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Despite the international standing of Deutsche Bank, Germany’s banking system is fragile. Several German banks required government support during the financial crisis. Highly fragmented (in part due to heavy government involvement) and with low profitability, German banks, especially the German Länder (state) owned Landsbanks, face problems. They have large exposures to European sovereign debt, real estate and structured securities.

Prior to 2005, the Landesbanken were able to borrow cheaply, relying on the guarantee of the state governments. The EU ruled these guarantees amounted to subsidies. Before the abolition of the guarantees, the Landesbanks issued large amounts of state-guaranteed loans which mature by December 2015.

While it insists on other countries reducing public debt, German debt levels are high—around 81% of GDP. The Bundesbank, Germany’s central bank, has stated that public debt levels will remain above 60% (the level stipulated by European treaties) for many years.

Germany’s greatest vulnerability is its financial exposures from the current crisis. German exposure to Europe, especially the troubled peripheral economies, is large.

German banks had exposures of around US$500 billion to the debt issues of peripheral nations. While the levels have been reduced, it remains substantial, especially when direct exposures to banks in these countries and indirect exposures via the global financial system are considered. The reduction in risk held by private banks has been offset by the increase in exposure of the German state, which assumed some of this exposure.

For example, the exposure of the ECB to Greece, Portugal, Ireland, Spain and Italy is euro 918 billion as of April 2012. This exposure is also rising rapidly, especially driven by capital flight out of these countries.

Germany is now caught in a trap. Irrespective of the resolution of the debt crisis, Germany will suffer significant losses on its exposure – it will be the biggest loser.

Once the artificial boom ends, voters will discover they were betrayed by Germany’s pro-European political elite. There will be an electoral revolt and, as in the rest of Europe, a strong challenge from radical political forces with unpredictable consequences.

In late May 2012, French President Francois Hollande provided a curious argument in support of eurozone bonds: “Is it acceptable that some sovereigns can borrow at 6% and others at zero in the same monetary union?”

Political will for integration

In the peripheral economies, continued withdrawal of deposits from national banks (a rational choice given currency and confiscation risk) may necessitate either a Europe wide deposit guarantee system or further funding of banks.

A credible deposit insurance scheme would have to cover household deposits (say up to euro 100,000), which is around 72% of all deposits, in the peripheral countries. This would entail an insurance scheme for around euro 1.3 trillion of deposits.

Given that the Spanish Economy Ministry reports that euro 184 billion in loans to developers are “problematic,” the additional recapitalization needs of Spain’s banks may be as high as euro 200-300 billion in additional funds (20-30% of GDP)

A Greek default would result in losses to Germany of up to around euro 90 billion. Germany’s potential losses increase rapidly as more countries default or leave the eurozone.

Austerity or default will force many European economies into recession for a prolonged period. German exports will be affected given Europe is around 60% of its market, including around 40% within the eurozone. In case of a break-up of the euro, estimates of German growth range from -1% to below -10%. It is worth remembering that the German economy fell in size by around 5% in 2008, the worst result since the Second World War, mainly on the back of declining exports.

For example, Greece owes about euro 400 billion to private bondholders but increasingly to public bodies, such as the IMF and ECB, mainly due to the bailouts. If Greece walks away as some political parties have threatened, then the fallout for the lenders, such as Germany, are potentially calamitous.

But the largest single direct German exposure is the Bundesbank’s over euro 700 billion current exposure under the TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) to other central banks in the Eurozone.

by Satyajit Das

Last year, Brazilian politicians used subsidies and the threat of continued high tariffs on imports to persuade Foxconn — which makes smartphones and computers in Asia for dozens of technology companies — to start producing iPhones, iPads and other devices in a factory north of São Paulo.

“Closing our border is a 20th-century thought, and it will only weaken the economy over the long term,”

Mr. Mir noted there were hidden costs that needed to be taken into account for both renewable energy and fossil fuels. Solar and wind farms, for example, produce power intermittently — when the sun is shining or the wind is blowing — and that requires utilities to have power available on call from other sources that can respond to fluctuations in demand.

“Renewables had two issues: One, they were too expensive, and they weren’t dispatchable. They’re not too expensive anymore.”

Especially in the interior region of the country, from North Dakota down to Texas, where wind energy is particularly robust, utilities were able to lock in long contracts at 2.1 cents a kilowatt-hour, on average, she said. That is down from prices closer to 5 cents five years ago.

Already, solar executives are looking to extend a 30 percent federal tax credit that is set to fall to 10 percent at the end of 2016.

