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ECONOMY

Schäuble pressures Greece to tackle debt

German Finance Minister Wolfgang Schäuble on Thursday warned of "worrying news" coming from the eurozone and said Greece must fulfil the conditions required if it wants more help to combat its debt crisis.

Schäuble pressures Greece to tackle debt
Photo: DPA

Speaking in parliament, Schäuble said it was “very important, especially given the worrying news from the eurozone, that the fund can, if necessary, release short-term funds to recapitalise banks.”

“It is very important that we combat the danger of contagion in the banking sector by providing access to additional capital,” he said.

Ratcheting up the pressure on Athens, Schäuble said it was too soon to talk about a second bailout package for Greece, considering the country has yet to implement reforms required to receive its first full disbursement.

“The debate over a second aid package to Greece is very premature given the current difficulties around the payment of the first package,” said the minister.

The European Union and International Monetary Fund bailed out debt-wracked Greece in May 2010, with a package worth €110 billion ($155 billion).

Athens was due to get its next €8-billion payout from the fund later this month but must first demonstrate it has achieved the fiscal targets laid down by its international partners.

However, EU and IMF auditors promptly left Greece last week saying more work was needed, sending the markets crashing and raising fears that Greece would not live up to its fiscal promises.

In July, EU leaders agreed a second bailout package worth some €109 billion, this time with a one-off contribution from the private sector.

“We understand the problems in Greece. Reducing a deficit … results in serious strains for the population concerned,” Schäuble said.

“But at the end of the day, it is up to Greece itself to decide whether it is ready to take the necessary measures to reduce its deficit and its too-high debt,” he added.

Anger is growing in Germany, which contributes the lion’s share of the guarantees for the rescue funds, over Greece’s perceived backsliding in implementing reforms, with some politicians calling for Athens to leave the euro.

“The situation in Greece is serious,” Schäuble said.

AFP/emh

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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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