Germany’s twin crises: football and the economy

0:02Good morning from the Financial Times. Today is Friday, July 3rd, and this is your FT News Briefing. The U.S. labor market is slowing, and the Korean government wants people to cool it on their property investments. Plus, Germany is struggling to stay on top of industry and football. Germany was, for decades, undoubtedly one of the powerhouses of both European football and, indeed, global football. But in the last decade or so, the crown has very much slipped. I'm Safiya Ahmed, and here's the news you need to start your day.

0:44The U.S. economy added just 57 ,000 jobs last month. Economists expected more than double that. It's a sign that the labor market is cooling. But the number is still a lot higher than the 10 ,000 jobs that the U.S. was adding on average each month in 2025. That means that this year, the Federal Reserve has been less concerned about a weak labor market. Instead, it's focused on tackling inflation from the Iran war. So investors were expecting the Fed to raise rates. But this disappointing jobs report means that traders are scaling back their bets on that. Now they think it's less likely that the Fed will raise borrowing costs.

1:25Global demand for AI semiconductors has been a big boost for the South Korean stock market. But there's a problem. The government can't convince people to keep their money in equities. Instead, more and more Koreans are pouring their earnings into an overheated property market. Joining me now to discuss is the FT's Seoul correspondent, Daniel Tudor. Hi, Daniel. Hi. So how much money is coming into the Korean property market from the stock market? So in the first three months of the year, and this is before even the biggest peaks of the KOSPI index, it was just under$3 billion going into higher value property.

2:02So places like Gangnao and so on. But the interesting thing is that it's about triple the usual level. So a property of around that level in Korea, about 4 % of the money that goes into that is usually from sales of stocks. But now it's something like 13. So why does the government want people to get out of property or at least not put as much money into property? So over the past several decades, people in Korea have come to believe that property is really the only investment. The Korean stock market historically has not really gone anywhere. It's only been in the past year or so that it's really shot up.

2:39And there are all kinds of reasons for that. But property, it's believed, never goes down and always goes up, particularly in Seoul. And the problem with that is that it makes property very expensive, of course. On top of that, the president, Lee Jae-myung, he believes in this concept of productive capital, as he calls it. So if you put money into a property, that's not producing anything in terms of output. So he would rather you invested your money in the stock market. Who is benefiting from the money moving from the stock market into property? See, I was talking to an economist named Kathleen Oh from Morgan Stanley here about this, and she's also written a report about this issue.

3:23One of the things that she mentioned, this is I think in her report as well, that the lion's share of these profits on stocks have gone to people who are already quite wealthy. And so I think it will be relatively rare to see somebody who's from the working class or has not that much money to begin with who has made enough money on stocks. OK, I'm going to be able to buy an apartment now. Well, what are the consequences overall for South Korea and for its economy if this trend continues? I think the main problem really is that young people will not be able to buy property, particularly in Seoul.

4:03Now, if you're a young person in Korea, you have any ambition whatsoever. You tend to gravitate towards Seoul. It's where all the opportunities are. But even if you have a decent job, you can't buy an apartment. So this will only get worse and it will make, of course, inequality worse as well. For the government itself, the property price issue is a real political banana skin. If you are the president, you don't want house prices to go down, of course, because people who own property will hate you. But you don't want them to go up too much either because people who don't yet own property will hate you.

4:36So it's really, it swings presidential elections, but also just for ordinary people, it's very painful. That's the FT's sole correspondent, Daniel Tudor. Thanks so much, Daniel. Thank you very much.

4:55Blue Owl Capital is still struggling to stem an exodus of wealthy clients. Investors tried to pull$4.7 billion out of the firm's flagship private credit funds last quarter. That's according to a recent FT analysis. It's slightly less than last quarter, and the firm told investors it was encouraged by that change. Both funds have capped withdrawals. Shares in Blue Owl have fallen more than 40 % this year. It's now lower than its listing price. The private credit industry more broadly has had a pretty painful quarter. The FT's analysis also showed that private credit funds honored less than half of the redemption requests that they received.

5:37Germany has had a rough couple of weeks, both in industry and on the football pitch. Let's start with the absolute shocker at the World Cup on Monday. The countdown, the kickoff at this level, at this World Cup level, the highs are so high and the lows are so low. Germany, they did okay in the group stages, got through to the round of 32 where they came up against Paraguay. That's the FT's sports editor, Josh Noble. In that round of 32 game, Paraguay took the lead in the first half. Germany scored an equaliser in the second. It went to extra time. It stayed the same score. So ultimately, it went to penalties.

