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EUROPE

Germany fails to find credible IMF candidate

Despite being Europe's top economy, Germany looks set to show, yet again, that it has no viable candidate for a top job at an important global institution – including the International Monetary Fund (IMF).

Germany fails to find credible IMF candidate
Photo: DPA

The tongue-in-cheek front page of German business daily Handelsblatt said it all. Headline: “The German candidate.” Picture: the French finance minister.

“Nations are also judged on their ability to occupy top international jobs. Germany, Europe’s biggest economy by far, has none of them right now,” the paper moaned.

Of all the names floated in the media to succeed Frenchman Dominique Strauss-Kahn as managing director of the IMF, the global of lender of last resort, none is from Germany, Europe’s economic powerhouse.

Chancellor Angela Merkel is playing her cards close to her chest, but on Friday she said she had “high regard” for French Finance Minister Christine Lagarde.

For many, this was a hint that she would end up supporting the 55-year-old.

Germany also looks set to go empty-handed when it comes to who will succeed Jean-Claude Trichet – another Frenchman, and also touted as a possible next IMF chief – as head of the European Central Bank (ECB) later this year.

The ECB president is arguably the most influential job in Europe, as the bank sets interest rates for more than 330 million people the 17-nation eurozone, the core of the the world’s largest trading bloc.

In its decade of existence, the ECB has had two heads, neither of them German. This time Berlin’s candidate Axel Weber, the chief of the Bundesbank, was initially seen as a shoo-in to succeed Trichet when he steps down.

But in February, Weber threw in the towel for “personal reasons,” leaving Germany no time to line up an alternative and forcing Merkel this month to reluctantly throw her weight behind Italian Mario Draghi for the job.

This was all the more galling as Berlin had refrained from pushing Germans for other top European jobs in order, analysts said, to keep its powder dry for the ECB top job.

The EU president is a Belgian, the president of the European Commission is Portuguese and the EU foreign policy chief is British. Germany’s highest-ranking European official is Guenther Oettinger, energy commissioner.

It is true that from 2000-2004 the head of the IMF was a German, Horst Koehler, but that is some time ago, and was before the global financial crisis, when the bank was less important than it is now.

Armed now with more cash, it has become a key player in the eurozone debt crisis, providing billions of euros towards bailouts of Greece, Ireland and Portugal.

“Since World War II Germany has been very prudent when it comes to occupying top political jobs,” sociologist Michael Hartmann, who specialises in studying the political elite, told news agency AFP.

But he added that Germany is content to pull strings behind the scenes in order to make sure things go its way, particularly as Europe seeks to respond to its debt crisis.

“For Germany, prestige is of secondary importance,” he said.

AFP/The Local/adn

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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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