Steinmeier says Europe warned US on financial crisis

German Foreign Minister Frank-Walter Steinmeier said during a visit to Wall Street on Wednesday that European states had long tried to convince the United States to approve measures that would have averted the current financial market crisis.

Steinmeier says Europe warned US on financial crisis
Steinmeier visiting Wall Street. Photo: DPA

Steinmeier offered his version of “I told you so” during a visit to the US Stock Exchange and said that Germany, Europe’s biggest economy, had run into an American brick wall when it called for more checks on international finance.

“I must say that we, and the finance minister (Peer Steinbrück) in particular, were right in the recommendations that we have been making for two years,” he told reporters on Wall Street.

“First of all, to ensure more transparency on international finance markets and secondly, to demonstrate more sensitivity to risk.”

Steinmeier said he was pleased to hear in his talks with US bankers and traders this week on the sidelines of the UN General Assembly’s annual debate that there was now “strong support” for market regulation to avert crises like the current one.

“It is a discussion that we have had for a long time in Europe, that the completely unregulated parts of the international financial market must be more closely monitored and that we must try to reach an agreement on common regulations,” he said. “There is agreement here on that now.”

He cited greater monitoring of new products available on finance markets and the need to ensure banks have sufficient capital as areas where there was now growing international consensus.

“All of this is going to stay on the agenda for a long time,” Steinmeier said, noting the ripple effect was being felt in leading emerging markets such as China and Russia. Steinmeier said the crisis was dominating the UN General Assembly debate and said African leaders in particular were concerned that the tightening of credit in the West would force cuts in development aid.

He said it was too soon to tell whether their fears were justified but noted that aid was “not significantly based on the financial markets” although their role in such budget earmarks had grown in recent years. Germany headed the Group of Eight industrialized nations last year and

advocated greater transparency in international financial transactions, especially in hedge funds. But it was thwarted by US and British resistance.

US lawmakers have proposed a $700-billion rescue package to avert calamity in the financial market after the bankruptcy of investment firm Lehman Brothers and an 85-billion-dollar aid package for insurance and financial giant AIG last week.


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.


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.