building things the world doesn’t have use for, or is not ready for, typically ends badly," he said in the June report. Venture capital firm Sequoia Capital and hedge fund Elliott Management share a similar view, suggesting that tech companies are already "in bubble territory."

Gartner's 'hype-cycle model'

To describe the development of breakthrough technologies like generative AI, Gartner's so-called hype cycle is often cited.

First, a potential technological breakthrough is announced and celebrated in the press, although no viable products exist yet. Exaggerated expectations lead to hype. Then comes the trough of disillusionment, as initial products are not as successful as expected. Next, new applications emerge that succeed in the market. The development stabilizes on the plateau of productivity when mainstream applications are running.

Applied to generative AI, the release of ChatGPTin November 2022 triggered the hype. It seems clear we have not yet reached the plateau of productivity.

A collapse of the hype was feared in early August when, among other things, shares in Nvidia plummeted and then again in early September, when the chipmaker shed nearly $280 billion in market value in one day.

The AI race continues, however. How long it will last and whether it will be successful is unknown, as not all hyped technologies make it out of the trough of disillusionment.

AI here to stay, despite bubble fears

Recently, more voices have suggested the AI hype might be a bubble. And bubbles have the unpleasant tendency to sometimes burst, causing significant turmoil in financial markets.

Experts from the rating agency Standard & Poor's believe the path to monetization and maturity for AI will be "longer than previously expected."

"By far the biggest beneficiary of AI spending by companies is Microsoft," the S&P experts said in August.

The number customers of Microsoft 365 Copilot, a generative AI chatbot, has increased by more than 60% compared to the previous quarter, and the number of daily active users has doubled. Goldman Sachs analyst Sung Cho believes there could be "a pause in the near term" which is going to "dictate the shorter-term direction of markets." What he called killer applications that justify the massive investments have yet to be invented.

Brook Dane, also a Goldman Sachs analyst, said investors will "need to see, at some point over the next year to year-and-a-half, applications that use this technology in a way that's more profound than coding and customer service chatbots." If it was just that, investors would be "massively overspending on this."

But Dane and Cho, both portfolio managers on the Fundamental Equity team in Goldman Sachs Asset Management, are convinced AI will be one of the biggest trends of all time, both in the medium and long term.

Daron Acemoglu, a professor at the Massachusetts Institute of Technology, is more skeptical. He estimates that "truly transformative changes won't happen quickly and few — if any — will likely occur within the next 10 years.

Quoted in the Goldman Sachs report in June, he said "only a quarter of AI-exposed tasks will be cost-effective to automate within the next 10 years, implying that AI will impact less than 5% of all tasks." 

He also predicted that AI's productivity effects within the next decade should be "no more than 0.66%," and an even lower 0.53% when adjusting for "the complexity of hard-to-learn tasks." That figure, he concluded, roughly translates into merely 0.9% higher gross domestic product for the US over the decade.

This article was originally written in German.

Germany is the "honored country" at this year's Thessaloniki International Fair, which kicks off this Saturday in Greece's second city. Not so long ago, this would have been unthinkable.

At the peak of Greece's sovereign debt crisis in 2014 and 2015, Greece teetered on the brink of leaving the eurozone currency union.

It was a time when "Grexit" — the term used to describe Greece's hypothetical withdrawal from the eurozone — was widely discussed across the continent.

Banks were nationalized, companies folded and people in Greece lost up to 40% of their income. Many Greeks blamed the austerity measures, which they felt had been dictated by Berlin.

Improved economic relations

A decade later and much has changed in the economic relations between these two EU members.

In 2024, Greece has one of the strongest growth outlooks in Europe. Once seen as the "problem child" of the eurozone, Greece has turned things around and now expects real gross domestic product (GDP) to grow by 2% this year.

Thanks to rising income in the tourism sector, Greece has also posted a high primary budget surplus in recent years. Put simply, this means it has been earning more than it has been spending. What's more, it's able to refinance its debt at historically low interest rates.

This is no cause for complacency, however, because a debt-to-GDP ratio of just under 159% is forecast for the country in 2024.

This is higher than it was before the start of the sovereign debt crisis, simply because economic performance shrank by a quarter as a result of the crisis.

Maintaining primary budget surplus is key

But nominal debt is not the key issue here, said Panagiotis Petrakis, professor emeritus of economics at the University of Athens. "It is much more important that the Greeks continue to post a primary budget surplus and meet the EU's requirements," he told DW.

If that happens, said Petrakis, the country will also be in a position to reduce its debt ratio in the coming years.

According to a report on the business website Capital.gr, Finance Minister Kostis Hatzidakis even wants to "positively surprise" the markets and has set himself the goal of reducing the debt-to-GDP ratio to below 120% by 2027.

German investments help drive renewal

Not least in response to pressure from its creditors, Greece has implemented important reforms and privatized state-owned enterprises.

In February 2024, Deutsche Bank reported that Greece had made an "astonishing economic comeback" and had an "intact macroeconomic environment."

The modernization of 14 regional airports by Fraport Greece, a subsidiary of the German airport operator Fraport AG, is seen as one of the country's model investment projects.

In 2017, the government in Athens awarded concessions for these airports, the potential of which had until then been largely underestimated.

Fraport paid €1.24 billion for the concessions and invested more than €400 million ($444 million) in the modernization of the run-down airports, which included the airports in Thessaloniki and on the popular holiday islands of Mykonos and Rhodes.

Government accused of 'sellout of public property'

Even though the resulting economic success surpassed expectations, not everyone was happy.

There was opposition, criticism and accusations of an alleged "sellout of public property" to foreign investors, from left-wing circles in particular.

Economic expert Petrakis doesn't understand this attitude. "The accusation of a sellout when it comes to investments within the EU is senseless," he said.

