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ECONOMY

Steinbrück slams US for sparking global financial crisis

German Finance Minister Peer Steinbrück on Thursday slammed the United States for allowing its lax regulation to spark a worldwide financial crisis.

Steinbrück slams US for sparking global financial crisis
Photo: DPA

Speaking to parliament, Steinbrück said the United States will cease to be the economic “superpower” because of the crisis, which he blamed on Washington’s “laissez-faire” attitude.

“The USA is the root of the crisis and it is the focus of the crisis,” he said. “The long-term consequences of the crisis are not yet clear. But one thing seems likely to me: the USA will lose its superpower status in the global financial system.”

Steinbrück also said the world financial system would become multi-polar and less dependent on the United States.

“Wall Street will never be the same again. A few days ago there were two Mohicans left remaining among the investment banks. Now they no longer exist,” Steinbrück said, referring to the change in status of Goldman Sachs and Morgan Stanley into bank holding companies.

He added that stronger international regulation agreed upon at the international level was necessary to “re-civilize” financial markets so that such a crisis was never repeated.

“The world will never be the same as it was before the crisis. The whole world over we must adjust ourselves to lower rates of growth and – with a time lag – unfavourable developments on labour markets,” he said.

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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