European integration threatened by 'Brexit', refugee crisis: IMF

      

This Oct 6, 2015 IMF file photo shows International Monetary Fund (IMF) Economic Counselor Maurice Obstfeld as he answers questions during the World Economic Outlook press conference at the 2015 IMF/World Bank Annual Meetings in Lima, Peru. 

PHOTO: AFP

NOV 11, 20156:42 AM

[WASHINGTON] The migrant crisis and Britain's threat to pull out of the European Union pose threats to European economic integration, the IMF's new chief economist told AFP in an interview.

"I worry a lot about the strong trend in Europe to pull back from market integration," said Maurice Obstfeld, a former economic adviser of US President Barack Obama.

"One factor is the refugee crisis, where there's a lot of pressure on open borders and workers' mobility," he said.

"There is a lot of political pressure coming from the extremes which could undo a lot of the economic integration that has occurred." But there are other important challenges, he added.

"Another obvious one is Britain wanting to possibly leave the European Union." Amid complaints in Britain that the country's benefits in the 28-member EU are much less than what it commits to as a member, Prime Minister David Cameron has promised to hold a referendum on membership by the end of 2017.

On Tuesday, Mr Cameron warned that Britain could leave the EU if it does not get the reforms it wants from the organisation.

AFP

      

New IMF economist sees major challenges to global economy

NOV 11, 20157:51 AM

[WASHINGTON] Just a few months into the job, the challenges are already piled high for the International Monetary Fund's new chief economist Maurice Obstfeld.

There's the Federal Reserve's plan to raise interest rates - which poses a deep test to economies worldwide. There's Europe's migration crisis. And not to be forgotten is Britain's threat to leave the eurozone when the region's economy is already frail.

That's all on top of slow global economic growth and climate change.

In an interview with AFP, Obstfeld, an economic advisor to US President Barack Obama before being named to the IMF, spoke of a "nightmare scenario" in which various pressures conspire to weaken the economic bonds of Europe.

"I worry a lot about the strong trend in Europe to pull back from market integration," he said.

"One factor is the refugee crisis, where there's a lot of pressure on open borders and workers' mobility," he added.

"There is a lot of political pressure coming from the extremes, which could undo a lot of the economic integration that has occurred." Speaking in his IMF office just a few blocks from the White House, Mr Obstfeld, 63, said other pressures were also stressing the 28-country EU bloc.

"Another obvious one is Britain wanting to possibly leave the European Union," he said, raising the "Brexit" issue that is increasingly making headlines in Europe.

Mr Obstfeld arrived at the Fund in September to replace French economist Olivier Blanchard, who held the chief economist job throughout the unprecedented financial crises in the United States and Europe.

Mr Obstfeld, whose position entails advising the management and member countries of the global crisis lender on economic conditions, faces some different challenges from Blanchard, particularly the impact of the sharp slowdown in the world's second largest economy, China.

An international economics specialist who studied at Cambridge and MIT and taught at Harvard and the University of California, Berkeley, Obstfeld has to keep watch on multiple hot issues and broader long-term trends.

"Climate change is a major economic threat. Warming reduces productive efficiency, climate disasters can be deeply disruptive to economic activity," he said.

The Fund looks at how climate change will hit the economies and budgets of countries impacted the most, and tries to help them prepare.

With an upcoming global summit in Paris on action against warming, Mr Obstfeld said countries need to understand it is a collective action problem.

If it isn't solved, he said, warming "can threaten their population and impose macroeconomic risks." The focus of the COP21 summit is obtaining pledges for carbon emissions. Mr Obstfeld said limits can have adverse effects for some industries.

But, for one, many industries essentially get a subsidy by being able to pollute without paying for it, he added. In addition, he said, implementing carbon dioxide limits "stimulates a lot of innovation and a lot of investment." He said incentives need to be changed to favor emissions reduction, including essentially putting a tax on carbon. That "would be the most efficient way to reduce emissions at the lowest cost," he said.

"Unfortunately, many countries, especially the United States, don't want to put in taxes. But that's really the efficient way to do it." At the same time, Mr Obstfeld has his eye on US plans to tighten monetary policy even while elsewhere, including Japan and the EU, central banks need to loosen theirs, he said.

He said the US Federal Reserve, expected to raise interest rates in December for the first time in nine years, might be better holding off a little longer.

