How outburst from head of German stock exchange Theodor Weimer set business community ablaze
There has been much soul-searching and agonising during recent years over the valuation of the UK stock market – intertwined with a debate over London’s ability to attract world-class businesses to list here.
Even though the FTSE-100 has hit several record highs so far in 2024, the UK’s premier stock index is still trading at a significant discount to its global peers.
The FTSE-100 is currently trading on a price/earnings ratio – a valuation measure widely used by equity investors – of 14.78 times, according to Refinitiv data, compared with one of 15.71 for the pan-European Stoxx 600 and one of 24.7 for the S&P 500, the main US stock index.
But the UK is not the only European economy where concerns are being expressed about the relatively lowly valuation applied to its stock market.
German business has been set ablaze after a speech made nearly two months ago by Theodor Weimer, the outgoing chief executive of Deutsche Boerse, surfaced at the weekend.
Addressing the Bavarian Economic Advisory Council on 17 April at Munich’s luxury Bayerischer Hof hotel, Mr Weimer said he had just had his 18th meeting with Robert Habeck, Germany’s vice chancellor and economics minister.
He told his audience: “And I can tell you, it’s a sheer disaster.”
German economy and climate minister Robert Habeck
Mr Weimer said that, when Mr Habeck had come to office, he had been encouraged by the minister’s preparedness to listen to him – but said that enthusiasm had now dissipated.
In a no-holds-barred attack on Germany’s coalition government, Mr Weimer criticised not only its economic policy but its attitudes towards immigration and innovation.
He added: “We are on the way to becoming a developing country.”
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Mr Weimer, a former investment banker who has been CEO of Deutsche Boerse since 2018, said this was not only his opinion but those of major international investors he speaks with.
He added: “Our reputation in the world has never been as bad as it is now. Never before.”
Mr Weimer said that he had been asked by investors in Singapore what kind of government Germany was putting up with while, elsewhere, he said people “just shake their heads and wonder where the German virtues have gone”.
He said the only investment in German stocks was being made “opportunistically” because its market was so cheap.
He went on: “We have become a junk store.”
Not the first outburst
It is not the first time Mr Weimer, who is renowned for his plain speaking, has bemoaned the lowly rating on Germany’s stock market.
He has drawn attention several times in the past to the risk of European stocks moving their main listing to the US – something that has also alarmed City figures following the decision of companies like Ferguson, CRH and Flutter Entertainment to move their primary stock market listing from London to New York.
But this speech saw Mr Weimer widen his comments to a broader critique of the government – and one which is shared by many in Germany’s business community.
It includes “destroying” the country’s car industry, long a source of industrial prestige, by insisting on the phasing out of new petrol and diesel vehicles and refusing to subsidise the energy transition in the way the Biden administration has in the US.
Other criticisms include what he described as an “orientation towards do-gooderism” in migration policy and encouraging working from home and promoting work-life balance over the traditional German virtue of diligent work.
Mr Weimer also complained that the government’s “economic policy lacks a compass” and said excessive government bureaucracy and interference in the economy was patronising to ordinary Germans.
He added: “Damn it, I don’t want to be protected by this government.”
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Reaction to the speech has been mixed.
Verena Hubertz, an MP in the SPD – the biggest party in the coalition government – told the Financial Times: “The bizarre speech is more beer tent than Dax-listed company executive.”
But Sarna Roeser, one of Germany’s most celebrated young entrepreneurs, told the newspaper Die Zeit that, as someone who travels abroad widely, she had also heard similar comments from international investors.
She added: “With ideological left-green politics, moral finger-pointing and feminist foreign policy, Germany will no longer be taken seriously at home or abroad and will continue to slide.”
Mr Weimer, whose €10.6m pay package in 2023 made him Germany’s second best-paid CEO after Ola Kaellenius of Mercedes-Benz, may have felt emboldened to speak because he is about to step down.
There is little doubt, though, that in attacking chancellor Olaf Scholz’s government, he has said publicly what many German business people are saying privately.
And to judge by the spanking Mr Scholz’s coalition received in the European parliament elections at the weekend – Mr Habeck’s Green Party did particularly badly – many ordinary German voters seem similarly disgruntled.
Fears of a US-EU trade war have been reignited after Europe refused to back down in the face of fresh threats from Donald Trump.
The word tariff has dominated much of the US president’s second term, and he has repeatedly and freely threatened countries with them.