Petrakis pointed to the fact that the Fraport investment was a success, specifically because the Germans invested in smaller airports, thereby attracting even more visitors to Greece.

He emphasized that it wasn't just the German investors who had benefited from the project, but also the local economies in all of the regions where Fraport is active.

Despite all the tension between the two countries during the Greek sovereign debt crisis, Germany is now Greece's most important economic partner and a major market for Greek exports.

And it works both ways: Products that are "Made in Germany" are in great demand in Greece. Indeed, when it comes to imports, Germany is still right at the top of Greece's list.

Focus on sustainable growth

What Greece now needs to return to a path of sustainable growth and new prosperity, according to experts, is more investment — including from Germany.

Such investment is getting ever more urgent because of the need to cushion the blow of inflation in recent years and cut energy costs.

According to Petrakis, Greece has already received about 40% of the money earmarked for the country from the EU's COVID-19 recovery fund. But, he said, that's not enough.

"It's important that German investors and other foreign investors get even more involved, for example in the energy or transport sector," he said.

He gave the example of the little-known port of Alexandroupoli in northeastern Greece. Strategically located at the junction of many energy pipelines and set to become even more important in the context of geopolitical tensions in Eastern Europe, Petrakis said it would be very attractive for foreign investors.

The article was originally written in German and adapted by Aingeal Flanagan.

In August, a US court in Washington, DC ruled that Google violated antitrust laws and spent billions of dollars to become an illegal monopoly and maintain domination in web search and advertising markets. The landmark US ruling targeting the tech giant's dominance has given impetus to calls from startups and tech companies for similar action in India. 

The Alliance of Digital India Foundation (ADIF), an interest group representing the South Asian nation's digital startups, has filed a complaint with the Competition Commission of India (CCI). It said Google's control over major online platforms, coupled with the fact that it derives 97% of its revenue from advertising, has stifled competition and adversely affected Indian businesses.

"These actions by Google have an adverse effect. We need a level playing field. This step by us is important to safeguard the market that operates on principles of fairness and transparency," Prateek Jain, associate director of ADIF, told DW.

India eyes Digital Competition Bill

The CCI, India's competition regulator, is currently examining a draft Digital Competition Bill to complement existing antitrust laws.

The draft bill aims to prevent anti-competitive practices and allows for heavy penalties in case of violations. It also aims to force tech companies to make fundamental changes.

"We will have to see how this shapes up and are carefully deliberating. We could see increased preemptive compliance on the part of large tech companies," a senior government official told DW on condition of anonymity.

Last year, the government constituted a Committee on Digital Competition Law to examine the "need for a separate law on competition in digital markets."

The draft bill currently identifies 10 "core digital services" such as online search, social networking and video sharing.

Strengthening India's digital startups

"No monopoly is permanent. In today's cyber world, every monopoly is likely to be scrutinized with microscopic attention by competition regulators to ensure the freeing of the digital market ecosystem from monopolistic shackles," Pavan Duggal, a cyberlaw expert, told DW.

"Since India is contemplating new digital competition laws aimed at regulating tech giants, the outcomes of international cases could trigger more stringent scrutiny and regulatory measures against companies like Google in the Indian market," he added.

The CCI has previously ruled against Google to prevent monopolistic practices in the Indian market. In 2022, it was fined over 13 billion Indian rupees (€139 million/$154 million) for abusing its dominant position in multiple markets with its Android mobile operating system.

This case was similar to the one Google faced in Europe, where regulators imposed a $5 billion (€4.34 billion) fine on the company in 2018 for abusing its Android market dominance in three key areas.

Murugavel Janakiraman, the founder and CEO of the Chennai-based matrimony.com, a network of matchmaking services, is hopeful that the new digital law will rein in big tech companies, especially when commercial app developers are forced to accept Google policy.

Last year, Google deleted popular Indian apps, including matrimony.com, from its Play Store, citing Google Play's billing system. However, Janakiraman obtained an injunction against the tech major in the Madras High Court.

"We cannot have this monopoly behavior. We also went to the CCI, which levied a penalty against Google," Janakiraman told DW.

One section of the industry believes that the government must think beyond legal measures and force Google to create a separate legal entity entirely located within India.

Leveling the playing field

Divyanshu Shukla, CEO and co-founder of PapSwap, a startup committed to citizen-centric governance, told DW that CCI's role will be crucial in navigating these complexities to balance market dynamics and safeguard consumer interests in India's burgeoning digital economy.

He pointed out that tech innovations can compete on the global stage by integrating global tech giants within the Indian legal framework, fostering competition, innovation and fair market practices that support both domestic and international growth.

"An Indian app store, though seemingly a solution, may fall short of addressing the issue fully as it could miss out on global tech innovations and opportunities," said Shukla.

"Instead, the focus should be on ensuring that global tech companies operate under Indian laws with a localized presence that aligns with India's regulatory framework. This approach would ease some of the burdens but still requires significant progress," he added.

Shrijay Sheth, founder of LegalWiz.in, a consultancy firm, said Google is close to a monopolistic position in India and is required to establish some level of accountability through regulations for the share of the market they hold alone.

"Several businesses have raised concerns around ranking fairness for ads, account suspension, stretched timelines to get back to 'compliant' status and material impact on business and, in some cases, almost losing all sales," Sheth told DW.

"This is an alarming level of control for one business to hold for the overall global trade."

India's digital market potential

According to various industry estimates, India will soon have over 1 billion internet users in a few years.

As digital advertising spending grows, industry leaders believe it is imperative to address market imbalances promptly.

"ADIF's complaint against Google embodies and symbolizes broader concerns about market fairness and competition in the Indian digital advertising landscape, and the recent US ruling could play a significant role in determining how and in which particular manner CCI is likely to move in this direction," said cyberlaw expert Duggal.

