Germany blasts EU over bank bailouts

German and Swedish finance ministers blasted the European Commission on Tuesday for being too "bureaucratic" in assessing whether state bailouts of troubled banks are in line with EU rules.

Germany blasts EU over bank bailouts
Photo: DPA

“You shouldn’t react to such a financial crisis in such a bureaucratic manner,” said German Finance Minister Peer Steinbrück as he arrived for talks with his EU counterparts.

“We need to restore the credit channel. The commission has not been constructive,” Swedish Finance Minister Anders Borg said. “I do think that we have to pull off these legions of state aid bureaucrats.”

In the face of the worst crisis in generations, many EU goverments have rushed to prop up banks through measures ranging from nationalisation to recapitalisations and loan guarantees.

The European Commission, the European Union’s state aid watchdog, has vowed to review state support for troubled banks more quickly than normal as well as be more flexible than usual.

However, Brussels has drawn fire for requiring too many guarantees that competition would not be stifled by the bailout plans.

“I do think that we have a risk of a huge policy mistake,” Borg said.

The commission’s misgivings over a massive capital infusion into German bank Commerzbank has grated on nerves in Berlin.

Over the weekend, a cloud of uncertainty hung over French plans to help troubled banks amid reports that Brussels was preparing to reject them, which it later denied.

EU Competition Commissioner Neelie Kroes, who is in chrage of reviewing state aid, was to meet with EU finance ministers during their meeting in Brussels.


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.