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ECONOMY

Greece no threat to world economy: ECB man

Greece, which is teetering on the brink of bankruptcy, is "no threat to the world economy," Germany's European Central Bank executive board member Jörg Asmussen said on Monday.

Greece no threat to world economy: ECB man
Photo: DPA

“Luckily, Greece is no threat to the world economy,” Asmussen told the Financial Times Deutschland.

“Nevertheless, other countries expect us to find a solution. But by the G20 meeting at the end of the week, we’ll be a great deal further” towards one, he said.

Eurozone finance ministers are meeting in Brussels on Monday to finalise a second Greek bailout in a deal which they hope will also quell suggestions that Greece could be pushed out of the currency area.

The deal to write off €100 billion ($130 billion) of debt and provide loans worth another €130 billion is contingent on painful new spending cuts that Athens must make despite violent protests.

Finance ministers and central bankers from the Group of 20 countries are to meet in Mexico City on February 25-26.

In a separate interview with the business daily Handelsblatt, the ECB’s director general for legal services, Antonio Sainz de Vicuna, said the bank was looking into ways for eurozone governments to channel profits from the ECB’s holdings of Greek bonds to help Greece.

“There is the political wish for the profits that we make on the bonds to be distributed to the EFSF (European Financial Stability Facility),” the EU’s bailout fund, Sainz de Vicuna said.

“Whether and how this can be done hasn’t been agreed yet,” he said, while insisting that the ECB itself is forbidden from financing governments. “That is a political decision, but the eurosystem must possibly agree to it to ensure that the procedure is in line with the law,” he said.

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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