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This included the so-called “liberation day” last month, where he unleashed tariffs on many of his trade partners.
On Friday, after a period of relative calm which has included striking a deal with the UK, he threatened to impose a 50% tariff on the EU after claiming trade talks with Brussels were “going nowhere”.
The US president has repeatedly taken issue with the EU, going as far as to claim it was created to rip the US off.
However, in the face of the latest hostile rhetoric from Mr Trump’s social media account, the European Commission – which oversees trade for the 27-country bloc – has refused to back down.
EU trade chief Maros Sefcovic said: “EU-US trade is unmatched and must be guided by mutual respect, not threats.
“We stand ready to defend our interests.”
Donald Trump speaks to reporters in the Oval Office on Friday
Fellow EU leaders and ministers have also held the line after Mr Trump’s comments.
Polish deputy economy minister Michal Baranowski said the tariffs appeared to be a negotiating ploy, with Dutch deputy prime minister Dick Schoof said tariffs “can go up and down”.
French trade minister Laurent Saint-Martin said the latest threats did nothing to help trade talks.
He stressed “de-escalation” was one of the EU’s main aims but warned: “We are ready to respond.”
Mr Sefcovic spoke with US trade representative Jamieson Greer and commerce secretary Howard Lutnick after Mr Trump’s comments.
Mr Trump has previously backed down on a tit-for-tat trade war with China, which saw tariffs soar above 100%.
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Sticking points
Talks between the US and EU have stumbled.
In the past week, Washington sent a list of demands to Brussels – including adopting US food safety standards and removing national digital services taxes, people familiar with the talks told Reuters news agency.
In response, the EU reportedly offered a mutually beneficial deal that could include the bloc potentially buying more liquefied natural gas and soybeans from the US, as well as cooperation on issues such as steel overcapacity, which both sides blame on China.
Stocks tumble as Trump grumbles
Major stock indices tumbled after Mr Trump’s comments, which came as he also threatened to slap US tech giant Apple with a 25% tariff.
The president is adamant that he wants the company’s iPhones to be built in America.
The vast majority of its phones are made in China, and the company has also shifted some production to India.
Shares of Apple ended 3% lower and the dollar sank 1% versus the Japanese yen and the euro rose 0.8% against the dollar.
Donald Trump has threatened to impose a 50% tariff on the EU, starting from next month, after saying that trade talks with Brussels were “going nowhere”.
Mr Trump made the comments on his Truth Social platform.
It marks a fresh escalation in his trade row with the European Union, which he has previously accused of being created to rip off the US.
While the US has done deals with the UK and China to reduce their peak exposure to his trade war, the president’s EU threat, which would cover all EU imports to the US, would risk retaliatory measures from Brussels if carried through.
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Mr Trump said of talks between his administration and the EU: “Our discussions with them are going nowhere! “Therefore, I am recommending a straight 50% tariff on the European Union, starting on June 1, 2025. There is no tariff if the product is built or manufactured in the United States.”
The European Commission was yet to respond to the remarks. Officials signalled there would be no comment until after a call between top US-EU trade figures due later on Friday.
Financial markets, however, were quick to take a view. European stock markets were sharply down across the board.
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The FTSE 100 in London was more than 1.2% lower shortly after the Truth Social post appeared, while Germany’s DAX and the French CAC 40 were in the red to the tune of more than 2%.
US stock markets fell at the open on Wall Street. The tech-focused Nasdaq was down more than 1%.
The potential for damage to the global economy saw Brent crude oil sink by more than 1% to $63 a barrel.
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‘US is losing’ trade war
The dollar took a hit too, as the news only intensified existing market worries this week about the sustainability of US government debt levels.
The pound was trading at levels last seen in February 2022.
Mr Trump said earlier that Apple will be forced to pay 25% tariffs on its iPhones unless it moves all its manufacturing to the US.
Apple shares dropped more than 2% in premarket trading after the warning, also posted on Truth Social.
“I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or any place else,” wrote the president.
“If that is not the case, a tariff of at least 25% must be paid by Apple to the US.”
Production of Apple’s flagship phone happens primarily in China and India, which has been an issue brought up repeatedly by Mr Trump.
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On Thursday, the Financial Times reported Apple was planning to expand its India supply chain through a key contractor.
Taiwanese company Foxconn is planning to build a new factory in the Indian state of Tamil Nadu, according to the paper, to help supply Apple.
Sky News has contacted Apple for comment.
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