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ECONOMY

Brüderle demands banks boost business lending

German Economy Minister Rainer Brüderle pressed banks on Wednesday to increase lending as the government named a "credit mediator" to boost the number of business loans.

Brüderle demands banks boost business lending
Photo: DPA

Brüderle urged banks to “fulfill their duties” to the wider economy in an interview with the public television channel ZDF.

“Taxpayers extended generous aide to help you avoid bankruptcy,” he said in reference to massive state aid extended to the troubled banking sector a year ago.

Financial institutions now had ample leeway to increase lending, Brüderle added.

His ministry later announced that Hans-Joachim Metternich had been named as a credit mediator to help Germany’s small and medium-sized enterprises obtain loans needed to fund their operations.

Metternich would work in Frankfurt and be charged with “compiling complaints from companies seeking external funding and finding constructive solutions with credit institutions,” a statement said.

France has already created such a position “with great success,” Brüderle noted.

Metternich is currently head of the public investment bank for the western German state of Rhineland-Palatinate, and would begin examining cases in March, the ministry said.

Meanwhile, a summit was planned in Berlin later on Wednesday with representatives from companies, federations and unions to discuss the threat of a credit crunch in Europe’s biggest economy.

Brüderle and Chancellor Angela Merkel have both warned that a generalised credit crunch was possible next year.

Capital Economics economist Jennifer McKeown noted that in its last Financial Stability Report, the German central bank said German banks might still have to write off €90 billion ($135 billion) in losses on loans and securitised instruments. That would imply “that the sector is not even halfway through its potential losses,” McKeown said.

But Commerzbank, the second-biggest German bank in which the state now holds a stake of around 25 percent said it would do its part to help firms out.

“We are going to take medium-term perspectives into greater consideration,” and raise loan offers by €5 billion in January, Commerzbank head Martin Blessing told the business daily Handelsblatt in an interview.

“Even if the situation is tough in 2009 and 2010, if companies have a positive fundamental perspective we will be able to extend credit.”

German savings banks were also set to create a joint fund with €5 to 10 billion, the head of their federation Heinrich Haasis told the Frankfurter Allegemeine Zeitung newspaper.

Haasis said the biggest problem in certain regions was to raise enough funds for big loans to large enterprises.

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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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