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Stocks slide as China recovery weakens

By - Aug 16,2021 - Last updated at Aug 16,2021

LONDON — Stock markets retreated on Monday as weak Chinese economic data, fears of a resurgent coronavirus and the Taliban's victory in Afghanistan gnawed at investor sentiment.

The main equity indices in the US and Europe were lower after widespread falls across Asia.

"Weaker economic data emanating from China has spoiled the mood, with lower readings on retail sales and industrial production raising questions on whether the recovery momentum can be maintained," said Richard Hunter, head of markets at Interactive Investor.

"In addition, there remain some health issues in Asia generally, while geopolitical concerns have also surfaced following the developments in Afghanistan and the implications for the future of the region."

Growth in China's retail sales and industrial production slowed in July, official data showed on Monday, with a rebound of COVID-19 dragging on demand in the world's second-biggest economy.

Market watchers were also closely following developments in Afghanistan.

US troops fired shots into the air and all commercial flights were cancelled at Kabul airport on Monday as thousands of Afghans crowded onto the tarmac in the hope of catching any plane out after the weekend Taliban takeover.

On the economic front, retail sales in China expanded 8.5 per cent in July year-on-year and industrial output was up 6.4 per cent, according to figures released by the government's statistics bureau, with both figures below analyst estimates.

Lockdowns and other movement restrictions brought in to combat the country's recent coronavirus outbreaks have been blamed for hampering economic performance along with a series of deadly floods.

Raymond Yeung, chief economist for Greater China at ANZ Banking Group, said the figures "suggest the economy is losing steam very fast".

Surging infections linked to the Delta variant of the coronavirus "also adds extra risk to August's activities", he added.

The resurgence of the virus in China was "weighing on investors' nerves now, especially when one looks at the evolution of outbreaks in the region from Australia to Singapore to Japan and everywhere in between", said Jeffrey Halley, senior Asia-Pacific market analyst at OANDA.

"If anyone can break the trend, it is China," he added. 

"But widespread outbreaks and restrictions would be a game-changer for the Asia recovery, and one could argue, the global one as well when one considers the implications to supply chains."

Investors are meanwhile also preparing for the US Federal Reserve (Fed) to begin reducing the pace of its asset purchases that have supported the economy — and equity markets. 

"Fed Chair Jay Powell is expected to announce tapering plans either at the Jackson Hole symposium in late August or at the next" meeting of the central bank's monetary policy body in September, ThinkMarkets analyst Fawad Razaqzada said.

Oil prices were down around 1.5 per cent on the weak Chinese economic data.

"Expectations were already low leading into the numbers, and combined with the warning from the [International Energy Agency] that demand for crude oil was slowing, prices have slipped sharply," said market analyst Michael Hewson at CMC 

Markets UK.

US opens probe of Tesla Autopilot after 11 crashes — agency

By - Aug 16,2021 - Last updated at Aug 16,2021

A man charges his car at a Tesla super charging station in Arlington, Virginia, on Friday (AFP photo)

NEW YORK — US safety officials opened a preliminary investigation into Tesla's Autopilot after identifying 11 crashes involving the driver assistance system, officials said on Monday.

The incidents dating back to 2018 included one fatal crash and seven that resulted in injuries to 17 people, according to the National Highway Traffic Safety Administration (NHTSA).

NHTSA "is committed to ensuring the highest standards of safety on the nation's roadways", an agency spokesperson said. "In keeping with the agency's core safety mission and to better understand the causes of certain Tesla crashes, NHTSA is opening a preliminary evaluation into Tesla Autopilot systems."

Tesla founder Elon Musk has defended the Autopilot system and the electric automaker warns that it requires "active driver supervision" behind the wheel, but critics, including in Congress, say the system can be easily fooled and have called for NHTSA to take action.

Tesla did not immediately respond to an AFP request for comment.

The crashes cited by NHTSA involved incidents in which "various Tesla models crashed" in instances where responders were involved, including "some that crashed directly into the vehicles of first responders", the NHTSA spokesperson said. 

