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Siemens suffers profit collapse

German industrial giant Siemens took a massive hit at the end of last year, the company reported Tuesday. Profits were down all of 17 percent between October and December 2011.

Siemens suffers profit collapse
Photo: DPA

The company’s net profit dropped around €300 million to €1.46 billion on the same period last year, it was announced at the Annual General Meeting in Munich.

The company’s leadership blamed delays to major projects, including the development of wind energy parks, as well as the manufacture of ICx fast trains for Germany’s rail operator Deutsche Bahn.

On top of this, Siemens was hit hard by the debt crisis in the eurozone, with orders down five percent on last year. But thanks to a large reserve of commissions, the company was able to increase overall turnover by two percent.

“We’re very clearly maintaining our targets,” Siemens boss Peter Löscher said Tuesday morning in an interview with Bloomberg TV.

But he also announced he would have to gird shareholders for difficult year ahead. “Even though we’re expecting a recovery in the second half of the year, we have to work hard to reach our targets,” he added.

Siemens wants to increase turnover by between three and five percent in 2012, and equal last year’s total profit of €6 billion.

DPA/The Local/bk

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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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