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ECONOMY

Schäuble calls for financial transaction tax

Eurozone members could introduce a financial transaction tax even if other EU countries were opposed, German Finance Minister Wolfgang Schäuble told the Financial Times in an interview published Monday.

Schäuble calls for financial transaction tax
Photo: DPA

Schäuble said he backed using the 17-member eurozone as a testing ground for the levy, which is designed to restrict speculative trading, even though Britain and its vast financial sector are firmly against it.

Schäuble said he respected the arguments of Britain, a member of the European Union but not of the eurozone.

He hoped it would be convinced to adopt the tax if it proved to be a success within the eurozone.

Schäuble hoped an agreement could be reached at this week’s G20 meeting in Cannes, France, before the proposal was presented to EU finance ministers on November 8.

The minister also said that the current debt crisis was an opportunity to push for closer fiscal union within the eurozone.

Schäuble told the FT that the bloc needed “stronger institutions to oversee the implementation of a commonly agreed finance policy.

“That is what I call fiscal union,” he added. “We need to take big steps to get that done.”

Britain is also worried about closer fiscal union within the zone, fearing it may be left out of key policy-making decisions.

Despite last week’s deal to rescue the eurozone from immediate danger, many economists fear that the sovereign debt crisis may have some distance to run, with Italy’s situation a major cause for concern.

Schäuble urged Italy’s leaders to live up to their own responsibilities and solve its own problems.

Creditors last week agreed to take a 50-percent hit on outstanding Greek debt.

But in an interview with the BBC aired on Monday European Central Bank chief Jean-Claude Trichet has warned other European countries in financial difficulties not to expect such generous terms in the event of a bailout.

“Greece was Greece and everybody recognises that it is a special case,” he

said.

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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