Edited by: Wesley Rahn

Chinese-owned solar companies operating in Southeast Asia — particularly in Thailand, Vietnam, Malaysia and Cambodia — are facing potential challenges due to rising US tariffs. These countries account for around 40% of solar module production capacity outside of China and may soon be subject to additional US tariffs amid accusations of aiding China in circumventing US import duties.

In response, many Chinese firms have scaled back operations in Southeast Asia, complicating the European Union's efforts to expand its solar capacity. Southeast Asia, second only to China in solar panel production, accounted for over 80% of US solar imports by the fourth quarter of 2023, according to S&P Global Market Intelligence.

In 2022, the Biden administration ordered a two-year tariff reprieve for solar panel imports from Malaysia, Thailand, Cambodia and Vietnam to prevent disruptions in domestic solar deployment while US manufacturing scaled up. However, this moratorium expired in June 2024, leading to immediate reactions from major Chinese-owned solar panel producers.

In that same month, the Chinese photovoltaic company Longi Green announced the suspension of production at a battery plant in Vietnam, while Trina Solar initiated maintenance shutdowns at its facilities in Thailand and Vietnam.

Some manufacturers have shifted production to Indonesia and Laos, which currently do not face US tariffs. Indra Overland, head of the Norwegian Institute of International Affairs' Center for Energy Research, told DW that tariffs could promote further industrial diversification in the region, which is not necessarily a negative outcome.

A shift from Southeast Asia?

Concerns about the industry's future remain high. Earlier this year, the US Department of Commerce launched an investigation into whether solar producers in the four aforementioned Southeast Asian countries were receiving government subsidies and dumping products in the US market. In August, Bloomberg reported that some US firms are lobbying for tariffs as high as 272% on all solar imports from these nations.

"There is concern, particularly if Donald Trump gets reelected, about the stability of these alternative manufacturing choices," Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore, told DW.

"If the US intensifies its crackdown on products with any Chinese content, it will make it harder for plants in Vietnam and elsewhere to ship finished solar panels to the US," she added. "It's possible, though currently less likely, that the EU would follow suit, which would weaken the business case for investments in Southeast Asia."

Over the past year, two of the world's largest solar companies, Jinko Solar and TCL Zhonghuan, have announced significant investments in the Middle East.

However, analysts believe that major Chinese solar producers will not leave Southeast Asia anytime soon. Despite higher US tariffs, these companies are still expected to profit from the American market.

While the EU has imposed tariffs on Chinese solar imports, it has been more lenient with imports from Southeast Asia. The US and the EU have differing objectives: "The US is focused on building domestic production, while Europe's priority is ensuring there are enough panels available for installation," said Elms.

Though some solar panel manufacturers have shut down operations in Malaysia, Vietnam and Thailand, many remain open and are looking to boost exports to India and Europe.

Analysts warn that a surplus of Southeast Asian-produced solar panels could undermine the EU's domestic solar manufacturing industry. According to Wood Mackenzie, EU-made solar modules cost around $0.34 (€0.31) per watt, compared to $0.15 per watt in China and Southeast Asia.

A boon for Europe's green agenda

On the other hand, reduced solar exports from Southeast Asia to the US due to tariffs could lead to falling prices as Chinese manufacturers in the region seek new markets. "Southeast Asian solar panels could flood the EU market as they are squeezed out of the US," said Overland.

An additional outcome of rising tariffs could be increased solar panel availability within Southeast Asia itself. "This would be a positive development," Overland noted, "as these countries have lagged in their energy transition. More panels are also likely to be redirected to other developing regions, which is beneficial."

Greater solar panel availability in Southeast Asia could support the EU's green agenda in the region.

While Southeast Asia contributes roughly 5% of global emissions, the International Energy Agency has predicted that its CO2 emissions could rise to 2.4 gigatons by 2040, a 71% increase from 2018 levels.

Solar and wind capacity in the region grew by 20% in 2023, reaching more than 28 gigawatts, according to a recent Global Energy Monitor report. With a substantial base of hydropower, this growth brings the bloc close to its renewable energy capacity target of 35% by 2025, GEM reports.

Edited by: Srinivas Mazumdaru

    

Volkswagen's announcement on Monday (September 2) that it is considering closing factories in Germany is unprecedented in the German automaker's 87-year history. Such plant closures were considered off the table for the Wolfsburg-based company.

To make matters even worse for the 680,000 VW employees worldwide, the management also feels forced to end its job security program which has been in place since 1994 and prevents job cuts until 2029.

Experts are already talking about a significant paradigm shift at Germany's largest industrial employer, which due to its shareholder structure has always been an enterprise controlled by the state and the Porsche family. The regional state of Lower Saxony still holds one-fifth of the company's shares and a permanent seat on the supervisory board, meaning securing jobs and factories has always been seen as matters of state interest.

VW in dire straits as savings plan falls short

That could change now that the management believes the company is in a precarious position. Last year, Volkswagen launched a cost-cutting program aimed at saving €10 billion ($11.06 billion) by 2026. However, the mass-market carmaker would need to cut an additional €4 billion, according to a report by German business daily Handelsblatt.

In a letter to employees on Monday, VW brand chief Thomas Schäfer described the situation as "extremely tense" and beyond the scope of "simple cost-cutting measures." VW Group CEO Oliver Blume added that the European automotive market is in a "highly challenging and serious situation," and that Germany has fallen behind in terms of competitiveness.

As a result, the 10 car brands within the VW Group must be comprehensively restructured, and "plant closures are no longer excluded," Blume said, adding that layoffs through early retirement and severance packages are also no longer sufficient. Therefore, VW feels "compelled to terminate the employment protection agreement that has been in place since 1994."

