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Deutsche Bank says there is no credit crisis

The head of Deutsche Bank, Germany's biggest bank, has said that there is no German credit crisis, even though banks have been accused of not lending sufficiently to consumers and businesses.

Deutsche Bank says there is no credit crisis
A Leipzig shopping centre over the weekend. Photo: DPA

“There is no credit crisis in Germany,” Josef Ackermann told the broadcaster Bayerischer Rundfunk late on Tuesday, adding that in the past year, the amount of credit granted by German banks had increased by 13 percent. “We have given a lot of money,” Ackermann said.

He said that Deutsche Bank loans to small and medium-sized enterprises had grown from €36 to €40 billion ($45.5 t0 50.5 billion) in a year, in response to critics who say banks are favouring large companies.

“We have a real interest in reinforcing the SMEs,” Ackermann stressed.

With respect to the government’s banking rescue package, which many Germany banks, including his own, have not tapped into, the Deutsche Bank chief said people should be “happy” that some financial institutions did not need the aid.

“Owing to quick and efficient action by the government, many banks are not obliged to ask for the help,” he said.

On November 26, German chancellor Angela Merkel criticized banks for being too proud to tap Berlin’s €480-billion rescue package and lend more money to recession-hit firms.

Merkel said in a speech to parliament that banks should not refuse help based on “false prestige.”

Merkel had already likened banks to “cold blooded creatures in winter,” complaining that “they don’t move. They are alive but they don’t do what you expect.”

Meanwhile, the European Commission said Tuesday that it would take a softer line on state bailouts of troubled banks, after countries including Germany, France, Italy, Spain, the Netherlands, Sweden and Austria griped about its hardline handling of bailout schemes.

But on November 7, the European Central Bank’s latest survey of bank lending found it had tightened up as markets erupted this year and was set to tighten further in the near future.

The poll of 112 representative eurozone banks “indicate a significant increase in the net tightening of credit standards for loans to enterprises in the third quarter of 2008,” the ECB said. Conditions had also become more restrictive for households, but to a lesser extent, it added.

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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