Deadline looming, Biden and McCarthy narrow in on budget deal to lift debt ceiling. Days from a deadline, President Joe Biden and House Speaker Kevin McCarthy are narrowing in on a two-year budget deal aiming to curb federal deficits in exchange for lifting the nation’s debt ceiling and staving off an economically devastating government default. (AP)
Turkey faces financial reckoning after election. The winner of this month’s Turkish presidential election will have to reckon with a dangerously lopsided economy that investors and economists say has veered close to the edge of financial stability. (WSJ)
Japan tightens Russian sanctions in line with G7. Japan has announced additional sanctions on Russia after the Group of Seven (G7) summit the country hosted last week agreed to step up measures to punish Moscow over its full-scale invasion of Ukraine. (Al Jazeera)
Trump's war on his own record. The recent political kinship and broad policy similarities shared by former President Trump and Florida Gov. Ron DeSantis have set the stage for a GOP primary like no other. (Axios)
China and Russia take small steps to bolster agriculture trade. China is hungry for commodities, and Russia has a lot of them. As the two nations increase their trade, agricultural goods are high on the priority list. (Bloomberg)
European officials are quietly preparing for the possibility Biden loses the next election. There’s still more than a year to go before U.S. voters head to the polls, but at the heart of the European Union, officials are already racing to get as much as possible done before any potential change of leadership in the White House. (CNBC)
Mexico inflation hits 20-month low after rate hikes paused. Consumer prices in Mexico fell more than expected in the first half of May, driving annual inflation to its lowest in 20 months, according to the first figures released after the central bank decided to pause interest rate hikes. (Reuters)
Saudi Arabia and Canada restore diplomatic relations, ending 2018 rift. Saudi Arabia restored diplomatic relations with Canada on Wednesday, the country’s foreign ministry said in a statement, ending a five-year rift over Riyadh’s jailing of activists that damaged trade and relations with both countries. (CNN Business)
France bans short-haul flights to cut carbon emissions. The ban all but rules out air travel between Paris and cities including Nantes, Lyon and Bordeaux, while connecting flights are unaffected. (BBC)
New York City commission votes to halt deposits at Capital One. The New York City Banking Commission voted to halt deposits into the city's bank accounts at Capital One (COF.N) and KeyBank (KEY.N) after the lenders failed to submit plans on their efforts to root out discrimination. (Reuters)
First Republic: 1,000 jobs cut by new owner JP Morgan. Wall Street giant JP Morgan Chase is cutting jobs at failed US lender First Republic Bank, after buying the firm this month. (BBC)
Regulators take aim at AI to protect consumers and workers. As concerns grow over increasingly powerful artificial intelligence systems like ChatGPT, the nation’s financial watchdog says it’s working to ensure that companies follow the law when they’re using AI. (AP)
Germany Slips Into Recession
Kendall Payton, editorial associate
Germany is the first major economy to officially slip into a recession since the pandemic. The country's GDP fell 0.3% in the first quarter of 2023 following a 0.5% contraction in the last quarter of 2022—marking the official start of a recession for the world’s fourth-largest economy. “The first-quarter figure was revised lower from an initial flat reading that made it seem like Germany had (just barely) dodged a recession,” reads an article from Axios.
And some experts believe this is just the beginning of Germany’s economic downfall. “Unfortunately, a fundamental improvement in the economy is not in sight,” Jörg Krämer, chief economist at German lender Commerzbank, told the Financial Times. “All important indicators in the manufacturing sector are pointing downwards,” he added, predicting German GDP would decline 0.3% this year and be flat next year.
Germany is expected to be the weakest performer among the world’s big economies this year, shrinking 0.1% in 2023, according to the International Monetary Fund. Germany’s annual inflation was reported 7.6% in April, showing a steady decline from its 11% peak last fall. However, core inflation that does not include food and energy has not declined.
The European Central Bank is expected to raise rates again at its next meeting on June 15. The Central Bank has lifted its rates by 375 basis points since July. “Higher interest rates will continue to weigh on both consumption and investment and exports may also suffer amid economic weakness in other developed markets,” reads an article from CNBC. “Our forecast is for further contractions in the third and four quarters.”
This will likely have knock-on effects for the rest of the global economy. “Germany has been Europe’s economic engine for decades, pulling the region through one crisis after another,” per Bloomberg. “But that resilience appears to be breaking down. Germany went into recession over the winter—its first since the start of the pandemic—signaling danger for the whole continent.”
Germany's economy relied on a constant supply of Russian natural gas, which was cut off after Russia's invasion of Ukraine—causing energy prices to soar. The Russian war in Ukraine is the main reason that Germany suffered from economic weakness during the winter, a spokesperson for the economy ministry said on Friday.
Customers in Germany have averaged roughly 11 days beyond terms, with 20% of credit professionals saying payment delays are increasing, per the FCIB Credit and Collections Survey. The most common causes of payment delays include billing disputes (50%), customer payment policy (25%) and cash flow and supply chain issues (25%).
What Credit and Collections Survey respondents are saying:
- “Increase collection activity and reduce billing errors.”
- “It is best to have local teams in Germany involved.”
- “Maintaining positive relationships is key in Europe.”
- “Start early building a relationship with your customer and include your salesperson. By doing this, you'll make a team and teams work together.”
- “Obtain financial statements on your customers and backstop sales with credit insurance.”
The Credit and Collections Survey is now open. It covers Egypt, Peru, Taiwan and Ukraine. You will earn ICEU/Participation credit for your input. Be sure to share the link with your credit and collections network.
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Week in Review Editorial Team:
Annacaroline Caruso, editor in chief
Jamilex Gotay, editorial associate
Kendall Payton, editorial associate