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ECONOMY

German banks abandon US customers

German banks are closing US customers’ investment accounts because they say financial reporting requirements by American authorities are just too onerous.

German banks abandon US customers
Photo: DPA

According to the Financial Times Deutschland (FTD) newspaper, HypoVereinsbank is the latest financial institution to tell US citizens and all its clients residing in the United States that it is closing their brokerage accounts.

Deutsche Bank already made the move earlier this year and Commerzbank has said it is studying whether to do the same, FTD reported. Elsewhere in Europe, both the British HSBC and Credit Suisse have said they won’t take Americans’ investment business anymore.

None of the banks have said they are restricting Americans’ run-of-the-mill banking activities such as making deposits into normal savings accounts.

That’s because those transactions aren’t yet covered by US regulations that as of the beginning of 2011 have required banks to make detailed disclosures to American authorities about US customers’ security holdings.

The US government has claimed the requirements are meant to make it easier to prosecute Americans trying to dodge taxes on their investments.

But some in the German financial sector think the rules are actually calculated to make it harder for Americans to invest money abroad, thereby forcing them to put their cash in US banks, according to the FTD.

The regulations will only get more complex in 2013 when the US Foreign Account Tax Compliance Act comes into effect. That will require banks to report more information about account holders to American tax authorities, although specifics about what the law will require remain elusive, angering many in the financial services industry.

In any event, German banks have said they’re being forced to invest millions of euros in updating computer systems to ensure their legal obligations are met.

“This is a tremendous burden on institutions,” a spokesman for the Association of German Banks griped to FTD.

The Local/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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