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EUROPEAN UNION

Weber reportedly out of running for ECB job

Germany's central bank chief Axel Weber is out of the running to be the next head of the European Central Bank as he is leaving to join Deutsche Bank, according to media reports on Wednesday.

Weber reportedly out of running for ECB job
Photo: DPA

Weber had been tipped as one of the most likely successors to Frenchman Jean-Claude Trichet when he steps down in October.

But reports said Weber, who has irritated some European Union figures, was no longer “available” and that he would give up his Bundesbank position to join Deutsche Bank, Germany’s largest private bank.

The ECB succession comes at a crucial time for the 17-nation eurozone as it works to regain the confidence of financial markets owing to debt crises in two member states, Greece and Ireland.

The Bundesbank declined to comment, and said “rumours” that it would release a statement later on Wednesday on Weber’s future were untrue. Deutsche Bank also refused to comment.

Speculation swelled further when the spokesman for Chancellor Angela Merkel, Steffen Seibert, said she and Weber had “a telephone conversation” Wednesday morning, the subject of which was “confidential.”

A source close to the German central bank told news agency AFP Weber had just “signalled to those close to him that he would not necessarily seek a second mandate as head of the Bundesbank. “He sees no reason to express himself personally,” on the subject, the source said.

The reports sent the euro briefly lower against the dollar on Wednesday, and the Frankfurt stock exchange’s DAX index gave up early gains in midday trading.

Barclays Capital economist Julian Callow said that regardless of who was finally named to head the ECB, “we would not envisage a significant change in its strategy or reaction function.

“Indeed, the lesson of the ECB’s history so far is that while the personnel may change, the institution has stuck firmly to its clearly-defined mandate” of ensuring that eurozone inflation was held below but close to two percent.

Weber has rankled several EU chiefs, who are due to select the next ECB president in the coming months, with comments criticising the bank’s purchases of eurozone government debt.

In late October, the Bundesbank chief vowed to remain true to his principles even if it meant he were not chosen as the next head of the ECB.

“If that’s going to have implications for my future career, then I’d be happy to live with those consequences,” he told an event in Stuttgart, southwestern Germany.

Several alternative candidates have been mooted in recent weeks, including Luxembourg central bank head Yves Mersch, Finnish counterpart Erkki Liikanen, and Klaus Regling, the German head of the European Financial Stability Facility.

Another name floated initially as a front-runner was that of Italian central bank chief Mario Draghi.

But a key factor weighing against Draghi is that the ECB vice president is Vitor Constancio of Portugal, another southern country. European institutions often strive for geographical balance among its senior positions.

Meanwhile, a poll commissioned by the Financial Times this month found that a German candidate would have more support across the continent than any other.

Callow said: “If Mr Weber were to resign from the Bundesbank to a new role, then in our view this would significantly elevate the chances of Mr Regling to succeed Mr Trichet as ECB president.”

AFP/mry

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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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