'Punch to the gut'

VW has not yet provided specific numbers regarding how many of the approximately 120,000 jobs in Germany might be eliminated. It hasn't also identified which locations might be closed. However, according to statements by the powerful VW works council, the management considers at least one vehicle plant and one component factory in Germany dispensable.

This could potentially include the plant in Emden, in northern Germany, where Volkswagen and the Meyer shipyard are the most important employers in the region known as East Frisia.

"The prosperity of East Frisia depends heavily on these companies. Every unionized industrial job that is lost is a punch to the gut for the entire region," the mayor of Emden, Tim Kruithoff, told DW.

The Emden mayor has the backing of labor union leaders like Thorsten Gröger, who described the VW plant closures "irresponsible plan." The head of the regional metalworkers union IG Metall told the news agency Reuters that the plan is "not only short-sighted but also highly dangerous," and would risk "destroying the heart of Volkswagen." Gröger also vowed to "fight with all our might" to preserve all sites and jobs.

The VW works council, meanwhile, is particularly enraged by VW's reluctance to clarify who might be affected and how. "This puts all German sites in the crosshairs — regardless of whether they are VW locations or subsidiaries, in western or eastern Germany," said Daniela Cavallo, head of the general works council. She announced "fierce resistance."

The beginning of the transformation of the German auto industry

Many experts, however, believe that plant closures at VW in Germany are inevitable. Helena Wisbert, director of the Center for Automotive Research (CAR) in Duisburg, Germany, thinks there's "no way around it." She told the German news magazine Spiegel on Tuesday that up until now, low capacity utilization in the plants could be offset by savings from suppliers. "That is clearly no longer enough," she added.

Moritz Schularick, president of the Kiel Institute for the World Economy, sees the announced cost-cutting measures as the beginning of a transformation in the German auto industry. He urges the German government not to intervene in struggling carmakers. "We should not stand in the way of structural change. Emerging industries are desperately looking for workers," he told the German business weekly Wirtschaftswoche.

VW's flawed ownership structure

CAR founder and director Ferdinand Dudenhöffer sees an "age-old VW problem" because the carmaker is "more like a state enterprise than a market-driven company." The problem will persist, he told DW, as long as VW's company structure remains "flawed." Along with its 20% stake and a seat on the VW board, the state of Lower Saxony was also granted a blocking minority on key decisions.

Lower Saxon State Premier Stephan Weil has already criticized VW's management, saying "the question of plant closures will not arise due to the successful use of alternatives."

Emden Mayor Tim Kruithoff, meanwhile, is confident that things will not turn out to become so dire for his town. "I am firmly convinced that the Emden plant will not be affected by a closure," he told DW, noting that VW has invested "more than one billion euros" in the factory to make it ready for "the future of electromobility."

This article was originally written in German.

It's 7.30 a.m. (0200 GMT) and like most days Rohan's* workday is starting. Working for a British multinational, throughout the day he is on phone calls with clients and stakeholders based across time zones. There are short breaks between calls, but his day only ends at 9.30 p.m. — a grueling 14 hours later.

In a different Indian city at 7.30 a.m. the first thing Aditi* does upon waking up is check her work emails. Her work officially starts at 9 a.m. and will go on to 11 p.m. Every day, five days a week. Aditi works for a major US consulting firm. 

Aditi says the long workdays leave her "tired and anxious." She ends up sleeping late trying to find some personal time.

"I can't imagine how people are managing marriages, kids, elder care along with long working hours," she said.

Aditi and Rohan both have one thing in common — for their long hours working for major multinational corporations (MNCs), neither of them gets paid for the extra hours.

Rohan and Aditi's experiences are not isolated cases and highlight a broader pattern of exploitative workplace practices in India.

Amit K. has spent 17 years working for a company headquartered in London, currently overseeing a team with members based in both India and the Philippines.

He says, despite working on the same projects, the Filipino employees receive overtime pay, "while India-based employees do not receive any extra compensation, regardless of the number of hours worked."

MNCs circumvent law on technicality

In India, many white-collar private sector employees say they regularly work up to 12-14 hours a day.

According to the Factories Act of 1948, which dictates overtime rules in India, if someone works for more than 8-9 hours a day, or 48 hours a week, they are entitled to double payment for the extra hours. But the language of the act specifies that this is for "factory workers" or "workers."

Since Rohan and Aditi are not "factory workers” as per the legal definition, the overtime compensation doesn't apply to them.

Mahesh Godbole, who started out as a human resources (HR) professional almost 40 years ago, said, "In office environments, companies circumvent overtime laws by designating employees as 'officers' or 'executives,' categories to which overtime laws for 'workers' do not apply, creating a legal grey area."

For this story, DW reached out to Meta, Apple, Amazon, Google, Ola Consumer and KPMG, among other companies, asking about their overtime policies in India, but none of them responded to the queries.

Laws not in keeping with the times

The shift to remote work has also blurred the lines between professional and personal time in India, making it harder for MNC employees to disconnect from work.

"For the companies, the idea of work-life balance is a marketing gimmick," said Isha* who has been working for an Indian multinational conglomerate for five years and, in her words, "has put in the never-ending hours."

"We are living in the post-pandemic world now where if you are working from home your managers expect you to be available at all times."

This is another example of how the laws governing the rights of Indian workers — drawn up 76 years ago — fail to address modern labor practices.

And successive governments have lacked the political will to address the issue.

Can the laws be challenged?

On the question of whether MNC workers can petition the court for overtime pay, Suresh Chandra Srivastava, a lawyer and professor of labor law, says there has been no direct precedence. 

He mentions a case where the Supreme Court of India ruled last year that government employees are not entitled to claim double overtime allowance under the Factories Act.

The court clarified that the act specifically applies to workers in factories, not government employees, who are overseen by different rules and regulations. As a result, the demand for double overtime pay by government employees was rejected.