Airbus has struggled to sell the planes. Orders have been slow, and not a single buyer has been found in the United States, South America, Africa or India.

While the A380 program has been a boon for the European aerospace industry, Airbus is unlikely to recover its research and development costs. The best it can now expect is to break even on production costs, according to analysts, provided that it can keep orders going.

Airbus made the wrong prediction about travel preferences. People would rather take direct flights on smaller airplanes, he said, than get on big airplanes — no matter their feats of engineering — that make connections through huge hubs.

“It’s a commercial disaster,” Mr. Aboulafia says. “Every conceivably bad idea that anyone’s ever had about the aviation industry is embodied in this airplane.”

Airline executives were wary of expanding their fleets aggressively, especially for a costly, four-engine fuel hog.

And there are a fair number of those routes. Around 15 of the 20 largest long-haul routes by passenger volume in the world today are slot-constrained,

“The A380 is not made for every route, but it is ideal for high-traffic routes, high-volume routes that are congested, or where there are flying constraints,”

A little more than a decade ago, the two dominant airplane makers, Boeing and Airbus, looked at where their businesses were headed and saw similar facts: air traffic doubling every 15 years, estimates that the number of travelers would hit four billion by 2030 — and came to radically different conclusions about what those numbers meant for their future.

Boeing, too, is facing lukewarm demand for its latest jumbo jet upgrade, known as the 747-8. The company has received just 51 orders for this big plane, which can seat about 460 passengers and lists at $357 million. By contrast, it has sold more than 1,200 twin-engine 777s, which sell for as much as $320 million.

Richard H. Anderson, Delta’s chief executive, has said the A380 is “by definition an uneconomic airplane unless you’re a state-owned enterprise with subsidies.”

Bruno Delile, Air France’s senior vice president for fleet management, says that there are a limited number of routes in its network with enough daily traffic to justify the expense of such a big plane. “The forecasts about traffic growth and market saturation haven’t exactly panned out,” he says.

Not only do airlines take a big risk on the size and cost of the A380, but they also have to gain the cooperation of airports to modify gates and widen taxiways to make room for the plane.

With versions that seat 210 to 330 passengers, and with a range of about 9,000 miles, the 787 allows airlines to fly pretty much anywhere in the world and connect smaller airports without going through a hub.

And passengers are willing to pay more to avoid a connection

f most airlines appear skeptical of the A380, Emirates is a true believer. It stunned the industry in December when it ordered 50 more of the planes, beyond the 90 it already had on order, throwing Airbus a much needed lifeline

The airport handled 66 million passengers last year, rivaling Heathrow as the busiest international hub.

for Emirates, the biggest selling point of the A380 is its ability to pack in more business-class seats and create an environment that appeals to big-spending passengers.

some executives believe Germany should change its immigration laws and accept foreign credentials

The share of people ages 55 to 64 in the work force had risen to 61.5 percent in 2012, from 38.9 percent in 2002.

A recent study found that more than half the Greeks and Spaniards who came to Germany left within a year

The goal is to be able to ship gas to Ukraine at an annual rate of more than three billion cubic meters by the time the heating season begins in the autumn, increasing the flow to up to 10 billion cubic meters annually by next spring. Last year Ukraine imported nearly 30 billion cubic meters of gas, according to a recent report by the Oxford Institute for Energy Studies.

Part of his message is that, even though gas demand in Europe has been weak because of sluggish economies, imports from Russia actually rose last year by about 16 percent as other sources of supply including Norway and Algeria declined. Europe, he warned, is simply not prepared to do without gas from Russia.

But with the gradual introduction of more competitive pricing in the European markets, the gas business has become much less attractive for ENI and other big gas middlemen. They are stuck with high-priced long-term contracts to a handful of suppliers like Gazprom and Sonatrach, the Algerian state-owned company, while their customers are able to secure gas at often lower spot market prices — assuming the gas is flowing.

The pipeline would be a major new source of Russian gas for energy-hungry Europe. But European Union authorities have become deeply skeptical about the South Stream plan, seeing it as just another way of making Europe more dependent on Russian energy.

hose outages in 2006 and 2009 are a top reason that the European Union had already been trying to chip away at Europe’s dependence on Russia even before the Crimea annexation.

That is partly because powerful Eastern European countries like Poland argue that such clean-energy policies would impede their ability to reduce Russian dependence by mining more coal or developing their own shale gas resources.

nd this month, the European Commission issued rules aimed at reducing the subsidies that governments use to support the wind and solar industries,