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ECONOMY

Germany warns of ‘bottomless pit’ in Greece

Germany's finance minister warned on Wednesday that Berlin was not prepared to pour money into what he termed a "bottomless pit" in Greece, after eurozone ministers put a new bailout for Athens on hold.

Germany warns of 'bottomless pit' in Greece
Photo: DPA

“We want to do everything we can to help Greece … we can help but we are not going to pour money into a bottomless pit,” Wolfgang Schäuble told SWR radio.

“We have always said that all conditions must be fulfilled before we can take final decisions and that the time was pressing. I have doubts that all conditions have been fulfilled,” added the minister.

He took aim at Greece’s conservative Nea Demokratia party, which enjoys a huge lead in the polls ahead of elections expected in April. Their lead is “exactly the problem,” Schäuble said.

“I am not certain that all political parties in Greece are aware of their responsibilities given the difficult situation in which their country finds itself,” the minister said.

“When you look at the situation in domestic Greek politics … the question is: who is going to guarantee that what we decide now will also be valid after the elections?” asked Schäuble.

Late Tuesday, Luxembourg Prime Minister Jean-Claude Juncker, who is head of the eurozone finance ministers, scrapped a planned meeting on more aid, opting for a conference call instead as Greece failed again to meet EU demands.

“I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme,” Juncker said in a statement.

Further “technical work” needed to be done, Juncker added.

Greece desperately needs the €230-billion ($303-billion) rescue package – €130 billion in fresh loans and a €100-billion write-down on privately-held bonds – to avoid defaulting on €14.5 billion in debt owed on March 20.

AFP/mry

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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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