Three of the crashes took place in California, with other incidents taking place in Florida, Texas and Massachusetts, among other states. The probe covers models Y, X, S and 3, NHTSA said. 

"A preliminary evaluation starts the agency's fact-finding mission and allows additional information and data to be collected," a NHTSA spokesperson said.

"NHTSA reminds the public that no commercially available motor vehicles today are capable of driving themselves," the spokesperson said.

"Certain advanced driving assistance features can promote safety by helping drivers avoid crashes and mitigate the severity of crashes that occur, but as with all technologies and equipment on motor vehicles, drivers must use them correctly and responsibly."

News of the probe sent Tesla shares sharply lower on Monday. 

Pushing the boundaries 

Musk has a history of skirmishing with regulators, but the controversies have had little effect on Tesla's ascendance over the last year and a half as the company has hit key production targets.

His success in building Tesla from a fledgling startup into an industry pacesetter on electric cars has stood out more as other electric auto startups like Lordstown Motors and Nikola have stumbled. 

At the same time, Musk has sparked blowback from critics as he pushed or flouted the rules on everything from his use of social media to discuss Tesla's operations to his response COVID-19 health protocols required by local officials near Tesla's California plant. 

Advocates with the Centre for Auto Safety, a non-profit group, have pressed US officials to bar the name "Autopilot" since 2019, viewing the moniker as deceptive.

Jason Levine, executive director of the Center for Auto Safety, welcomed news of the NHTSA probe, but said it should go "far beyond" crashes involving first responder vehicles "because the danger is to all drivers, passengers, and pedestrians when Autopilot is engaged", he said in an email.

"Whether Autopilot needs to be disabled, or be required to use driver monitoring systems to prevent these crashes, is a question for NHTSA," Levine added. "But there's no question that something needs to be done quickly to prevent more injuries and deaths."

Testers with the magazine Consumer Reports demonstrated in a video that Autopilot could be fooled into driving with nobody behind the wheel, an exercise also shown in widely-seen videos on TikTok and other social media platforms.

In April, Democratic senators Richard Blumenthal of Connecticut and Ed Markey of Massachusetts urged NHTSA to probe a fatal crash in Texas involving a Tesla after law enforcement said there was no driver behind the wheel.

The senators said Tesla has been criticised for "misrepresenting" its systems and "giving drivers a false sense of security", according to an April 22 letter.

Tesla has said it does not believe the April crash involved Autopilot, and the incident was not included in NHTSA's list of 11 crashes. 

Tesla shares tumbled 5.1 per cent to $680.77 in mid-morning trading.

HSBC to buy Axa's Singapore insurance business

By - Aug 16,2021 - Last updated at Aug 16,2021

PARIS — HSBC has agreed to buy the Singapore unit of French insurance giant Axa as the British banking group expands its foothold in Asia, the companies said on Monday.

HSBC makes 90 per cent of its profit in Asia and has said it plans to redouble efforts to seize more of the market in the region.

The bank has agreed to acquire Axa Singapore, the city-state's eighth largest life insurer, for $575 million (487 million euros).

"This is an important acquisition that demonstrates our ambition to grow our wealth business across Asia," HSBC Chief Executive Noel Quinn said in a statement.

"Wealth is one of our highest growth and highest return opportunities, and plays to our strengths as an Asia-centred bank with global reach," he said.

The bank said it plans to merge the operations of HSBC Life Singapore and Axa Singapore once the deal, which is subject to regulatory approval, is completed.

As part of its Asia pivot, HSBC sold its 90 branches in the United States this year and completed a long-running disposal of its unprofitable French retail business.

Singapore is a "strategically important scale market for HSBC, and a major hub for its ASEAN wealth business", the banking group said, referring to the Association of Southeast Asian Nations.

Axa said it expects the transaction to be completed in the fourth quarter.

The sale is part of Axa's "simplification journey" in the region, said the French insurer's Asia and Africa chief executive, Gordon Watson.

"In line with the Group's strategy, we are focusing on our core markets where we have the size, presence in the right business segments and a strong potential to grow," Watson said.