This apex court ruling illustrates the limitations of current labor laws. Being in the same legal grey area, MNC workers will run into the same hurdle as the government employees mentioned earlier.

But Sophy KJ, associate professor of law and director of the Center for Labor Law Research and Advocacy at the National Law University in Delhi, referred to a 2022 ruling by a labor court in the southern city of Chennai.

The court ruled that an IT analyst could be classified as a "workman" under the Industrial Disputes Act, rejecting an Indian software MNC's claim that the employee did not qualify because of his supervisory role.

Sophy said, "if we follow that route of jurisprudence" where the nature of the work is considered rather than the salary, software engineers (except those in supervisory and managerial roles) might be able to raise industrial disputes under the Industrial Disputes Act, including issues related to working hours and allowances.

From economic liberalization to now

Experts look at the years following India's economic liberalization in 1991, when a booming private sector created a demand for labor. However, this growth came with lax government oversight, allowing private companies to exploit loopholes in archaic laws, they say.

Sophy KJ pointed out that, historically, trade unions safeguarded against the exploitation of labor. But post-liberalization practices like "contractualization and outsourcing became the norm," she said.

Contract workers could not form or join unions without the immediate threat of losing their jobs, unlike regular workers.

"This shift has led to a weakening of trade unionization since the 1990s," she underlined.

"In some cases, small, independent unions have emerged in the private sector, but without support from larger, established unions, these smaller unions are often bought out by employers and rendered ineffective."

This has contributed to the eventual reduction in workers' rights and entitlements, trickling down to the white-collar workers of today who have almost no union representation.

What does the industry say?

Prasheel Pardhe is a senior HR professional with 25 years of experience. Pardhe, currently working in the IT sector, says there is no overtime pay offered by companies in India because these companies offer "market-competitive compensation."

"To retain good and skilled talents in the IT industry, there is always market-competitive compensation that companies pay now in India," he said.

Moreover, employees are given compensatory time off for extra hours and also performance bonuses for their efforts.

Pardhe also touches upon the topic of how a lot of Indian workers say they did not receive overtime payments while working in India but did so after moving abroad. He lists the examples of Germany, some states in the US, where all employees are regulated.

"Their compensation structures are less competitive and more compliance-driven," he said.

So, in this kind of a scenario, the government can have a compliance rule that mandates overtime payment, according to Pardhe.

A worker will work

In the end, in the absence of strong regulations protecting their rights, it's people like Rohan, Aditi and Isha who continue to struggle to find some work-life balance.

As Isha says, people take the exhausting work schedules without complaints with the hope of their work being recognized or there being a payoff in the future.

"Eventually they just switch jobs when neither of these happen and go back to the grind — hoping this time it works out."

*Names changed on request.

Edited by: Srinivas Mazumdaru

When European Union Commission President Ursula von der Leyen came to Dresden on August 20 for the groundbreaking ceremony of a new chipmaking factory she brought a gift of €5 billion ($5.58 billion) with her.

It wasn't actually a gift or even EU money. What she had done in the early morning hours was approve subsidies from the German government for the project.

It was the official go-ahead needed for a massive project, part of Germany's goal of building up its own chipmaking industry. German Chancellor Olaf Scholz, who was also at the groundbreaking, was glad to accept.

Up and running soon in Silicon Saxony

The new factory is expected to employ 2,000 people and be up and running by 2027. The project is a joint venture of ESMC (European Semiconductor Manufacturing Company) with partners Bosch, Infineon and NXP.

The impulse behind the deal is Taiwan-based TSMC, the biggest contract chipmaker in the world. This is the company's first foray in Europe.  

The new €10 billion factory will be built next to German engineering company Bosch and facilities of Germany's largest semiconductor manufacturer Infineon in what many call Silicon Saxony.

Silicon Saxony is a region encompassing a 100-kilometer (62-mile) radius around Dresden, the capital of the regional German state of Saxony. After some bumpy times, for the past 15 years the region has been on an upward trajectory.

Today, this high-tech cluster is home to 3,600 companies working in microelectronics, software or as suppliers to these businesses. These companies employ around 81,000 people, a third of which are women.

Continued growth puts the industry on track for 100,000 workers by 2030, says Frank Bösenberg, the managing director of an industry association also called Silicon Saxony. He calculates that it would then overtake the automotive sector to become the most important industry in Saxony.

In an interview with DW, Bösenberg described his job as a mix between a politician, economic developer, marketing expert and office manager. Besides focusing on Saxony, he coordinates with other semiconductor clusters in France, Belgium, the Netherlands, Sweden, Italy, Austria and the Czech Republic.

Build it and they will come?

Saxony has been a manufacturing hub since the 1980s. Partly because of this long history Silicon Saxony is now the biggest microelectronics cluster in Europe with the biggest choice of employers and the most partners or competitors. This ecosystem, which includes technical universities in Dresden and the town of Chemnitz nearby, has been able to support itself and grow. 

Building factories is one part of the equation. Having qualified people to run them is another and this is where Saxony and nearby Thuringia could run into problems.

The states, and eastern Germany more generally, have not always been kind to recent arrivals. For a place that is heavily dependent on foreign skilled workers, fears of intolerance could keep workers away. If these fears are backed by a more right-wing government things could get worse.

So far, Silicon Saxony companies have been able to meet the challenge of finding skilled workers. The worry that big new factories would hoover up workers from smaller companies has not been confirmed as more people from outside the region discovered the jobs on offer.

For Bösenberg, there are other problems that growth can bring like affordable housing, schools and public transportation. Infrastructure projects in Germany are notorious for taking a long time and running over budget. And in Saxony much of the planning is based on the region shrinking not growing.

