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ECONOMY

Works council officials says Opel needs European aid to survive

Opel, the German subsidiary of US car maker General Motors, will require European state aid to survive, the head of its works council said Monday amid reports the firm could go under with the loss of 25,000 jobs.

Works council officials says Opel needs European aid to survive
Photo: DPA

There will not be a “isolated German solution for Opel,” Klaus Franz told Deutschlandfunk radio. “If we find a solution, it will only be a European solution,” he added.

Opel needs more than €3.3 billion ($4.2 billion) to stay afloat, according to media reports, as auto sales have slumped around the world, especially in Europe. The company will go bankrupt by May or June if no state aid is forthcoming, mass circulation Bild reported over the weekend.

Before considering ploughing public money into the company, Berlin has insisted the company draw up a restructuring plan, which will be presented on Friday, according to Franz.

“A decision can only take place when a restructuring plan becomes available,” deputy government spokesman Thomas Steg told a regular briefing. “There can be no blank cheque.”

Nevertheless, politicians have raised hopes that some public money could be made available to save tens of thousands of jobs in Germany’s ailing economy. Finance Minister Peer Steinbrück told ARD public television Sunday there would be a high price to pay in terms of unemployment benefits and lost tax revenue if Opel’s 25,000 employees were made redundant.

“Would it not be more logical to provide aid (to the company) so that these people can continue to earn their living?” Steinbrück asked.

Frank-Walter Steinmeier, Germany’s foreign minister, appealed on Saturday for international aid for the carmaker.

“We have to look further than our own backyard. No car factory is capable of surviving alone in Germany or elsewhere,” he told the daily Rheinische Post.

General Motors has opened the door to spinning-off Opel as part of a broader restructuring plan which includes laying off 47,000 workers worldwide, slashing production and closing plants.

“We are on this path,” confirmed Franz.

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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