The risks of the Fed acting sooner "are certainly higher," he said, adding: "I don't see huge risks at all to waiting." "If for any reasons the Fed had to reverse that first interest rate increase, markets would interpret it as a big deal." As for the Fed's counterpart in the eurozone, he said the European Central Bank "should be following the strategy of expanding asset purchases and lowering the interest rate."

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Rising cost, regional rivals weaken Singapore's medical tourism appeal

Increasingly challenging for Singapore to maintain its position as leading medical tourism hub in South-east Asia

By

Claire Huanghuangjy@sph.com.sg@ClaireHuangBT

The Raffles Hospital logo, operated by Raffles Medical Group Ltd., is displayed on the exterior of a hospital building in Singapore, in this 2002 handout photograph released to the media on Jul 5, 2013. 

PHOTO: BLOOMBERG

 Medical receipts

NOV 11, 20155:50 AM

Singapore

RISING cost of treatment and growing competition from regional rivals are hitting the once-bullish medical hospitality sector in Singapore, which is already experiencing a decline in the number of medical tourists coming here.

While the numbers vary according to the different players, industry observers speaking to The Business Times said they have generally seen a drop in the number of medical tourists for some time now, particularly from traditional markets such as Indonesia, Malaysia and Brunei. While new markets such as Myanmar and Bangladesh are developing, it isn't enough to make up for the loss of medical tourists from the traditional markets.

Rising cost is seen as a key factor deterring foreign patients from seeking treatment in the Republic. This is exacerbated by the relatively stronger Singapore dollar, in relation to other regional currencies.

In a report earlier this year, BMI Research pointed out that it will be increasingly difficult for Singapore to maintain its position as the leading medical tourism hub in South-east Asia, given cost issues. A heart bypass in Singapore costs 41 per cent more than in Thailand and 106 per cent more than in Malaysia, it noted.

Jeremy Lim, partner and head of the Asia Pacific health and life sciences practice at Oliver Wyman, said that variability in pricing has heightened concerns of unanticipated costs resulting from complications and overlooked charges. Coupled with high transport and accommodation costs here, medical tourists have been put off.

Based on the 2013 annual tourism statistics by the Singapore Tourism Board, medical receipts grew from S$777 million in 2009 to peak at S$1.11 billion in 2012, before dropping 25 per cent year-on-year to S$832 million in 2013.

Regional countries are also narrowing the gap with Singapore.

Countries like Malaysia and Indonesia, which used to be plagued by the lack of medical capabilities and patient confidence, are moving up the ladder with improved healthcare infrastructure and services. As a consequence, the impetus for seeking treatment in Singapore has diminished, said Dr Yong Chern Chet, healthcare sector leader at Deloitte Southeast Asia.

This shift in the regional medical tourism landscape is also observed by David McKeering, Singapore healthcare leader of PwC Southeast Asia consulting, who said Singapore's key competitors in the region include Thailand and Malaysia.

Malaysia's 2020 medical tourism target is 1.9 million foreign patients, up from 770,000 patients in 2013, said Mr McKeering, who noted that in recent years, 18 hospitals in Thailand and eight hospitals in Malaysia have gained JCI (Joint Commission International) accreditation, which is regarded as the gold standard.

"Specialist services were previously a strong selling point for Singapore, but with more international providers branching into this area, this is no longer such a compelling competitive advantage," said Mr McKeering.

One way to respond to this is to "fix the unpredictability of pricing and provide bundled prices", he said, adding that Singapore now needs to move even higher up the value chain and focus on skills and infrastructure and differentiated medical procedures which are more price inelastic.

The less bullish outlook here has led healthcare players to look further afield for growth. Several have moved to capture overseas markets with bigger populations so as to generate more revenue. This has led to a flurry of joint ventures and mergers and acquisitions (M&As) in the region.

For example, Singapore and Malaysia-listed IHH Healthcare Berhad, the world's second largest healthcare operator by market capitalisation, has been particularly active.

In March, it bought a 51 per cent stake in India's Continental Hospitals. Five months later, it acquired a 73.4 per cent stake in India's Global Hospitals for 12.84 billion Indian rupees (S$0.27 billion). This year, IHH also announced two joint ventures - one with Shanghai Broad Ocean Investments in October and another with Shanghai Hongxin Medical Investment Holding in July.

"Going forward, we will continue to expand in markets with rapidly growing demand for quality private healthcare, especially China, India and Asean, while maintaining our leadership positions in our home markets of Malaysia, Singapore and Turkey," said Dr Tan See Leng, managing director and CEO of IHH.