Japan economy rebounds despite virus surge

By - Aug 16,2021 - Last updated at Aug 16,2021

A cargo ship arrives at the international cargo terminal at the port of Tokyo, on Monday (AFP photo)

TOKYO — Japan's economy grew slightly in the second quarter, recovering from a slowdown at the start of the year despite continuing virus surges and restrictions, data showed on Monday.

The world's third-largest economy contracted at the beginning of the year as a new wave of infections forced the government to impose virus restrictions that slowed consumption.

But despite continued virus worries and restrictions that have lasted most of this year, Japan's economy grew a better-than-expected 0.3 per cent in the three months to June, data from the Cabinet office showed.

That slightly exceeded the expectations of economists surveyed by Bloomberg, who had forecast just 0.1 per cent quarter-on-quarter growth.

The data released by the cabinet office also showed a slight upwards revision for the first quarter, when the economy shrank 0.9 per cent, compared with a previous estimate of 1.

Japan has seen a smaller virus outbreak than many developed economies, with 15,400 deaths despite avoiding harsh lockdowns.

But for much of this year Tokyo and several other regions have been under virus states of emergency, limiting alcohol sales and restaurant and bar opening hours.

Experts have warned the measures are losing their effectiveness, with signs the rules are being increasingly flouted.

Stefan Angrick, a senior economist at Moody's Analytics covering Japan, said consumption proved surprisingly resilient despite the restrictions.

"The Japanese economy eked out some moderate growth in the second quarter of the year, avoiding a technical recession thanks to a combination of stronger consumption and business investment," he said in a note.

"Despite the improvement, we expect growth to remain under pressure in the third quarter as spending and production continue to struggle amidst disruptions from the pandemic."

Japan is also playing catch-up with its vaccine programme, which began much later and more slowly than those in many other developed economies.

The roll-out has now picked up speed and around a third of Japanese are now fully vaccinated but infections are at record levels, with nationwide daily cases topping 20,000 in recent days.

The surge in cases, driven by the more contagious Delta variant, has clouded the chances for a strong and fast vaccine-driven recovery.

Analysts said there was still hope on the horizon.

"Output only edged higher in the second quarter and won't do much better this quarter as the Delta-driven fifth wave holds back consumer spending," wrote Tom Learmouth, of Capital Economics.

"But with the vaccine rollout still moving fast, a strong recovery in Q4 [fourth quarter] remains on the cards."

He noted that the 0.8 per cent quarter-on-quarter rise in private consumption was stronger than expected and offset most of the fall in the previous quarter. 

As throughout the pandemic though, uncertainty remains.

"With severe cases surging, the risks to our forecast that consumer spending will tread water in Q3 are currently tilted to the downside," Learmouth acknowledged.

Still, he said the solid pace of the vaccination programme now would leave Japan "well-placed" for a strong rebound in the final part of the year.

Many US-based companies delaying return to offices

By - Aug 15,2021 - Last updated at Aug 15,2021

This illustration photo shows a person working on their laptop from a home office in Los Angeles, on Saturday (AFP photo)

WASHINGTON — When Romain Daubec and his wife Monica left San Francisco last summer for Denver, Colorado, they thought their telework hundreds of miles from their offices would last no more than a half-year.

But the stunningly rapid spread of the Delta variant of COVID-19 has them settling in for a new way of life that now, they say, feels more "natural".

Across the United States, a growing number of companies are delaying their employees' return to the office out of concern over the new wave of disease.

But like the Daubecs — he is French, she is American — more and more people across the country have settled in for a second year of telework — willingly this time, with little desire to return to the office, content and comfortable with their new personal and professional lifestyle.

The Delta variant, now dominant in the United States, has taken a heavy toll. An average of nearly 113,000 new daily cases of COVID-19 were registered over the previous seven days — a 24 per cent increase over the prior week, Rochelle Walensky, director of the US Centres for Disease Control and Prevention, said Thursday.

One employer taking note was Facebook, which on that same day announced that it would not require workers to return to the office before January 2022. 

"Data, not dates, is what drives our approach for returning to the office," a Facebook spokesperson said in response to an inquiry, saying the company's prime concern was "everyone's safety".

