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Merkel tells bankers to help bailout Greece

German Chancellor Angela Merkel Wednesday called on bankers to help bailout Greece, saying they "should lend a hand" to eurozone governments trying to hammer out a new rescue package for the debt-ridden country.

Merkel tells bankers to help bailout Greece
Photo: DPA

“If you want to be able to continue working in stable countries, then lend us a hand and do so with a modicum of goodwill,” Merkel said in a speech to bankers and members of her conservative Christian Democrats at a conference in Berlin.

Merkel called the Greek parliamentary vote on Wednesday approving emergency austerity measures “really good news” that would help pave the way for a massive bailout by the European Union and the International Monetary Fund.

Amid angry street protests, Greek MPs voted in favour of €28.4 billion ($40 billion) in spending cuts by 2015, unlocking €12 billion in emergency aid. The funds represent the fifth tranche of a €110-billion package agreed last year with the EU and the IMF, and are needed to prevent Greece defaulting on its mammoth debts.

Such a default could have grave consequences not only for the 17-nation eurozone and for the global financial system.

The head of Germany’s largest bank, Deutsche Bank CEO Josef Ackermann, told the meeting the banking community was working “around the clock to find a solution” to the Greek crisis.

Speaking of talks beginning Thursday between Germany’s leading banks and Finance Minister Wolfgang Schäuble, Ackermann said the bankers “will make an offer” of help, “not because it pleases us, but in order to avoid the nuclear meltdown” which would otherwise overwhelm all eurozone economies.

But such aid will cost German financial institutions dearly, he added.

“This will cost substantial amounts, depending on the plan that is chosen, we’ll discuss that tomorrow,” Ackermann said.

The banker said German financial exposure to Greece stood at about €20 billion, adding that financial institutions might have to depreciate the assets by 45 percent if they were to roll-over loans to Greece to assist in a second rescue package.

“It looks nice and simple to roll-over (credit), but this creates a new category of funds” that we shall have to carry, Ackermann said. “You can’t just pretend it’s the same thing,” he added.

Earlier Berlin signalled support for a French plan to involve private lenders in a new rescue for Greece with deputy finance minister Jörg Asmussen describing the plan as a “good foundation for discussion.”

A spokesman for the German Federation of Private Banks (BdB) told news agency AFP that the French plan was “the most detailed currently on the table”, but that discussions were continuing on how it might be implemented.

President Nicolas Sarkozy announced Monday that France was working on a 30-year scheme to give Greece time to get on top of its debt mountain, which is now worth more than a year-and-a-half of the country’s total output.

“We have concluded that prolonging loans over 30 years, and putting them on the level of European loans indexed on Greek growth, would be a system that all countries might find useful,” Sarkozy told a news conference.

AFP/DAPD/The Local/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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