However, he said the group remains upbeat about Singapore's long-term prospects as a medical hub given the well-regulated healthcare environment and availability of high quality medical staff and equipment.

Raffles Medical Group has also made clear its ambitions of expanding into places such as China and Vietnam as the company aims for its overseas operations to contribute more than half of total revenue as soon as possible.

Healthcare players have started to recognise the benefits of consolidation - for price negotiations with suppliers and staffing optimisation, for example, said Dr Lim, who cautioned that this is not necessarily beneficial to Singapore. "Singapore could be hurt in three ways - skills and expertise migrating outside Singapore, management attention turning to where the revenues and opportunities are, with less interest in Singapore, and finally the availability of good jobs in Singapore would diminish."

There is still upside for local players, but they need to be alert to shifts in demand.

"Knowing exactly where, when, why and how their patients come to them for healthcare services will enable healthcare groups to make strategic business decisions with subsequent operational tweaks to ensure that there is a steady state of demand for their services," said Dr Yong, who noted China's recent scrapping of the one-child policy could prove to be a boost for those in the field of reproductive medicine.

    
 

Raising the productivity sales pitch, on the ground

Tharman and other ministers have been reaching out to a myriad of businesses, stressing the need for greater innovation and efficiency

By

Kelly Taykellytay@sph.com.sg@KellyTayBT

Singapore's first on-site centralised dishwashing facility at IMM Building which he visited this week. 

PHOTO: SEAH KWANG PENG / THE STRAITS TIMES

NOV 11, 20155:50 AM

FROM dishwashing facilities to supermarket chains, Deputy Prime Minister Tharman Shanmuga- ratnam's recent site visits have underscored the government's stance on restructuring: No sector, company, or task is too small to apply innovative techniques and raise productivity.

Together with other ministers overseeing the economy, Mr Tharman - who is Coordinating Minister for Economic and Social Policies and chairman of the National Productivity Council - has been reaching out to a myriad of businesses on the ground, stressing the need for greater efficiency and a more manpower-lean workforce.

This is particularly in the domestic services sector, where productivity growth has been disappointing.

In doing so, Mr Tharman and his team of ministers - Heng Swee Keat for finance, and Lim Hng Kiang and S Iswaran for trade and industry respectively - have emphasised that innovation should not only be centred on a few individuals, companies, sectors, or technologies; it must involve all firms including smaller ones, and those in traditional trades.

Innovation is also now being seen in every sense - and not just through technological advancements - such as developing new brands, detecting new tastes in a new generation of customers, and breaking into markets abroad.

Said Mr Tharman recently: "We must focus more on real innovations, not just simple solutions such as purchases of basic IT devices. For the government's part, we will step up support for innovation, through targeted help for companies, rather than focusing on broad-based support for basic solutions."

This means a renewed focus on spotlighting productivity enhancements that result in tangible improvements - no matter how small or seemingly mundane, and whether through technology, workflow enhancements, or shared resources.

Take, for example, the task of dishwashing. Just this Monday, Mr Tharman visited Singapore's first on-site centralised dishwashing facility at IMM Building. Spanning over 7,000 sq ft of warehousing space, its seven automated dishwashing lines boast the capacity to consolidate dishwashing for 70 to 100 food & beverage outlets, resulting in substantial productivity and manpower savings of 50-80 per cent in manhours.

In the weeks before that, Mr Tharman also commended supermarket chain Cold Storage and 22 local Indian restaurants for adopting efficiency-boosting practices. For the former, he noted that the integrated storefront and back-end cash management system at Cold Storage's Dunearn Road outlet has saved costs and manpower. The latter were applauded for investing in central processing units, which allow the restaurants to aggregate demand, purchase in bulk, and therefore reap economies of scale.

Minister for Finance Heng Swee Keat, too, has been stressing the need to stay competitive at just about every event he has graced - especially given his new role as chairman of the Committee on the Future Economy, formed to ensure that Singapore remains competitive.

At the Semi-Centennial Leadership Conference organised by the Singapore Business Federation, Mr Heng said Singapore cannot simply produce what the world is producing, and expect to command a premium or sustain its competitive edge.

"We have to produce what the rest of the world is not producing, or at least, not much of. To do so, we have to build deep capabilities and linkages, in our companies, in our industries and in our economy, to create new products and deliver better solutions, in cost-effective, innovative ways," stressed Mr Heng.

This is in contrast to a value-adding economy, which proposes improvements to add incremental value to the products, services, or ideas that already exist.

