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Deutsche Bank’s ‘hunger trade’ in spotlight again

The United Nations head of nutrition has criticised Deutsche Bank for pushing up food prices by speculative trading. His scolding comes months after the bank promised to reduce commodity betting, acknowledging that it increased prices.

Deutsche Bank's 'hunger trade' in spotlight again
Photo: DPA

“The role of investments banks like the Deutsche Bank has strongly increased. The price of foods is increasingly dictated by financial bodies,” said Olivier de Schutter, UN special rapporteur on the right to food.

Speaking during a visit to Osnabrück University, he said, “The extreme price fluctuations in the food markets have only a little to do with supply and demand.”

Rather, hedge funds and banks understand that discrepancies between supply and demand can result in increased prices, and will bet on that being the case, de Schutter said, the Handelsblatt newspaper reported on Thursday.

“The betting on higher prices turns into a self-fulfilling prophecy,” said de Schutter.

“When the prices rise, people want to buy more, and quickly. It is an artificially-created panic,” he said.

The rapporteur said the European Union must regulate such activities. “This development concerns me very much,” he said, adding that it led to people in developing countries being pushed into the situation of not being able to afford to feed themselves.

One in seven, or 925 million, people on the planet do not get enough to eat, he said.

De Schutter also said he was frustrated with the result of the recent G20 summit, as it did not tackle the fundamental problems. “The statement that the production of food must grow by 50 to 70 percent by 2050 is a generalisation of global hunger and shows that the real problem is not being recognised,” he said.

“We have to support small producers on the ground, so they can become more efficient and grow,” he argued. “What use is it to poor people in developing countries if 50 percent more food is produced by 2050 if they are so poor that they cannot afford to buy it?”

The poorest countries in the world saw their food bills increase six-fold between 1992 and 2008 he said, adding that the only solution to this problem is to invest in their domestic production, to free them from imports.

“Global hunger can only be fought if the poor work, their income increases and agriculture becomes more independent and efficient,” said Schutter.

The Local/hc

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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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