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ECONOMY

Investor Soros blames Merkel for euro crisis

US investment guru George Soros has squarely blamed Germany for the escalation of Europe’s debt crisis – and in particular Chancellor Angela Merkel’s cautious approach.

Investor Soros blames Merkel for euro crisis
Photo: DPA

“It was the German indecision that intensified the Greece crisis and led to the contagion that has transformed it into an existential crisis for Europe,” Soros wrote in a guest commentary for the business daily Handelsblatt on Friday.

Soros, who has long criticised Europe’s handling of the crisis, called for the introduction of jointly backed eurobonds – a call that has been made by many economists but resisted by Germany.

He wrote that it had been a mistake to try to back up individual countries such as Greece via bailouts rather than strengthen the European Union as a whole. Germany now had to take the lead, he added.

“Otherwise the euro will collapse.”

The current system of rescue packages for individual counties such as Greece was unsustainable. It meant Italy and Spain had to pay higher interest for their state debt than they were receiving from Greece for the emergency credit they supplied.

Merkel’s policy of small steps was too slow, he said.

Merkel has come under fire from several quarters for staying on holiday even as the stock markets gyrated wildly and deep concern emerged over France’s creditworthiness.

“Stockmarket tremors, eurodrama: why is the Chancellor silent?” asked daily Bild this week.

Merkel will meet on Tuesday with French President Nicolas Sarkozy in Paris to hammer out a new plan to tackle the euro crisis.

DPA/The Local/djw

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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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