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EUROPEAN UNION

Schäuble to urge banks to join Greek bailout

German Finance Minister Wolfgang Schäuble wants to meet over the weekend with private German bank directors to encourage them to contribute to a Greek financial rescue plan, a press report said on Friday.

Schäuble to urge banks to join Greek bailout
Photo: DPA

Schäuble has planned telephone conferences with bosses from the main German banks, probably on Sunday, once a deal has been negotiated by Greek officials, the International Monetary Fund and European Union representatives, daily Handelsblatt reported.

The business newspaper quoted sources close to the government as saying that Schäuble wants to extract “a voluntary commitment” from the banks to buy Greek debt as a “stabilisation measure” aimed at volatile financial markets.

Such a move would also help soothe German public opinion, which is currently opposed to helping Athens out of its fiscal jam.

Greece has asked the EU and IMF to activate a three-year rescue package worth €45 billion this year alone as it faces a May 19 deadline to repay €9 billion in maturing debts.

The cost of the bailout plan over three years could reach €120 billion.

A new poll by the Dimap institute cited Friday by the German news television channel NTV found that 53 percent of Germans would now accept a Greek rescue if the banks took part.

Several political leaders have blamed the banks for helping stoke the Greek crisis while Berlin has been reluctant to approve a rescue plan ahead of a key state vote in North-Rhine Westphalia on May 9.

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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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