Merkel demands international rules for financial markets

German Chancellor Angela Merkel called on Friday for a framework of international market rules – in place of national regulations – to prevent financial crises like the one now threatening the world economy.

Merkel demands international rules for financial markets
Photo: DPA

“The economy is in the service of people,” not the inverse, she said, and the role of politicians was to show this “clearly.”

Merkel who heads the conservative Christian Democrats, said she was convinced that “the (German) social market economy model is the best rule imaginable in which people can fulfil themselves” in a spirit of “solidarity between the weakest and the strongest.”

Speaking in Dresden shortly before a meeting in Washington of G7 finance ministers on the crisis, she said: “We feel more than ever in these times that it is no longer enough to have national rules. We need rules not merely for Europe but also internationally.”

Finance ministers and central bank governors from the Group of Seven leading industrial countries were to meet to discuss steps taken by each country and ways of strengthening cooperation, US Treasury Secretary Henry Paulson had said.

Merkel’s plea for greater regulation and coordination was backed up by German Finance Minister Peer Steinbrück in Washington as he prepared to attend the G7 meeting: “We need global rules for the markets.”

Germany is of the view that the United States and Britain did not take on board its calls in the last year for revised market rules.

“Today, certain things can no longer be decided at national level and that is why such rules must be put in place,” she said. This was necessary to ensure that “a financial market crisis such as we are experiencing is not repeated.”

Berlin reportedly mulling bank plan

Germany is reportedly working on a plan to part-nationalise the country’s banks along the lines of a similar British move this week, daily Die Welt said on Friday without saying where it got the information.

The plan involves a capital injection of more than €10 billion ($13.5 billion) in return for equity stakes in German banks as well as more than 100 billion euros to guarantee loans between banks, the newspaper said in a pre-release of an article to be published on Saturday.

The paper reported Chancellor Merkel’s cabinet will decide on the plan in the coming days although there is considerable opposition from within Merkel’s conservatives, who are in a ruling coalition with the centre-left Social Democrats.

A German government spokesman declined to comment on the report.

Britain said Wednesday it would make £50 billion ($64 billion) of taxpayers’ money available to buy shares in the country’s banks in return for fresh capital. The three-part British package also makes available £200 billion in short-term loans and another £250 billion to guarantee loans between banks.


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.