Only weeks earlier, the popular social network had been pushing for a quicker return to normal, saying it would completely reopen its offices by October — while requiring all employees to be masked and vaccinated. 

Facebook thus joined Microsoft, Amazon, American Express and NBC in delaying, to October or January, the full reopening of offices. 

 

Lower wages 

but also taxes 

 

For 34-year-old Romain Daubec, a financial analyst for a subsidiary of French bank BNP Paribas, and Monica, who works for Facebook, a return to the office is no longer an option.

While Monica saw her earnings cut by 10 per cent because of the move, "that was largely compensated for" by a greater quality of life and more affordable housing — less than half as expensive in Colorado as in California — as well as by lower taxes, Romain said.

Above all, Monica no longer has to spend three hours on a bus every day.

For Oren Klachkin, an economist with Oxford Economics, it took a bit longer to make the decision to leave New York for Boulder, Colorado.

But when a new wave of COVID-19 struck last fall, he saw the silver lining: It was a "once-in-a-lifetime opportunity to live somewhere else, maintain our jobs, try living in a different place", he said.

Space was a big draw: He and his wife Nicole, a 35-year-old consultant, had been sharing a cramped Manhattan apartment.

In Boulder, not far from Denver, the couple now has a "small house" where each has a separate room for work.

"I like the new life that I have here," Klachkin said, especially "having access to outdoor activities" in a scenic region near the Rocky Mountains.

Telework in Colorado has allowed him to strike a better balance between work and home life and saved him from having to "waste" up to two hours a day in the subway, he said. 

But "there are certain downsides, of course", Klachkin added, notably the inability to interact in person with colleagues. 

That is partially offset by "the availability of different online software to essentially allow us to see each other... even though we're not physically in the same space".

 

A tacit deal 

 

To Romain Daubec, where one works matters less than how one works.

"As far as I'm concerned, I just need a good internet connection and have to work on San Francisco's time zone," he said, while acknowledging that not every job lends itself to distance work. 

Fundamentally, Daubec added, telework succeeds when built on a basis of trust between employer and employee: Companies allow telework because they save on fixed costs like office rent, while workers tacitly agree to work as seriously as if their boss were standing in the same room.

Klachkin, for his part, says he is more productive than ever — no longer having to spend long, wearying hours commuting every week.

Consumers queue for bread in Lebanon

By - Aug 14,2021 - Last updated at Aug 14,2021

A woman leaves a bakery with a bag of bread as people wait for their turn, in the neighbourhood of Nabaa in the Lebanese capital Beirut's southern suburbs, on Friday, amidst a wave of shortages of basic items due to a severe economic crisis (AFP photo)

BEIRUT — Michael Hamati emerged from a long queue at a Beirut bakery sweat dripping from his forehead, as Lebanon's economic collapse sparks increasing shortages including over bread.

"There's nothing left in this country," said the 72-year-old, as dozens of people clamoured behind him in the simmering heat for their turn.

Lebanese flocked to bakeries before dawn on Friday, desperate to find affordable bread in a country where fuel and medicine are already in critically short supply.

The rush came after the central bank on Wednesday said it could no longer afford to subsidise fuel in Lebanon.

The country, struggling with political turmoil since 2019, has also been hit by the worst global economic crisis in 150 years, according to the World Bank.

At least 78 per cent of the more than six-million-strong population lives below the poverty line and businesses can barely stay afloat.

The Lebanese pound has lost more than 90 per cent of its value against the dollar on the black market in less than two years.

Many bakeries have already closed down because they cannot afford the rising cost of fuel needed to power private generators as electricity cuts last for around 20 hours a day.

Those that remain open have rationed production to make the subsidised flour they receive from the state last longer, leading to shortages in stores and supermarkets. 

Hamati arrived at a Beirut bakery early in the morning, bracing for a long wait.

"This is the first time I come to this bakery. There isn't any bread left in stores," he said.

"Is there anything left at all" in Lebanon? He asked.