But even as the government asks local companies to be ambitious when it comes to innovation, it is also showing its own willingness to laud even the tiniest of micro-enterprises for their improvements in productivity.

Indeed, at the recent Singapore Heartland Enterprise Star Award gala dinner - an event Mr Tharman called the "most meaningful" of all business awards - the Deputy Prime Minister lauded homegrown herbal hair treatment firm, Bee Choo Origin, for being a so-called "old economy" business that has gone global. In particular, Mr Tharman praised Bee Choo Origin for tapping on SPRING's Capability Development Grant for a project that led to a significant reduction in customers' waiting time.

Said Mr Tharman: "We will spare no efforts to support innovation by SMEs (small- and medium-sized enterprises). We will continue to review our schemes to ensure that they are easily accessed by such businesses, no matter how small. But we will also want to make sure that our schemes are not for those seeking to take advantage of government support without really upgrading business methods."

This constant refinement of the restructuring drive - both in terms of its policy and sales pitch - is surely a welcome move. Where will the ministers turn up next?

    
 

IMF says risks higher in an early Fed rate hike

Maurice Obstfeld, Economic Counsellor and Director, Research Department of IMF delivers the International Monetary Fund's media briefing on the world economic outlook during its annual meeting in Lima, Peru on Oct 6, 2015. 

PHOTO: REUTERS

NOV 11, 20156:46 AM

[WASHINGTON] An early interest rate hike by the US Federal Reserve would involve higher risks than would waiting a bit longer, the chief economist of the International Monetary Fund told AFP.

"I'm not sure that the risks of acting are gigantic, but they're certainly higher," said Maurice Obstfeld, in an interview. "I don't see huge risks at all to waiting." "If for any reasons the Fed had to reverse that first interest rate increase, markets would interpret it as a big deal."

The Fed has made clear that it could undertake its first rate hike in more than nine years as soon as December, a move it has repeatedly put off as US and global economic growth has remained tepid.

The prospect of the key federal funds rate being lifted from near zero, where it has sat since the end of 2008, has roiled markets as it would mean higher borrowing costs for many governments and businesses around the world which are already struggling with slower economic growth.

The Fed has not yet decided, and what path it will take will depend on the economic data that comes out before its December 15-16 meeting, Obstfeld acknowledged.

But continued questions about either of the Fed's key guideposts - employment or inflation - "could justify waiting", he said.

Meanwhile the Fed's counterpart in the eurozone should continue on an easing path, he argued.

The European Central Bank "should be following the strategy of expanding asset purchases and lowering the interest rate," he said.

"Inflation remains weak, unemployment remains high, growth remain low. Any policy options are very welcome."

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United We Fall (Video)

United We Fall

2010 , 

One has to look at the effects of the free trade agreements between US and Canada. They've been good for some powerful sectors and not at all good for poor, working people, for those that are not benefiting from corporate profits. So in Canada, for example, since they've signed the bilateral free trade agreement with the United States, two thirds of the Canadian families have experienced a decline in their real incomes.

Also the North American free trade agreement has displaced 2 million Mexican peasant farmers from their land. Some of them have migrated to cities and about half a million every year try to enter illegally into the United States to find work. So it's not so good for the people at the bottom of the social ladder.

One of the major concerns that Canada and Mexico had about NAFTA was that it might open their capital to being taken over by US multinational corporations. If you are a large corporation and you're given national treatment within any country you're automatically given the rights of a citizen within that nation and by that, as a citizen, you're allowed to challenge the laws in that country. And these are the provisions that allow a corporation to sue a national government if it feels that is not getting the treatment that would be entitled to under NAFTA.

United We Fall is a documentary about the North American Union and for years this topic has been debated in the news and in political circles as being a possible future for North America. In recent years, the mood has shifted and a rift is developing between those who want a Deeply Integrated North American Community, and those who wish to retain their national sovereignty. This film takes a look at both sides by interviewing both insiders and activists who have been at the heart of this heated debate. The film also looks to the broader agenda of building a world government and its implications.

Petroleum, strong dollar depress US import prices

NOV 10, 201511:56 PM

[WASHINGTON] US import prices fell more than expected in October as the cost of petroleum and a range of goods declined, a sign that a strong dollar and soft global demand continued to exert downward pressure on imported inflation.

The Labor Department said on Tuesday import prices dropped 0.5 per cent last month after a revised 0.6 per cent decline in September. Import prices have now fallen in 14 of the last 16 months.

