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Germany welcomes Spain’s bid for help

German central bank chief Jens Weidmann on Sunday welcomed Spain's decision to seek a eurozone lifeline of up to €100 billion for its stricken banks.

Germany welcomes Spain's bid for help
Photo: DPA

“It’s important that Spain use the financial instruments to recapitalise its banks,” Weidmann told public television station ARD in an interview.

“I am confident in the Spanish government, which has already begun undertaking full measures in the labour market. But that path must continue.”

The Bundesbank president also called for tighter supervision of European banks.

“I consider it wrong to introduce common guarantees as long as there is no credible supervision,” said Weidmann, who is also a member of the European Central Bank’s governing council.

He also had stern words for Greece, which returns to the polls on June 17 for an election that could determine its future in the eurozone.

“It’s up to the Greeks to decide if they want to stay in the euro or not,” Weidmann said.

“But it must be clear that the financial assistance that has been granted cannot continue if the obligations aren’t fulfilled, because otherwise all the other programmes and commitments linked to them will also be called into question.”

He called on the Greek government, to “send a clear signal to show that it is ready to put in motion the reforms it has promised.”

AFP/jcw

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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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