 

Queues from 3 am 

 

Lebanon has been gripped by a fuel crisis since the start of summer, with importers blaming shortages on a delay by the government in opening credit lines to fund imports.

The authorities have accused distributors of hoarding stock to sell it at higher rates on the black market or across the border in Syria. 

"Bakeries don't have the means to secure fuel oil... and we don't know if we will receive any" from the state, said Ali Ibrahim, who heads the syndicate of bakery owners.

"They just give us enough for two days... though bakeries and mills should be receiving enough for a month."

In Beirut's Nabaa district, Jacques Al Khoury looked flustered as he tried to organise a queue of dozens of people waiting outside his bakery for bread.

The line started as early as 3:00am — just as he started baking for the day.

"All the bakeries in this area have closed and the pressure is all on me," he said.

Khoury, 60, said he receives 36 tonnes of state subsidised flour per month — but with demand for bread increasing it only lasts a week.

In the northern city of Tripoli, Lebanon's poorest, many bakeries have been forced to close while supermarkets have stopped selling bread.

 

'Stale bread' 

 

The few Tripoli bakeries that have remained open are also struggling to keep up with demand.

"We are rationing the amount of bread we distribute to stores," an employee at one of the city's largest bakeries said.

"We are providing them with half the usual amount."

In one bakery in the southern city of Sidon, residents were only allowed to buy one bag of flat white bread each.

According to the United Nations, food prices have increased by up to 400 per cent. 

The cost of a basic food basket for a single family is now five times the national minimum wage, the Crisis Observatory at the American University of Beirut says. 

"Once we've paid rent, we have no money left," said Mohammad Abdul Qader, a pastry shop employee who needs to provide for five children.

He said food has become so expensive, he can no longer afford meat.

"I gaze at the butcher's from a distance, and then go on my way," he said.

"Yesterday, I ate stale bread" with onion and tomato, he added.

The curious case of the $600 million crypto heist

By - Aug 14,2021 - Last updated at Aug 14,2021

PARIS — Cryptocurrency investors have been transfixed over the past few days by the antics of a mysterious hacker who stole more than $600 million — before giving some of it back.

But is the thief a good samaritan who stole the money to expose a dangerous security flaw, or did they simply realise they were about to be caught?

The hacker struck Poly Network, a company that handles cryptocurrency transfers, on Tuesday in one of the biggest thefts of digital monies in history.

By Thursday they had returned some $342 million — still far short of the total, but enough to raise furious speculation over their motives.

In messages embedded in the transactions, the thief insisted they stole with good intentions.

"I am not very interested in money!" they wrote, adding it was "always the plan" to return the stolen funds.

Digital sleuths 

 

Despite their volatility and concerns over the huge waste of electricity they generate, cryptocurrencies like Bitcoin and Ethereum have soared in popularity in recent years.

Their combined market value currently stands at nearly $2 trillion, creating alluring prospects for hackers. 

Most notoriously, thieves stole 850,000 Bitcoins from Japanese exchange Mt. Gox in 2014. Worth around $470 million at the time, the coins would today be worth a staggering $38 billion.

Another Japanese exchange, Coincheck, was hacked for nearly $500 million in 2018.

But in both cases, the technology that cryptocurrency uses allowed some of the funds to be traced — even though for Mt. Gox, it came too late to save the company. 

Cryptocurrencies use blockchains, digital ledgers that record every transaction made.

Pawel Aleksander, an expert in tracking stolen cryptocurrency, said thieves typically try to cover their tracks by splitting the money up and moving it around — "sometimes using hundreds of thousands of consecutive transactions". 

But his company Coinfirm is among a growing number that specialise in following dizzyingly complicated blockchain transactions, helping law enforcement agencies and investors to trace stolen assets. 

While some crypto-aficionados are hailing the Poly hacker as a hero, others suspect they began handing the money back because sleuths were on their trail.

The returns began after SlowMist, another investigative firm, claimed to have identified some of the hacker's personal details, including their email.

"It's hard to say what the hacker's initial intention was," said Aleksander's colleague Roman Bieda.

