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Geschäftsbericht 2012, englisch

Management report – münchener Hypothekenbank eg l annual Report 201212 Economic development The pace of the global economy slowed further in 2012 and expanded by 3.2 percent, which was more than half a percent- age point weaker than in the previous year. The effects of the European sovereign debt and economic crisis were partially responsible for the decline as economic performance in the eurozone contracted to minus 0.4 percent in 2012. The other reason was a deceleration in the previously strong economic growth posted by developing and emerging markets. Despite the recessive economic development seen in Europe, the German economy performed comparatively well as its gross domestic product (GDP) rose by 0.7 percent. Although this was one of the highest growth figures noted for a European econ- omy in 2012, the pace of growth recorded for the German econ- omy slowed substantially over the course of the year. Foreign trade was once again the biggest contributor to growth, although domestic consumption also had a favourable influ- ence. Capital expenditures, in contrast, decreased notably and dampened economic growth. This was also the case for invest- ments in construction, which fell by a total of 1.1 percent fol- lowing the significant increase seen in the previous year. The decline was caused by a massive collapse in public sector con- struction due not least to the expiration of the German govern- ment’s economic stimulus programmes. Residential construc- tion, on the other hand, developed favourably as investments rose by 1.5 percent with sales climbing by even about 5 percent. The rise in consumer prices weakened a bit in 2012 as the aver- age annual figure amounted to 2 percent. Higher energy prices were once again the main driver that pushed prices up. The good economy had a favourable effect on the labour mar- ket as the number of employed persons in Germany continued to rise from the previous year’s record level to an annual aver- age of 41.6 million in 2012, despite the deceleration in hiring seen in the second half of the year. The average unemployment figure continued to decline from 7.1 percent to 6.8 percent as the yearly average jobless number dropped by almost 80,000 to about 2.9 million. Financial markets The European sovereign debt crisis was again the dominant theme in the international financial markets last year. The Euro- pean Central Bank’s (ECB) long-term tender transactions initially assured the markets that sufficient liquidity would be available and in the interim led to substantially more stable and favour- able financing conditions. These circumstances also benefited the eurozone’s peripheral countries and well as their banks. “Policymakers and the European Central Bank made numerous efforts to reinforce trust in the markets.” Capital markets were heavily burdened by the restructuring of Greek government bonds that took place at the expense of private bondholders, as well as by the worsening creditworthi- ness of the peripheral countries that occurred at the same time. European policymakers made numerous efforts to reinforce trust in the markets including, in particular, using the European Stability Mechanism to recapitalise Spanish banks. Capital mar- kets, however, continued to doubt the peripheral countries’ willingness to enact sustainable reforms, as well as the euro- zone’s core countries’ unwavering commitment to continue providing support. The market viewed Greece’s exit from the monetary union as a possibility, which in turn led to massive increases in risk premiums demanded for the debt of non-core countries in the eurozone. In addition, the global economy further weakened, which together with Europe’s unresolved sovereign debt crisis led to rising recessionary fears around the world. The ECB responded to these fears in July 2012 by further reducing its key interest rate to a new historic low of 0.75 percent. The American central bank, the Fed, maintained its key interest rate in an unchanged range between 0 and 0.25 percent. Management report 2012 Overall economic conditions

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