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ECONOMY

Car scrapping bonus to be extended until year’s end

The German government is planning an extension of its popular Abwrackprämie, or scrapping premium, until the end of the year, a spokesperson said on Monday.

Car scrapping bonus to be extended until year's end
Photo: DPA

“It will be guaranteed that everyone who applies within the valid time period will receive money,” spokesperson Ulrich Wilhelm said in Berlin.

The programme, which offers Germans €2,500 to junk their old car and buy a new one, was initially allotted €1.5 billion, enough for 600,000 applications. But since it began in February after being approved for the German government’s second economic stimulus package, two-thirds of that sum have been spoken for.

“I haven’t the slightest indication that the terms would change,” Wilhelm said. Eligible applicants will get their money even if the number of applications exceeds the existing €1.5 billion cost, though Wilhelm said that there is no sign that the allotted budget wouldn’t be sufficient.

German Chancellor Angela Merkel and Foreign Minister Frank-Walter Steinmeier said last week that they would consider extending the scrapping bonus due to its “great success” in helping the nation’s ailing auto industry. Car sales have reportedly increased significantly since it came into effect on February 20.

Meanwhile, the online application system for the €2,500 bonus crashed on Monday – it’s very first day – according to German weekly magazine Der Spiegel. The problems were associated with “difficulties loading and filling out the reservation application,” the magazine said.

“We are having trouble with the system.” Federal Office of Economics and Export Control (Bafa) spokesperson Holger Beutel told Der Spiegel. The server wasn’t overloaded, rather “ a bottleneck in the Internet somewhere that we’re trying to root out,” he said.

The crash occurred despite comments by a spokeswoman for the economics ministry that the server was stable and equipped for 1,000 applications per second.

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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