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German banks wary of fresh Iran sanctions

German banks and companies are uneasy about proposals by an international anti-corruption body to require financial institutions to do more to curb exports to Iran, business daily Handelsblatt reported Tuesday.

German banks wary of fresh Iran sanctions
Iran President Mahmoud Ahmadinejad. Photo: DPA

The calls by the Financial Action Task Force (FATF), an inter-governmental body to counter illicit financial transactions that could be used to promote terrorism, could be adopted in February as part of a new round of sanctions against Iran over its nuclear programme, the paper reported.

The Association of German Banks (BdB), grouping private financial institutions, warned against the potential consequences of the FATF proposals put forward in November.

“If the cost is too high, we run the risk ultimately of seeing banks withdraw from doing business with certain countries or in certain sectors,” Bernd Brabänder of the BdB told Handelsblatt.

German industry has also raised objections to FATF proposals requiring banks to demand that companies that do business with Iran assure that their activities are “above reproach” before offering them financing.

But Oliver Wieck of the Federation of German Industry said that Germany already had effective checks on exports and argued that FATF regulations would undermine them.

According to federal statistics, German exports to Iran reached €291.4 million in September, with imports totalling €97 million.

The FATF task force secretariat is based at the Paris headquarters of the organisation for Economic Cooperation and Development.

Many in the West suspect Iran seeks to build a nuclear bomb, an allegation Tehran denies.

European Union leaders and the United States this month backed new sanctions against Iran, warning that Tehran’s refusal to negotiate over its nuclear programme must be met with a tough response.

Iran is already working under three sets of UN sanctions for refusing to stop uranium enrichment, a process to make both nuclear fuel and the fissile material needed for an atomic bomb.

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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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