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ECONOMY

Court stops fast-track bailout fund committee

Germany's top court Friday stopped a new fast-track committee appointed to approve emergency measures to tackle the eurozone crisis, potentially slowing decisions by the eurozone paymaster.

Court stops fast-track bailout fund committee
Photo: DPA

The Federal Constitutional Court in the southwestern city of Karlsruhe upheld the complaint of two opposition deputies filed this week to stop the nine-member body from taking any decisions on the European rescue fund.

The ruling, which says only parliament can approve such measures, is temporary pending a definitive decision by the tribunal.

The Bundestag lower house had only created the panel, comprised of members of all the parties in parliament, on Wednesday with the aim of allowing Germany to take quicker action to fight the crisis.

It was to have started work behind closed doors on Friday.

In particular, the committee would have been able to green-light decisions on the use of the €440 billion EFSF bailout fund for debt-wracked European nations, such as buying bonds or aiding threatened banks.

In early September the Court gave parliament a bigger say in decisions on saving the euro. The decision raised concerns that it would slow Germany’s reaction in crisis situations when speed is vital.

The head of the EFSF himself, Klaus Regling, had insisted on Germany creating a rapid-response body to head off turmoil while markets await action.

Depending on the urgency of the measures, the entire Bundestag, the 41-member budgetary committee or the nine-member panel would have been tasked with providing approval.

But the Court said the panel could threaten parliament’s sovereignty on budgetary issues, a “possible violation of the law” that could not be reversed if breached because Germany would have made “commitments that are binding under international law.”

The chief whip for Chancellor Angela Merkel’s conservative Christian Democrats, Peter Altmeier, said that despite the ruling, parliament would make sure the EFSF could be activated when needed.

“The German Bundestag will ensure that until a final ruling is made, Germany’s ability to take action and the ability of the European rescue fund to be used will be ensured at all times,” he told reporters. “We will, if necessary, take quick and effective action.”

But government sources told news agency DPA that the preliminary verdict would slow decisions on the EFSF and open the door to speculators exploiting the gaps before measures can be taken.

Government spokesman Steffen Seibert said he would not comment on an ongoing judicial review but pledged the administration would continue to work closely with parliament according to the tenets of the country’s Basic Law.

When asked when a final decision could be expected from the Court – something observers said could take months – finance ministry spokesman Martin Kotthaus told a briefing: “We can only hope it will be soon.”

Despite occasional grumbling among members of her coalition, Merkel has

never failed to win strong majorities for parliamentary decisions on eurozone crisis measures.

AFP/mdm

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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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