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Rösler says financial transaction tax must apply to all EU members

German Economy Minister Philipp Rösler has shown the government’s hand on the subject of a financial transactions tax, saying he would only support one applied to all European Union countries, not just the eurozone.

Rösler says financial transaction tax must apply to all EU members
Photo: DPA

In what initially seemed to be a contradiction of Chancellor Angela Merkel and French President Nicolas Sarkozy’s recent call for such a tax, he said he would only back it if it applied to all 27 European Union countries – not just the 17 members of the eurozone.

Rösler, whose Free Democratic Party is the junior coalition partner of Merkel’s Christian Democratic Union, threatened to withhold support of the plan.

“We would only give our agreement to a transaction tax, if at all, only if it was applied in all 27 EU countries,” he told the regional daily Stuttgarter Zeitung.

He said the eurozone countries should not be put at a disadvantage to other EU countries, several of which, most notably Britain, have said they would not implement such a tax.

The government has long included the concept of taxing finance transactions, with Finance Minister Wolfgang Schäuble even including €2 billion income in his medium term financial planning – from 2013.

Rösler said it was now the job of the finance ministers to develop a concept for all 27 EU member states, firmly handing responsibility to his CDU colleague, according to Der Spiegel.

The magazine said that there seemed to be little difference between his attitude and that of Merkel, saying that government insiders were signalling that the suggestion for the eurozone was intended to revive the debate of imposing the tax throughout the EU.

Gathering as many supporters for the concept within the eurozone would be the first stage in exerting pressure on other EU members, the magazine suggested.

Rösler has also recently clearly mapped out his party’s opposition to the idea of eurobonds, saying a meeting of the party’s leadership had ruled them out, and that he had communicated this to Merkel before her meeting with Sarkozy.

Sarkozy, who met with Merkel this week in Paris, told media later that “German and French finance ministers will put a joint proposition for a tax on financial transactions on the table of European institutions from next month.”

AFP/The Local/hc

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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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