Merkel hails US decision to weakening ‘Buy American’ clause

Chancellor Angela Merkel of Germany, the world's largest exporter, on Thursday hailed the US Senate's decision to water down a "Buy American" clause from its stimulus plan, calling it a "good signal."

Merkel hails US decision to weakening 'Buy American' clause
Photo: DPA

“We think it is a good and important signal that this ‘Buy American’ clause was very greatly diluted,” Merkel said at a press conference here with the heads of several major economic bodies.

No country can implement stimulus packages without regard to other countries in the interconnected global economy, Merkel added, not even the “very, very big USA.”

On Tuesday, Merkel indirectly attacked the clause which forbade stimulus spending on a project unless all of the iron, steel and manufactured goods involved were made in the United States.

US lawmakers Wednesday approved by voice vote a softening in the clause’s language, but rejected a separate effort to strip it from the bill. Germany wants to have access to US markets for its goods and also wants to attract US products to its domestic markets, Merkel said.

She also joined with the heads of other major economic bodies to condemn protectionism, saying in a joint statement: “Despite today’s troubled state of

the global economy, all countries have a duty to resist protectionist tendencies.”

European Central Bank President Jean-Claude Trichet said earlier Thursday that protectionism was a “very, very important threat.”

Following a meeting with – amongst others – heads of the World Trade Organisation, Pascal Lamy, and the International Monetary Fund, Dominique Strauss-Kahn, Merkel said clinching a global trade deal was “all the more urgent” during the economic crisis.

Ministers have been struggling to agree a trade deal since talks were launched in Doha in 2001 and regular commitments to make progress and complete the round have come to nothing.


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.