Merkel to warn G20 on trade protectionism

Germany's Chancellor Angela Merkel warned on Tuesday ahead of this week's G20 meeting in Seoul that trade protectionism poses the greatest threat to global economic recovery.

Merkel to warn G20 on trade protectionism
Photo: DPA

“The greatest danger that threatens us is protectionism, and we are still not taking enough steps to ensure genuinely free trade,” Merkel told the Financial Times newspaper.

The chancellor, who will meet up with world leaders in South Korea on Thursday, called for a new effort to complete the Doha development round of trade liberalisation measures.

“There is something we can do that does not cost us much, and does not create any new debts, and that is to finish the Doha round,” she said.

“We have been talking about it for many years, but there is another chance in 2011 to complete it at last.”

The German leader broached the subject of China’s manipulated currency, saying that the blossoming superpower needed to be persuaded using “facts and benchmarks” rather than bullied into allowing its currency, the renminbi, to appreciate.

With Sino-US relations strained over one another’s monetary policies, Merkel said she would be prepared to act as peacemaker, adding: “I do not think it sensible to have a political argument.”

Merkel brushed off US suggestions that nations should adhere to targets for maximum levels of balance of payments surpluses and deficits, describing it as “narrowly conceived.”

Germany has come in for criticism over its large trade surplus, which some other countries say causes imbalances and distortions in international commerce.

“I don’t think much of quantified balance of payments targets,” she said. “It is not just a question of exchange rates but also a question of competitiveness.”


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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.


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.