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EUROPEAN UNION

ECB signs off on new Frankfurt headquarters

The European Central Bank said Thursday it would start construction of new Frankfurt headquarters in early 2010 and would meet its initial budget despite a nearly three-year delay.

ECB signs off on new Frankfurt headquarters
Photo: DPA

The ECB governing council “has decided to start the main construction works for its new premises in spring 2010,” a statement said.

The 45-floor twisted double-tower building should be finished in the autumn of 2013, with full occupancy expected by mid-2014, ECB executive board member Lorenzo Bini Smaghi told a press briefing in the German financial capital. The bank had originally planned to occupy its new premises by the end of

2011.

Bini Smaghi said there had been “a lot of interest by industry in this project,” which suffered delays in part because the original strategy of using a general contractor was abandoned in favour of a series of smaller tenders for specific parts of the project.

That boosted competition and provided the ECB with “offers which were quite good and were in line with the budget that we set – for the construction part it’s around €500 million ($720 million) at 2005 prices,” Bini-Smaghi said.

He said later the result was “even better than the budget,” but noted the final cost of construction had been indexed to variations in the prices of items including raw materials and labour, which might add between six to 20 percent to the tab.

Total costs including furniture and various processes on which final occupancy depends has been estimated by the ECB at €850 million.

The ECB has benefited from significant cost decreases since a previous tender was cancelled in June 2008, 10 months after its launch in August 2007.

“Last time, our tender coincided with the peak of the bubble” in commodity prices and major construction projects, Bini Smaghi noted.

“This time I think we got the benefit of the burst of the bubble,” he said. “That was an advantage that we were able to exploit.”

The glass and steel design includes the integration of eastern Frankfurt’s historic wholesale goods market, and is based on two towers of 185 and 165 metres (607 and 541 feet) linked by an atrium and interchange platforms.

The building is expected to be 30 percent more energy efficient than German standards at the time of its design, with natural ventilation and a geothermal assisted heating system.

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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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