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ECONOMY

Opel teeters on the brink

German carmaker Opel is reportedly threatening to close three of its plants in Europe and sack 11,000 people as it teeters on the brink of bankruptcy.

Opel teeters on the brink
Photo: DPA

According to the weekly Der Spiegel on Saturday, a plan submitted to government officials last week calls for the closure of factories at Bochum in western Germany, Eisenach in the east and Antwerp in northern Belgium.

The aim is to save some $1.2 billion (€949 million) in staff costs, Der Spiegel said. An alternative proposal would be to cut only 3,500 jobs but lower wages across the board, it added.

General Motors and its German subsidiary Opel are also reportedly readying themselves for bankruptcy, Die Welt reported. The newspaper said the companies have hired high-powered insolvency lawyers in case the German government doesn’t come to the rescue.

Opel has also raised the amount of loan guarantees it wants from the government to €4 billion, the weekly news magazine Focus reported. The company had originally asked for €3.3 billion worth of guarantees to help it restructure and survive Germany’s worst recession since World War II.

The companies have hired three law firms, including the Heidelberg insolvency specialist firm Wellensiek, to provide “pre-bankruptcy” advice, Die Welt reported.

The move comes as talks with the German government for loan guarantees to help the storied German brand appear to have stalled over government displeasure with the restructuring plan Opel put forward. The 217-page plan reportedly lacks specifics and instead includes glossy car advertisement photos and sales slogans.

“The Opel leadership has recognised that their restructuring plan can be nothing more than a first proposal,” Dagmar Wöhrl, the State Secretary of the Economy Ministry told Die Welt. The newspaper reported that at least 10 to 12 major questions remain open before the government can come to a decision about whether to rescue the company.

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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