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BUSINESS

Germany wants cash back from Nokia

Germany’s research ministry has joined calls to demand a return of subsidies from Finnish mobile phone maker Nokia which is under fire from Germans for moving production to Romania.

Germany wants cash back from Nokia
Props during a protest against Nokia in Bochum. Photo: DPA

Germany’s Federal Research Ministry on Saturday confirmed media reports that they are asking back for subsidies worth €4 million from embattled Finish handset maker Nokia.

A spokeswoman for the Ministry said there were “huge doubts” that Nokia’s use of the subsidies to promote the development of antennas and wireless communication networks was still justified after the company announced it was closing its plant in the city of Bochum and moving to Romania instead. The Ministry has sent a letter to the company urging it to explain which patents stemmed from the projects and which German plants profited as a result.

If Nokia fails to come up with a “substantial answer,” it will have to pay back the subsidies, the spokeswoman said.

The state of North-Rhine Westphalia where the Bochum plant is located has already demanded the return of subsidies worth €41 million. State authorities accuse the company of violating the conditions of its agreement for receiving subsidies from the state because it did not create the minimum number of 2,800 permanent jobs at the plant that had been promised under the deal.

Nokia sparked national outrage in Germany when it announced in January that it was closing its Bochum plant and moving to low-cost Romania by mid 2008. Around 2,300 Nokia employees in Germany will be affected by the closure.

Nokia claims it has become too expensive for the company to continue manufacturing mobile phones in Germany. The move prompted some politicians to call for a boycott of Nokia phones.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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