Economists had forecast import prices slipping 0.1 per cent after a previously reported 0.1 per cent fall in September.

In the 12 months through October, prices tumbled 10.5 per cent. Dollar strength and a sharp decline in oil prices have weighed on inflation, which is persistently running below the Federal Reserve's 2 per cent target.

Weak inflation pressures, however, are unlikely to deter the US central bank from raising interest rates next month after job growth surged in October and the unemployment rate fell to a 7-1/2-year low of 5.0 per cent.

A tightening labor market could give Fed officials confidence that inflation will gradually move toward its target.

REUTERS

    
 

Samsung's supply of geeks are looking for a new boss: themselves

An exterior view of the Samsung Electronics headquarters in Seoul, South Korea, on Oct 29, 2015. 

PHOTO: EPA

NOV 10, 20156:49 AM

[SEOUL[ Passengers stepping off the high-speed train in Pohang station in South Korea are greeted enthusiastically by a dog. It's a robot.

In the station concourse, five little automatons dance to a song by K-Pop girl band Exid.

This is South Korea's steel city, the birthplace of Posco which fed the country's industrial rise to become the world's biggest producer of crude steel by the end of the last century. Yet, nowhere better illustrates the efforts to wean the country off its dependence on the giant companies that transformed the economy.

Posco was part of the industrial plan championed by former dictator Park Chung Hee, which gave rise to the family-run conglomerates, called chaebol, that still dominate the economy, groups like Samsung and Hyundai. Now his daughter, President Park Geun Hye, is trying to roll back their influence and encourage high-tech entrepreneurs to create a "second miracle on the Han river."

"What is of paramount importance if Korea is to better compete with the rest of the world is to enable young Koreans with creative ideas to freely take on the challenge of starting a business," Ms Park said on Sept 25 in written answers to Bloomberg News.

"Groundbreaking changes are sweeping across our startup and venture communities." Merging Visions She said that the number of newly established business entities exceeded 80,000 for the first time last year, when venture investments reached the highest level.

The visions of Ms Park and her father merge in Pohang. Here are steel mills, chemical plants and shipyards. Here also are Posco's Pohang University of Science and Technology, a light accelerator, one of the country's biggest clusters of scientific research centers, and a robot museum.

A block away from the museum is a "creative economy" center, one of 17 startup incubators that are part of Park's US$18-billion program to boost entrepreneurship.

South Korea isn't the only developed country trying to replicate Silicon Valley's cauldron of innovation, but the efforts of successive presidents to boost science and technology give it an unusual edge. The country has raised spending on research and development every year since 1991, lifting it 20- fold in the time to US$15 billion, and putting it first in R&D in the Bloomberg Innovation Index.

It is also one of the most-wired nations on Earth. It has the sixth-highest number of fixed broadband subscribers per 100 people among OECD nations and the fastest Internet download speed.

Yet much of that success is due to the very entities that have been criticised for stifling creativity and innovation. Companies like Samsung Electronics Co, the world's biggest maker of smartphones and memory chips, have traditionally creamed off the best graduates from the top colleges every year.

"Big corporations were safe throughout most of the 20th century, but they have been challenged by global competition, the drive for low wages, international mergers and acquisitions and the growth of multi-dimensional data analytics," says John Howkins, a British consultant who coined the term "creative economy" in his 2001 book. "It is now safer for someone to take charge of their own destiny, develop their personal portfolio of skills and move between a cluster of employers and clients." With South Korea's big corporations increasingly being squeezed by competitors in China, some of the nation's brightest minds are heeding that call.

Across the street from the crucible-shaped university library are the offices of StradVision, a company started by former Samsung SDS and Intel Korea engineer Jun Bong Jin, who is trying to crack one of computing's hardest goals: how to get robots to recognize things by sight.

Mr Jun, who inhaled carbon monoxide till he passed out as an experiment as a small boy, has assembled a group of coders to build software that won the most prizes in a competition in France this year, sponsored by the International Association for Pattern Recognition.

"I quit Intel because I wanted to work freely," Mr Jun said, wearing a T-shirt, as one of his employees showed up for work at noon. "As long as you love what you do, what you wear, when you show up and how you work don't matter." Those around him typify the growing appeal for many young Koreans of this approach. In a massage chair in the center of the room, algorithm engineer Sung Myung Chul is laughing at a joke on his mobile phone, while former computer-game developer and professional rapper Cho Kuk Hyun types nearby on two keyboards at once.

