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Telekom to face irate shareholders in court

Deutsche Telekom will be in the dock from Monday in a case already rewriting German legal history, brought on behalf of 16,000 shareholders who feel cheated by the former public phone company.

Telekom to face irate shareholders in court
Photo: dpa

More than 800 law firms are representing plaintiffs reportedly claiming to have suffered a collective loss of €100 million euros ($157 million) because the company was overvalued at the time of its 2000 listing.

The participants and the potentially huge public audience were not expected to fit into a courtroom and therefore the Frankfurt high court will be sitting in a conference centre in southwestern Germany.

In addition to the venue, the law has also been changed to cope with the unprecedented case.

Since the German legal system did not allow US-style class-action suits in which a single plaintiff sues on behalf of numerous others, each of Deutsche Telekom’s accusers would have had to act on his own.

Faced with the prospect of thousands of individual claims, lawmakers in 2005 created a similar mechanism that is now being used for the first time — and sometimes referred to as “Lex Telekom.”

The main argument is simple — the company is accused of inflating the value of its real estate holdings and misleading potential shareholders.

Deutsche Telekom vigorously denies any wrongdoing and has said the case will serve to confirm that the listing process was beyond reproach and clear the company of any suspicion.

In 2000, it listed a third slice of its capital at a price of €66.5 per share.

Demand far exceeded supply. One of the plaintiffs, a pensioner from southwest Germany, bought shares for more than a million euros. And like millions of others he saw his investment evaporate when, in February 2001, Deutsche Telekom was forced to announce a drastic write-down of its real estate portfolio value, causing share prices to plunge.

There are expected to be 17 court hearings between Monday and the end of May. But the case could carry on for years and a second of its kind is in the pipeline as hundreds of shareholders prepare to sue over alleged irregularities in the listing of Deutsche Telekom capital in 1999.

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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