Product owner vs development manager

A PO is responsible for creating the user stories, managing backlog, setting priority 

Partially correct.

A Product Owner is accountable for, not responsible for, Product Backlog management. Product Backlog management does include expressing the Product Backlog Items (Scrum does not say the format of Product Backlog Items - User Stories are one format), ordering the items, ensuring visibility and transparency into the Product Backlog, and ensuring that the Development Team understands the Product Backlog with sufficient detail. Some, or even all, aspects of Product Backlog management may be delegated, but the Product Owner always remains accountable.

The Product Owner does not necessarily set priority. A Product Owner may represent one or more stakeholders, each of which may have a different idea of priority of the work. The Product Owner is responsible for ordering the Product Backlog in a way that enables the work done by the Development Team to be maximized.

A development manager is responsible for HR activities relating to the development team . However, should not get involved with User Stories or deciding what exactly gets delivered

Scrum does not have a role called a "development manager". There may be an organizational need for someone to handle HR activities within the organization - performance management, training, career development, and so on. The advice I would have is to look at the different roles and consider the risks of having someone with this type of power or influence participating on the Scrum Team and how this may impact the team's ability to self-organize around the work and to have open, honest conversations and drive continuous improvement.

A development manager is responsible for HR activities relating to the development team 

Isn’t each member of the Development Team a development manager? In Scrum, why would anyone else be?

@ Thomas

A minor correction if true, but I believe this is what you meant:

The Product Owner is responsible for ordering the Product Backlog in a way that enables the value of the work done by the Development Team to be maximized.

Yes - Timothy Baffa is correct and I accidentally left a key phrase out and the insertion of "the value of" is absolutely correct.

I have seen this in many threads that there should be no Development Manager? Does it really happen in practice? If there is no Development manager, who takes care of HR stuff, appraisals, career paths, align with external stakeholders, top management, IT strategy..?

I have seen this in many threads that there should be no Development Manager? Does it really happen in practice? If there is no Development manager, who takes care of HR stuff, appraisals, career paths, align with external stakeholders, top management, IT strategy..?

If there is no Development manager, who takes care of HR stuff, appraisals, career paths, align with external stakeholders, top management, IT strategy..?

It's important for a Scrum Team to self-organize around the work that need doing. Can you think of any reason for that not to be the case here? Each of the three Scrum roles may have a perspective and interest in the various things you mention.

My interpretation and experience...

Scrum has no role for a Development Manager.  However reality is that most companies have hierarchical organization structures. Even though Scrum does not recognize titles in Scrum Teams, organizations often do.  So it is true that Scrum does not have Development Managers. 

In the organizations I have worked there have always been some type of Manager and above (Development, Quality Assurance, etc) that exist.  In the ones that truly embrace agile those individual's duties are limited to career development and reviews. There are usually a single Manager that has responsibilities for individuals on many agile teams. The "align with external stakeholders, top management, IT strategy.." are done by the agile teams as they are the ones closest to the work, have better knowledge of the problems and technology, have relationships with the stakeholders that are directly related to the work that is being done. 

In the organizations that are not fully embracing agile practices, the managers usually are included in the agile teams and are responsible for all of the things you mention.  In all of those situations the organization never fully achieved the benefits of agile because the manager did just that.  They managed everything that was being done and did not allow the agile teams to self organize,they interrupted the information flow thus reducing the transparency, and constantly wanted to fully architect solutions and build from the ground up thus eliminating the ability to deliver increments of functional product.

While outside of your question I will add that in both of the cases where managers exists there were constant issues with teams becoming self organizing and self managing. A large factor in those issues were the organizations being unwilling to change the compensation/reward systems.  Individuals were awarded raises and bonuses based on their individual performance instead of teams being rewarded for the success they had together. I am still waiting for that magic moment. 

Thanks every one for the clarification. Honestly I have a hard time imagining a team without a Development manager. In Belgium, it would be difficult, don't know about working cultures in other countries.

This article sums up what the role of a development manager in Scrum is realistically like in a larger company https://www.infoq.com/articles/scrum-management-deemer/