"The hacker could be simply afraid of action taken against him," he suggested, although he added that "white hat" ethical hackers do often seek to publicly shame companies for their security flaws.

Some investors would also consider it a "fair bargain" for the hacker to keep some of the money, as a reward for finding the security flaw, Bieda said.

End of the Wild West? 

 

Crimes involving cryptocurrencies are on a downward trend, despite spectacular thefts like this one and concerns about their use by criminal gangs.

A report this month by security firm CipherTrace estimated global crypto crime losses at $1.9 billion last year, down from $4.5 billion in 2019. 

It did, however, warn of an alarming rise in hacking and fraud linked to de-centralised finance, or "defi" — a form of crypto-financing, including loans, designed to cut out intermediaries like banks. 

The Poly heist is part of that trend, with the company calling it the biggest hack "in defi history". 

"The imagination of fraudsters in this industry is constantly developing," said Syedur Rahman, a British lawyer who specialises in cases involving cryptocurrencies. 

But he added that tighter regulations are increasingly forcing cryptocurrency exchanges to verify users' identities, while law enforcement agencies are growing more experienced in handling crypto crimes.

Hackers extracted a $4.4 million ransom in Bitcoin from oil company Colonial Pipeline in May, but the FBI was able to track down most of the coins and seize them. 

Retrieving stolen crypto-assets can still be difficult, however. 

"Criminal activities in crypto are very much multinational," said Aleksander.

"It's typical that the victims sit in different jurisdictions, and the exchanges are registered in different jurisdictions."

Victims' battle to claw back money stolen in the Mt. Gox hack has been bogged down in years of international litigation. 

Hiring sleuths to trace stolen assets is an expensive option that is often out of reach for individual investors hit by hackers.

"When you have a consumer who has lost a nominal sum, there's not much that can be done," said Rahman. 

Samsung unveils new foldable smartphones as competition heats up

By - Aug 11,2021 - Last updated at Aug 11,2021

This undated photo released on Wednesday courtesy of Samsung shows the Samsung Galaxy Z Flip3 5G smartphone and Galaxy Buds2, Samsungs smallest and lightest earbuds (AFP photo)

SAN FRANCISCO — Samsung unveiled two upgraded folding smartphones on Wednesday as the South Korean sector leader sought to head off rising competition from Chinese firms in a fast-evolving market.

The Galaxy Z Fold3 and Z Flip3 offer sleeker designs, improved water resistance and more durable screens are available for pre-ordering for delivery later this month in the United States, Europe and South Korea.

The new devices come with Samsung facing heightened competition from Chinese manufacturers including Xiaomi, which grabbed the number two position in the second quarter.

The Flip3, with a 17 centimetres display, will start at $999, in line with other premium and flagship devices, and the 19 centimetres Fold3 at $1,799.

"Samsung is once again redefining the possibilities with foldable smartphones that empower users with the flexibility and versatility needed for today's fast-paced world," said TM Roh, head of Samsung mobile.

"These devices equip consumers with technologies that unlock new ways to maximise and enjoy every moment with an ecosystem built on openness and innovation."

The Flip3 aims to offer an affordable foldable, and the Fold3 aims to replace the large-screen devices and will include a retractable pen than can be used on the screen.

A recent survey by the research firm Canalys showed Chinese electronics firm Xiaomi has overtaken Apple as the number two global smartphone maker in a market in turmoil due to a global chip shortage and consumers emerging from lockdowns.

The Canalys survey showed worldwide smartphone sales up 12 per cent, with South Korea's Samsung holding its top position with a 19 per cent market share.

Xiaomi meanwhile surged to the number two position for the first time ever with a 17 per cent share as sales jumped 83 per cent, according to Canalys.

Apple dropped to number three with iPhone sales up just one per cent, after getting a lift from last year's new models.

Chinese makers Oppo and Vivo held fourth and fifth place in the global market, each with around 10 per cent, according to Canalys.

Smartphone sales were up 11 per cent from last year but down from the first quarter as manufacturers struggled with a global shortage of semiconductors, according to the research firm.