Around Dresden, the current situation is "good to very good," said Bösenberg, but needs to keep up. More housing will soon be needed. It is already hard to find bigger apartments. One challenge is figuring out who will come to fill the jobs: singles or couples and how many children they will bring? These are all factors that change what will be needed.

Unfulfilled promises to build more

The new TSMC facility in Dresden went quickly from talks to groundbreaking. Projects elsewhere have not been so fast. Last year the government signed an agreement with Intel to help build two chipmaking sites in the eastern city of Magdeburg. Total investments could come to around €30 billion.

At the time, the chancellor called the company's plans the biggest direct foreign investment in German history. Construction was supposed to start this year, but not much has happened. In the meantime, the company announced the need to cut back its workforce and investments. Many around Magdeburg doubt anything will be built.

Wolfspeed, an American chipmaker, has also been trying to get a factory off the ground for a number of years in Saarland in western Germany. Groundbreaking for this facility, which would make chips for the car industry, was pushed from 2023 to 2025.

Moreover, Germany has to think bigger. The €10 billion TSMC factory is a nice addition to Silicon Saxony, but pales compared to the $65 billion (€58 billion) the company plans to invest in three new plants in Arizona in the US by 2030.

In August, the US Department of Commerce announced that in the last two years the CHIPS and Science Act had granted over $30 billion in funding for 23 projects — including 16 brand new semiconductor manufacturing facilities — in 15 US states.

Some observers question all these subsidies, especially when the investments support production and not research and development (R&D). TSCM and Intel, for example, will continue to keep R&D close to home, leaving Germany to be a production line for others.

Does branding chips 'Made in Germany' matter

Yet for many customers, when it comes to chips the "Made in Germany" label doesn't mean much, especially since no one really sees the chips.

"As a customer you do not care whether the chip comes from Dresden or from Hsinchu [in Taiwan]. The quality has to be correct," Frank Bösenberg told DW.

If Germany wants to become less dependent on others for their  semiconductors, they have to deliver top quality at a globally competitive price. Being made in Germany is just not enough. 

Bösenberg says the country is still in the chip race. Though he sees some room for improvement, he takes a wider view.

"Yes, we are Silicon Saxony. Yes, we are the biggest microelectronics cluster in Europe," he said. "But after all, Europe is the scale, the region, the level things should be considered on, because otherwise we will be too small." And no one wants to be small when it comes to chips.

Edited by: Uwe Hessler

The AfD emerged as the strongest force in Thuringia and nearly tied with the Christian Democratic Union (CDU) in Saxony, substantiating fears of a political shift to the right in parts of former Communist East Germany.

Following the results, AfD leaders Alice Weidel and Tino Chrupalla demanded a role in the regional governments, claiming a mandate for a center-right coalition including their party and the conservative CDU. The CDU has rejected any collaboration with the AfD though, maintaining a so-called political firewall against the far-right which rules out any ties to that party.

Before the elections, both labor unions and business representatives expressed concerns over the potential economic fallout of an AfD victory. Investors could be deterred, fearing instability and an unwelcoming environment.

Olaf Zachert, an investor specializing in rescuing distressed companies, had warned, for example, that "capital is a shy deer," and potential investors wouldn't invest in regions where they don't feel welcome. He told DW that a rise in AfD support would make many investors think twice before committing to new ventures in Saxony and Thuringia.

Business lobby groups and economists alarmed

A day after the regional polls, the president of the German Employers' Association (BDA), underscored the link between a thriving economy and stable politics, suggesting that the AfD's rise reflects "deep public anxiety and a lack of confidence that Germany is currently moving in the right direction." Partly blaming the current policies of German Chancellor Olaf Scholz for the right-wing shift, he called on Scholz's three-party coalition to reverse its policies.

"The election results are a clear warning to the coalition government," he told German news agency dpa, and added that any government must keep jobs and social cohesion always in mind.

Following the elections, some economists expressed the view that an already huge shortage of skilled labor could worsen in eastern Germany, potentially triggering an exodus of companies.

Monika Schnitzer, chairwoman of the German Council of Economic Experts, said Thuringia- and Saxony-based companies could be disadvantaged in the global competition for qualified workers. State institutions and educational facilities are already suffering from staffing shortages, which could escalate, especially given the AfD's stance against skilled immigration.

Marcel Fratzscher, the president of the German Institute for Economic Research (DIW), echoed these concerns, predicting a loss of jobs and foreign investment. He argued that the AfD's policies — advocating trade protectionism, reduced immigration, and less openness and diversity — would likely result in a flight of companies and skilled workers. This exodus could lead to more insolvencies and company relocations.

"Younger and more qualified citizens will be leaving the two states heading for regions where they feel more valued," Fratzscher told Reuters news agency.

Michael Hüther, director of the employer-aligned German Economic Institute (IW), said the rise of the AfD "isn't a positive sign" because businesses would need "political and institutional stability." He also argued that more social policies alone would not deter voters from supporting populist parties; instead, a "proactive investment state" is necessary to prevent economic decline.

Important investments on the line?

Ralf Wintergerst, president of the German digital association Bitkom, is also alarmed, stressing that  Germany must remain a "country of openness and innovation" — values not represented by the AfD. "The planned semiconductor factories in Saxony will not operate without foreign talent," he stressed, highlighting that such experts have the flexibility to choose their work locations.

Research firm Capital Economics (CE) cautioned against extrapolating these state election results to the national level, however, it noted that some AfD positions might influence the programs of mainstream parties. Franziska Palmers, senior Europe economist at Capital Economics, said in a note to investors that Germany is "unlikely to deviate from its strict fiscal policy, both domestically and within the European Union."

Deutsche Bank Research also downplayed the election results, saying they are "not a preview of the next federal election" next year. The analysts at Germany's biggest private lender anticipate only "temporary economic risks," particularly around labor shortages, and do not foresee fundamental shifts in German economic policy.

