Schroder's tax reforms herald shakeout of German industry

GERHARD SCHRODER, the German Chancellor has announced plans to scrap punitive capital gains taxes, paving the way for the wholesale dismantling of the network of cross-shareholdings between banks and industry which has underpinned Germany's economic structure since the Second World War.

The proposals, which would abolish Germany's 50 per cent tax on asset disposals in 2001 and clear the way for the country's powerful banks and insurance companies to offload an estimated $100bn worth of industrial holdings over the next few years, set the Frankfurt stock market alight yesterday.

Frankfurt's Xetra Dax index soared 4.46 per cent to a new high of 6782.39 points as foreign investors piled into stocks of financial-sector companies who have been lobbying for years for this change.

"This would be the death of Deutschland AG," said one official at a major German insurer, referring to the tight web of relationships which has marked out corporate Germany for decades.

Robert Law, banks analyst at the investment bank Lehman Brothers, said: "Schroder has made it clear that the rationale is to restructure corporate Germany. If the proposals go through it is a very significant move for corporate Germany. The government appears to take very seriously the requirement to restructure the corporate sector. It views the industrial holdings as a barrier to that."

Germany's big financial institutions hold significant stakes in the largest German companies accounting for a third of the total value of the German stock market.

Allianz, whose shares rose nearly 11 per cent yesterday has around $30bn tied up in various companies including the giant power concern RWE, Bayer, the chemicals group, truck maker MAN and Linde, the industrial gases group. Deutsche Bank, whose shares rose nearly 9 per cent yesterday, has around $23bn tied up in various companies, including a massive stake in DaimlerChrysler, the German-US auto giant.

The networks are tightest within the financial sector itself. The big three banks, Deutsche, Dresdner and Hypovereinsbank, have significant stakes in Allianz and Munich Re, Germany's largest insurance groups, which in turn own big slices of the three banks. Analysts said dismantling this web of shareholdings will free those institutions upas Europe's financial companies consolidate.

In the past these cross-shareholdings have been seen as an integral part of so-called Rhineland capitalism, supposedly encouraging a more supportive relationship between suppliers of capital and the corporate sector. However, the recent collapse of Philip Holzmann, the German construction giant in which Deutsche Bank had a 15 per cent stake, highlighted the system's weaknesses.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living