SHARE
COPY LINK

SECURITY

BND sees economic crisis boosting China

The global financial crisis is resulting in a "geopolitical metamorphosis" that is likely to boost China's standing in the world, the head of Germany's foreign intelligence service said Tuesday.

BND sees economic crisis boosting China
Photo: DPA

“If China recovers more quickly than other (countries), its weight will increase in the region compared to other players,” Ernst Uhrlau, head of the Bundesnachrichtendienst (BND), told the Handelsblatt daily in an interview.

“And internationally, if China becomes the motor of the (global) economic recovery, the country will … have greater influence on the rules of the game. We are most likely experiencing a geopolitical metamorphosis.”

China has doubled its stated defence budget since 2006 and in March announced it would spend 480 billion yuan ($70 billion) in 2009, a 14.9-percent increase on the year before. Experts say actual spending is considerably higher.

The United States, Japan and their allies such as Germany have long expressed concern about China’s military build-up and what they see as a lack of transparency about the intent behind the expansion.

In March a Pentagon report said China’s pursuit of sophisticated weaponry was altering Asia’s military balance and could be used to enforce its claims over disputed territories.

In February the BND, whose job is to inform the government about security and foreign policy issues, compiled a secret report on the possible outcomes of the global downturn, the Handelsblatt said. It laid out three different scenarios: that the economy starts to recover in 2009 and the current balance of power is maintained; that China recovers

more quickly and emerges stronger; and that the economy fails to recover.

Supporting the second scenario is the fact that China is devoting a large part of its economic stimulus package to modernise its infrastructure but also its military, Uhrlau said.

“Under this scenario others would be caught in China’s wake, because growth primarily comes from there. Certain inbalances in Asia would be strengthened. India for example would be affected,” he said.

Uhrlau also said that the global recession might lead to more people joining Islamic extremist groups because these organisations see the crisis as “proof that the West’s supposed domination has lapsed.”

“This could boost recruitment for militant or Jihad groups,” he said.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

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.

READ ALSO:

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.

SHOW COMMENTS