This article was originally written in German 

Court documents released last week by the US District Court for the Northern District of California shed light on shareholders and investors involved with Elon Musk's X Holdings Corp, disclosing who helped to finance his $44 billion (€40 billion) acquisition of the platform formerly known as Twitter in 2022.

The filing, obtained by the Washington Post, lists around 100 entities and individuals, including prominent Silicon Valley entrepreneurs, but also individuals that reportedly have links to Russian oligarchs.

Lawyers for the nonprofit Reporters Committee for Freedom of the Press filed a motion in July asking the court to unseal the records, on behalf of independent technology journalist Jacob Silverman.

On his website, Silverman wrote that, "I believe that people have a right to know who owns a company with such a prominent role in shaping public discourse, both in the United States and around the world."

Ties to Russian oligarchs?

One of firms listed is 8VC, a venture capitalist company co-founded by Joe Lonsdale, co-founder of intelligence contractor and data analysis platform Palantir.

8VC has invested in US defense projects with Lonsdale arguing that China's growing influence is behind his firm's move to back military startups.

Speaking at an event in March, Lonsdale said China is "building really advanced things that they're starting to compete with the US."

"That became a very scary realization to us about 10 years ago so we went hard into defense," he said.

On the fund's website, Denis Aven and Jack Moshkovich pop up in the staff section — the sons of sanctioned Russian oligarchs Petr Aven and Vadim Moshkovich. The former is co-founder of Alfa-Bank, Russia's largest private bank, and LetterOne Holdings investment company. He's been sanctioned as part of the measures imposed on Russian individuals in the wake of Russia's war against Ukraine.

Moshkovich, meanwhile, made his fortune in the agro-industrial business with his Rusagro Group company. Following Russia's invasion of Ukraine he was sanctioned by Western countries due to his alleged ties with Russian President Vladimir Putin.

There is nothing to suggest that the sanctioned fathers have any financial ties with 8VC. However, their sons' roles are likely to come under further scrutiny, as the US government is becoming increasingly wary of foreign actors' ties to the tech industry.

The National Counterintelligence and Security Center recently released a bulletin warning Silicon Valley startups about foreign players using investment deals to exploit sensitive data. 

At the time of writing 8VC had not responded to DW's request for comment.

What does the disclosure mean for X?

Knowing the ownership of a media channel that wields considerable influence with an international reach provides transparency — not only for users but also interested financial parties. So what do these ownership disclosures mean for Elon Musk and his social media platform X?

"Traditional owners such as investment funds might expect a conventional financial return. In comparison to other media, the wild west of social media channels could attract other investors who might imagine their returns coming in a different mix of ways," says Gordon Fletcher, Associate Dean: Research and Innovation at the UK's Salford Business School.

"Endorsements, access to data, algorithmic amplification of messages or enhanced filtering could all be possibilities," he told DW.

The disclosure could prove uncomfortable for some of the high-profile investors, who include Prince Alwaleed bin Talal from Saudi Arabia's ruling royal family and investment firms such as the Baron Opportunity Fund and Andreessen Horowitz.

"While the US-based tech investors were revealed early on, the wider pool of investors were not. A promise of nondisclosure would upset some who are now in the spotlight. It might be useful as leverage to negotiate a different position in relation to the company," said Fletcher. 

However, whether it will spark an investors‘ exodus from X is unclear at this stage.

"It may not be straightforward for them to sell their interests to Musk or some other buyer. The ability to sell may turn on particular investment agreements to which we're not privy," says Paul M. Barrett, deputy director of the NYU Stern Center for Business and Human Rights.

Will the revelations deter potential investors?

At this stage, it's also too early to tell whether the involvement of 8VC and specifically that of the two sons of the sanctioned Russian oligarchs might deter other venture capital funds from investing in X.

"There is an increasing pool of large institutional investors that are increasingly presenting their portfolio as being based on ethical commitments. Many of these are based on environmental rather than political concerns. But the visibility of these specific investors and their link to Russia will make some institutional investors nervous," said Fletcher.

That being said, Fletcher thinks that other international players may still be willing to invest. "There has previously been interest from different sovereign-wealth funds in making media investments of all kinds across print and digital. If the return is right (in whatever form it is promised) an investor can always be found."

Meanwhile, Barrett thinks that, notwithstanding potential ethical concerns, investors are more likely to see "X's fundamental financial instability" as a "greater deterrent, from a strictly business perspective," he told DW.

Indeed, X's financial fortunes have taken a hit in the wake of Musk's takeover financed in part by a $13 billion loan from seven leading banks. Due to Twitter's poor financial performance the platform was unable to find buyers of the debt. For 2023, the platform reported a revenue of $3.4 billion, a drop of 22% from the previous year when revenue stood at $4.4 billion.

While Fletcher says that investors and advertisers will be "considering their options carefully," Barrett is not convinced that the potential fallout from the ownership disclosures will deter advertisers.

"It's not clear to me that an advertiser that has tolerated Twitter's slide back into the swamp of extremism and hate mongering would suddenly become so disillusioned by this revelation that it would cut ties to the company," he said. 

DW was unable to reach X's communications department for comment.

Edited by: Uwe Hessler

When the West imposed sanctions on Russia over its full-scale invasion of Ukraine, it choked off the Kremlin's ability to trade in US dollars, euros and other currencies. Russian banks were blocked from the SWIFT international payment-messaging system and the central bank's foreign currency reserves were frozen. That forced Moscow to shift its remaining reserves to currencies not controlled by the West, including the Chinese renminbi (RMB) of which its principal unit of measurement is called the yuan.

The Kremlin's energy deals with China, to offset the income loss from missing European buyers of Russian oil and gas, have since helped international transactions in the yuan to a record high, the British business daily Financial Times (FT) reported recently, citing data from China's State Administration of Foreign Exchange (SAFE).

