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Merkel calls for European credit rating agency

German chancellor Angela Merkel called Sunday for the creation of a European credit rating agency, on the back of recent discontent over the downgrading of some EU economies.

Merkel calls for European credit rating agency
Photo: DPA

“It is important in the medium term that Europe also has a ratings agency,”

she said in an interview with public broadcaster ARD.

“The Chinese now have a ratings agency,” the chancellor said – adding the new body should be created by the “European economy” and not by states.

There had not, until now, been much interest in creating such an agency, but there was a void, Merkel continued.

“I would really welcome it (if) the European economy manages to create a ratings agency,” she added.

The European Commission has in recent days roundly criticised the world’s three leading credit ratings agencies, questioning the timing of their debt downgrades, which influence prices and interest rates in the sovereign bond market.

Ratings agency Fitch severely downgraded Greece’s credit status this week, as the eurozone struggled to contain a debt crisis contagion. Last week another agency, Moody’s Investors Service, downgraded the debts of Ireland and Portugal to junk status.

EU leaders object that Standard & Poor’s, Moody’s and Fitch are an “oligopoly” issuing self-fulfilling prophecies of doom, greatly aggravating the eurozone debt crisis.

The EU’s Internal Markets Commissioner has suggested a partial gag to

prevent them from grading debt issued by EU economies being rescued with

official funds.

There is also an undertone of critical comment that they are based in the United States.

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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