Others are busy hunched over laptops or testing the software with Google Glass: hardware architect Lee Su Hyun, who was shocked with electricity as a boy while experimenting with a wall socket and a pair of metal chopsticks; coder Lee Myung Jin, who ran a fried-chicken restaurant at college; and Jun's five- year-old son, who's at a desk watching the Disney Channel.

They share the space with a hamster, two stag beetles and a tank of small fish (a pet chicken was exiled for being too smelly.) One of Mr Jun's biggest challenges is the one that bedevils entrepreneurs everywhere - funding. Unlike the startups in the government-backed center next door, he's relying on his savings because it gives him more control.

Rejected by Investors Finding investors in South Korea isn't easy. Mergers and acquisitions account for only 2 per cent of how investors make a profit on backing start-ups, deterring them from looking for the next YouTube or WhatsApp. And it takes an average 12 years for a South Korean venture to list on the stock exchange.

Kim Hyoung Ki, chief executive officer of biotech company Celltrion, which now leads the tech-centered Kosdaq index, recalls being rejected by every South Korean investor he visited when his company decided to quit contract manufacturing in 2009.

"We were taking a chance by trying to build our own product, but it scared investors away," Mr Kim said in his office in Songdo, west of Seoul. He then produced the fountain pen used to sign a deal in 2010 with Singapore's Temasek Holdings. "We were wading through a valley of death, and we found relief overseas." Ms Park pointed to investment from companies like Cisco, Intel and SoftBank as a sign her policy is working. Her "creative economy" centers operate in collaboration with major companies, including the chaebol.

Pop Music Competitive small-to-medium sized companies and invigorated local economies are essential to address the economic challenges facing the country, Samsung Electronics said in an e-mailed replied to questions. Samsung welcomes entrepreneurship and already operates an internal "Creative Lab" for staff to challenge themselves, it said.

Seoul-based Woowa Brothers is one beneficiary, drawing US$36 million from a Goldman Sachs consortium last year for a smartphone app that delivers everything from pork hocks to sashimi. Founded in 2010, the company plays pop music in its office and has a stool between every pair of desks so the boss comes to employees instead of summoning them.

As he sweeps floors and wipes desks with his staff in a weekly company ritual, 40 year-old jeans-clad executive Choi Jung Yi sums up why Korea's young talents are increasingly abandoning the traditional path.

"When my parents were young, Korea's economy was booming like a rocket," said Mr Choi. "It no longer is. Just working hard doesn't give you financial stability, let alone affluence. Which do you think has better odds - becoming a Samsung Electronics executive or succeeding with your own startup?"

BLOOMBERG

    
 

Former West German Chancellor Helmut Schmidt dies at 96

      

NOV 10, 201511:20 PM

[BERLIN] Former West German Chancellor Helmut Schmidt, who led the country for eight years at the height of the Cold War, has died at the age of 96, his office in Hamburg said on Tuesday.

Schmidt was West Germany's second centre-left Social Democrat (SPD) chancellor from 1974 to 1982 and a leading proponent of European integration.

Media reported that Schmidt caught an infection after having surgery to remove a blood clot from his leg about two months ago.

In recent years, Schmidt, a chain smoker, was a frequent talk show guest and he commanded more respect as an elder statesman than he did when he led the country. "I am deeply saddened by Helmut Schmidt's death. He was an outstanding chancellor, his death is a loss for Germany and Europe," tweeted European Parliament head Martin Schulz, a Social Democrat.

As chancellor, Schmidt tried to balance a conciliatory tone towards Moscow and Communist East Germany with a strengthening of West Germany's standing within NATO and Europe.

Schmidt, who had served as finance minister from 1972 to 1974, was in office at the time of West Germany's 'economic miracle' although he tried to make some welfare cuts as the situation worsened.

One of his biggest challenges was dealing with the ultra-left Red Army Faction (RAF), whose attacks on the political and business establishment included a wave of killings and kidnappings that peaked in the 'German Autumn' of 1977.

He took over as chancellor after his SPD ally Willy Brandt resigned after his close aide Guenter Guillaume was uncovered as an East German spy. Schmidt was succeeded by conservative chancellor Helmut Kohl.

Born in the northern port of Hamburg in 1918, Schmidt fought in World War Two and was taken prisoner by the British.

He was married for 68 years to Loki, his childhood sweetheart. She died in 2010. They had a son who died in his first year and later a daughter.

REUTERS