A third more yuan transactions

The number of bilateral transactions using the Chinese currency grew by a third in July to 53% from 40% in the same month in 2021. In 2010, 80% of outbound Chinese trade was conducted in dollars, the FT reported, but that figure has halved since Western sanctions on Russia went into effect. Over the same period, outbound trade in yuan has grown from almost zero to more than half of all transactions.

"Trading in yuan is convenient for both Russia and China," Maia Nikoladze, associate director at the Atlantic Council think tank's GeoEconomics Center, told DW. "Russia does not have too many other currency alternatives, while China benefits from exerting more economic influence over Moscow, and also makes progress towards internationalizing the yuan."

Globally, however, the yuan is used for less than 7% of all foreign-exchange transactions, versus 88% for the dollar, according to the Dollar Dominance Monitor by the Washington-based Atlantic Council. The tracker found that 54% of export invoicing is still done in dollars, versus 4% for the yuan.

Other BRICS nations watch China-Russia trade

Yuan trade is benefitting from bilateral deals between Moscow and Beijing that led to Russia increasing its holdings of the Chinese currency, as part of its foreign exchange reserves. A currency swap agreement allows Russian banks to access yuan liquidity. Russian financial institutions have also started to issue yuan-denominated bonds.

Other countries, particularly those of the world's fastest-growing BRICS economies, are watching the increasing yuan transactions with interest. BRICS leaders have mooted the idea of a shared currency, to create a multipolar financial system and be less reliant on the dollar,

Hanns Günther Hilpert, senior fellow at the German Institute for International and Security Affairs (SWP), said that many countries in the Global South are "concerned" about Western moves to freeze Russian reserves.

"Maybe they will have a problem with the United States in the future and their reserves could also be frozen. So these countries are shifting away from the dollar," he told DW.

US Republican presidential candidate Donald Trump sees dedollarization as such a huge threat to US hegemony that he threatened at a recent campaign rally to slap countries that shun the currency with 100% tariffs.

"Many countries are leaving the dollar. They not going to leave the dollar with me. I’ll say, you leave the dollar, you’re not doing business with the United States because we’re going to put 100% tariff on your goods," he said.

Saudi, Brazil and Argentina follow Russia

Beijing has sealed deals with several other countries to conduct more trade in yuan. Saudi Arabia, one of the largest oil exporters to China, signed a three-year currency swap with Beijing last November worth the equivalent of $6.93 billion (€6.26 billion).

That deal marked a significant potential shift in global energy markets, which have been traditionally dominated by the US dollar, hence the term Petrodollar. While a complete move to yuan pricing for all Saudi oil sales is unlikely in the short term, the arrangement allows both countries to test the waters without disrupting existing trade practices.

"Saudi Arabia is selling oil and gas to China. They get renminbi, which can be used to buy Chinese goods or to invest in China, which the Saudis have already done. It's a barter trade," said Hilpert.

The likes of Brazil, Iran, Pakistan, Nigeria, Argentina and Turkey have also agreed to conduct more yuan trade. In Iran's case, heavy Western sanctions have forced Tehran further into China's sphere of influence. Chinese refiners bought 90% of Iran's exported oil last year, tanker-tracking data from trade analytics firm Kpler showed. Iran receives payments in yuan for its oil via small Chinese banks.

Argentina, which has been dealing with a brutal economic crisis, faces a severe shortage of US dollars to pay for imports, servicing debt, and stabilizing the Argentine peso. By settling more of its trade with China in yuan, the Latin American country can conserve those dollars and reduce the pressure on its other foreign currency reserves.

Capital controls stop yuan's ascent

Despite moves by Beijing to internationalize, the Chinese currency is not yet fully convertible with other global currencies, which experts say is vital for it to become a reserve currency. Beijing maintains capital controls that restrict the free flow of capital in and out of the country.

As well as a threat to the Communist Party's iron grip on power, Chinese leaders are concerned about a repeat of the 1997/8 Asian Financial Crisis, which saw Wall Street bet against several Asian currencies, due to the heavy indebtedness of their respective countries, sparking a massive flight of capital.

Hilpert thinks that becoming a fully convertible currency "comes with a price tag" which will be political and economic instability. "The renminbi would then be subject to currency speculation, which the Chinese are afraid of. They saw what happened to Thailand and South Korea," he said.

At the peak of the late 90s Asia meltdown, the Thai baht and Korean won lost more than half of their value against the dollar and both countries, along with Indonesia, were forced to seek a bailout from the International Monetary Fund (IMF).

"Beijing has not signaled a willingness to lift capital controls, which would be a key factor in enabling the yuan to realize its potential as a currency for global trade," Nikoladze said.

Another benefit of Beijing's curbs on the yuan is having the flexibility to devalue the currency to boost exports during slowing economic growth. Chinese leaders did this most recently in 2015 and again during the COVID-19 pandemic. There's speculation that another sharp devaluation may be on the cards.

Xi wants China to be a 'financial power'

While the dollar's role as the world's reserve currency is seen as secure in the short and medium term, Chinese President Xi Jinping in January restated his ambition for China to become a "financial power," noting that his country's system was "distinct from Western models."

Asia's largest economy faces many challenges as it seeks to move the world toward a multipolar currency system. They include high levels of corporate, household and local government debt, a worsening real estate crisis and an opaque shadow banking system that helped support high property prices. Ongoing trade and geopolitical tensions with the West and Asian neighbors also threaten China's relatively sluggish recovery from the pandemic.

Hilpert thinks that China is not really integrated with the global financial system because it has "many inefficiencies," including state-owned enterprises which are highly subsidized, and a crude [domestic] financial system. "If you want to become a great economic power, this is not the right strategy," he added.

Edited by: Uwe Hessler