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ECONOMY

Rösler calls for eurozone ‘stability council’

German Economy Minister Philipp Rösler Tuesday called for a eurozone "stability council" with the power to sanction countries that mismanage their finances.

Rösler calls for eurozone 'stability council'
Photo: DPA

Such a council would be independent of governments and have the power to help countries implement economic reforms, if need be by determining where financial aid from fellow members would best be spent, Rösler told reporters.

“A stability council wouldn’t mean — ‘you’re not getting any money’, but

rather we’ll apportion it for you,” said Rösler, who is also vice-chancellor in Angela Merkel’s centre-right coalition.

Rösler, the head of the small pro-business Free Democrats (FDP), also called for “competitiveness tests” to determine how countries were managing their finances.

When a country failed such tests, “there would be consequences,” he said.

He also urged eurozone countries to adopt “as quickly as possible” constitutional amendments to limit overall public debt.

Speaking against a background of growing international financial turmoil, Rösler said eurozone members should strive to adopt “a common culture of (financial) stability” and so limit the risks of debt contagion.

The minister, whose party has been outspoken in its criticism of debt-ridden countries such as Greece, said he would present his ideas next month at a European level.

Germany has long sought closer eurozone economic governance rules, arguing that tighter controls would prevent the sort of debt problems now besetting the 17-nation bloc.

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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