6:15It's down to Jose Canale. A few have been in this position for Paraguay. but he scores! Germany lost on penalties for the first time at a World Cup in their history. Paraguay have won it and they booted Germany out of the World Cup. And they got sent packing by Paraguay who were ranked more than 30 places below them in the global rankings or at least they were at the start of the tournament. Germany, a four-time World Cup winner, Had a squad ranked at number 10 globally before this year's games started. The reaction in Germany, I think is fair to say, is sort of one of existential crisis about the state of German football.

6:59Because this isn't a new problem. Germany didn't even make it out of the group stages in the last two World Cups. This points to a sort of broader malaise that Germany was for decades undoubtedly one of the powerhouses of both European football and indeed global football. But in the last decade or so, the crown has very much slipped. And not only are they not an elite team, they actually haven't been an elite team for quite some time now. But the football team's crash out isn't the only malaise that's plaguing Germany. Its industry is struggling too. The country's iconic carmaker, Volkswagen, announced brutal job cuts earlier this week.

7:35And Franco-German tankmaker, KNDS, said on Wednesday that it was going to postpone its IPO until the market improves. The FT's Berlin correspondent, Laura Patel, says that this is all happening with the backdrop of a German economy that has been stagnating for years. The country is suffering with what many describe as a triple shock. Germany lost its biggest source of natural gas when the war in Ukraine cut off Russian gas flows to this country. Its relationship with the US is in tatters. And at the same time, German industry, especially the car industry, is facing a huge China shock with very fierce competition from China.

8:14So there's this just general sense that the country is not in a good place. And I think that the football defeat deepens that sense of woe and angst. The triple shock she's describing has German Chancellor Friedrich Mertz backed into a corner. But just yesterday, a little hope surfaced, at least on the economic front. Chancellor Friedrich Mertz and his coalition partners from the Social Democrats managed to agree after a lot of wrangling, a package of reforms which are aimed at kind of sprucing up the economy. It includes a lot of different things. 10 billion euros worth of tax cuts for the middle class, labor market reforms, and some other provisions.

8:52It remains to be seen whether or not these will actually make a difference to Germany's economy, which has barely grown since the COVID pandemic. But I think there is some positivity from economists and businesses that this is a step in the right direction. So Germans are down on their football team and their economy. But Laura has another perspective to offer them. I'm a Brit. I've lived in Berlin for about three years. And when I compare the state of Germany to my own country, I feel that in many ways it still feels like a very prosperous country. I think a lot of Germans are comparing to, say, 10 years ago, which was when Germany last won the World Cup in 2014.

9:30And the country was in a very different place then. Angela Merkel was chancellor. There was a lot of optimism. But I do still think this country has a lot going for it. And Germans are very partial to a bit of self-clagulation. And so I think to an extent, they're kind of enjoying this sense of doom and woe around the World Cup defeat. Before we go, this is your last chance to take our survey about a Saturday FT News briefing. Just take a look at the link in our show notes. You could win a pair of Bose headphones if you feel it out. This has been your daily FT News briefing. Check back next week for the latest business news.

10:06The FT News Briefing was produced this week by Sonia Hudson, Katya Kamkova, Fiona Simon, and me, Safiya Ahmed. Our editor is Mark Filippino. Our show was mixed by Alex Higgins and Kelly Gary. And we had help this week from Peter Barber, Michael Lello, and Gavin Kallman. Our intern is Cole Van Miltenburg, and our executive producer is Topher Foreheads. Flo Phillips is the FT's global head of audio, and our theme song is by Metaphor Music.

11:04Transcription by CastingWords and manage money. Learn more at schwab.com slash teen. Why spend thousands on a basic will when you can get access to legal help for around a dollar a day? With LegalShield, you can put a full estate plan in place, including a will, health directives, and powers of attorney to help protect your family and hard-earned assets. Sign up today at LegalShield.com and get 10 % off our annual plans. It's finally simple and affordable. LegalShield, real lawyers, really affordable. Sign up at LegalShield.com. That's LegalShield.com. LegalShield does not provide legal representation or advice.

11:39See a plan for complete terms.