Job Cuts in Germany, a bad sign for the region

SI, GE

German newspaper Boersen-Zeitung reports that industrial giant Siemens AG (NYSE:SI) may cut thousands of jobs in the fall. The action is described as "explosive," at least as far as a rough translation says.

The reason given for the probable cuts is "austerity," a term usually reserved for government expense reductions. Siemens has $100-B in revenue, and the wide array of businesses that make up the conglomerate show that Europe's problems have begun to damage Germany's multinationals across a number of sectors.

Germany has been nearly immune from the job-cut effects of the EU-wide recession. Unemployment in the country was 6.8% in July, according to the Federal Labor Agency. The figure is low compared to almost any other developed nation, although it did rise for the 4th month in a row.

Germany's consumer base is critical to its gross domestic product just as much as its strong export base. The country has 82-M residents, a large portion of whom are middle class. If unemployment rises toward US levels, the last viable economy in Europe almost certainly will tip into recession.

It is too early to say what a German recession would mean for the balance of the region. Certainly it would make German politicians think twice about how much money they are willing to put into bailouts of their neighbors.

There is rarely any talk about the need for government stimulus in Germany. And the country has spoken out against stimulus programs for other nations in the region, the weaker ones who cannot afford it, Germany officials have argued. Those arguments are unlikely to keep Germany from putting money into its own economy.

Siemens could be an isolated case. But it is hard to see why. Its multiple divisions should shield it from a slowdown, or at least that is the argument for why conglomerates exist.

General Electric Co. (NYSE:GE), the US company most like Siemens, has been a good barometer for the health of multinationals in American. Siemens' fortunes are likely to send similar signals for.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.