TikTok tops Facebook as most downloaded app of 2020

By - Aug 11,2021 - Last updated at Aug 11,2021

SAN FRANCISCO — TikTok was the world's most downloaded app last year, overtaking Facebook and its messaging platforms, market tracker App Annie said on Tuesday.

The Chinese-owned video app surged in popularity despite efforts by former president Donald Trump to ban it or force a sale to US-based investors, according to the research firm.

TikTok, owned by China-based ByteDance, is believed to have one billion users worldwide including more than 100 million in the United States, and its short-form videos are especially popular with young smartphone users.

In June, US President Joe Biden revoked executive orders from his predecessor seeking to ban TikTok and Chinese-owned WeChat from US markets on national security concerns but ordered a review of the potential risks of foreign-owned Internet services.

While political debate about the video-snippet sharing sensation roiled, TikTok climbed from the fourth most downloaded app in 2019 to the top spot last year, according to App Annie data.

On the way, TikTok stepped over Facebook and two of the US internet giants texting apps Messenger and WhatsApp, the market tracker determined.

TikTok's popularity has prompted Facebook-owned Instagram to add video features to ride the hot trend.

Meanwhile, TikTok last month began letting users post videos up to three minutes in length, tripling the prior cap to stay ahead of competitors.

Facebook has argued that the surge in TikTok's popularity undercuts claims from antitrust enforcers in the United States that the California group dominates social networking.

German train drivers call strike in escalating wage spat

By - Aug 10,2021 - Last updated at Aug 10,2021

In this file photo taken on February 10, 2020, empty tracks and red lights are pictured at the main railway station in Munich, southern Germany (AFP photo)

BERLIN — German train drivers voted to go on strike from Tuesday over a wage dispute, their union said, in a blow for summer vacationers and adding to logistics and supply woes already plaguing the industry.

The walkout will affect cargo trains from 7pm (17:00 GMT) on Tuesday, before extending to passenger traffic at 2 am on Wednesday, said the leader of the train drivers' GDL union, Claus Weselsky.

Some 95 per cent of union members had voted for the first round of industrial action, which is due to end on Friday.

Train operator Deutsche Bahn slammed the decision as an "unnecessary escalation on the back of rail customers".

"Just as people are travelling more again and using trains, GDL leaders are destroying the upswing that we urgently need given the huge damage from the coronavirus pandemic," said Martin Seiler, DB board member for human resources and legal affairs.

But Weselsky argued that the GDL "intentionally chose this timeframe in the week to limit the impact on weekend and holiday traffic" and that it was "never the best time" for a strike.

He in turn accused DB managers of "lining their pockets while the little guys are getting their pockets picked".

The strike would be the first hitting rail traffic since December 2018, when a stoppage was called for four hours.

It marked a new setback at the height of the key summer vacation season for the travel industry which was only starting to recover after months of shutdown over coronavirus infection risks.

With the walkout also due to affect rail cargo, Germany's industrial groups already hit by supply chain issues risk seeing further delivery delays for raw materials or components from timber to steel to computer chips.

 

Struggle for influence? 

 

The last major conflict between unions and DB took place between 2014 and 2015, when over nine months, GDL organised nine rounds of strikes to demand regulatory reforms. 

The stoppage in May 2015 of six consecutive days has held the record as the longest in the company's history.

This time, GDL argues that it was fighting for a better remuneration deal for train drivers. Among its demands are 1.4 per cent pay hike and a bonus of 600 euros ($704) for 2021, and a further wage rise of 1.8 per cent in 2022.

Deutsche Bahn had offered to phase in a 3.2 per cent wage increase in two steps but the two parties were unable to agree on when the hikes would apply.

Critics have accused GDL of using the strike to gain greater influence and attract members from larger union EVG — which covers railway workers and public transport employees.

The fight for influence was all the more critical due to a rule coming in force this year stipulating that the collective deal negotiated by the biggest union applies across the sector.

Deutsche Bahn was already contending with huge losses as demand for travel drastically shrank over the pandemic which erupted in March 2020.

It was also struggling to rebuild kilometres of tracks destroyed by deadly floods that struck western Germany in mid-July.

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