Annual Report 2010 - Muenchener Hypothekenbank eG

OvERALL EcONOmIc cONdITIONS mANAgEmENT REPORT EcONOmIc dEvELOPmENT The global economy recovered from the effects of the financial market crisis more quickly and strongly than was generally expected. The worldwide gross domestic product increased by about 5 percent in 2010. however, this growth began to slow again in the second half of the year. This was primarily due to slowing economic activity in many industrialised countries. With a 1.8 percent gain in economic performance, the euro zone in particular lagged behind the pace of global economic development. A series of factors had a dampening effect, including the lower growth rate for industrial manufacturing, the ending of government stimulus programmes and the effects of the European debt crisis in the form of tax increases and government spending cuts in some countries. The economic development in Europe was largely driven by germany. The german gross domestic product rose by 3.6 per- cent, thereby compensating for a significant portion of the manufacturing losses seen in the recession year of 2009. The upswing in the german economy was largely driven by increased domestic demand. About one-third of the growth resulted from the significant expansion of exports. investments in plant, equipment and construction strongly con- tributed to this growth. for the first time in many years, private residential construction once again was the engine driving the increase in construction spending. however, public-sector and commercial building projects also posted gains. growth was also supported by the increase in government spending and to a lesser degree by private consumption, which rose by half a percent after shrinking in the previous year. The increase in consumer prices was mainly noted in the last quarter of 2010. over the course of the year, the average infla- tion rate increased by 0.7 percentage points to 1.1 percent. Prices for heating oil and fuels, in particular, grew along with food prices. The upswing also brought further relief to the job market. The average number of employed persons for the year reached a new high of 40.5 million. This also reduced the unemployment rate. With an average of 7.7 percent for the year – approximately 3.2 million unemployed – it was even slightly lower than the pre-recession level. fINANcIAL mARkETS The European sovereign debt crisis was the most important issue for the financial markets in 2010. Above all, market par- ticipants were unsettled by the imbalances within the euro zone, especially by the relatively great differences between member states in terms of their economic growth, budget def- icits and the debt ratio. The Eu and the iMf initially responded to the debt crisis with a support package for greece, which soon needed to be expanded to include a new support mechanism: the European financial Stability facility. The so-called “euro rescue umbrella” was opened for the first time over ireland in November 2010, in conjunction with iMf support. however, thus far the Eu and iMf measures have not yet produced any long-term relief. The high level of sovereign debt in some Eu countries placed a serious strain on the exchange rate of the euro, which fell substantially in comparison to the Swiss franc, in particular. The euro did recover vis-à-vis the uS dollar after measures were taken to support greece, and due to fed’s expansive monetary policy the euro temporarily rose to over $ 1.40. The exchange rate dropped back down to values around $ 1.30 after support measures were taken for ireland. “the european sovereign debt crisis was the dominant issue for the financial markets in 2010.”