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ECONOMY

Britain insists Germany vetoed BAE deal

Britain's finance minister George Osborne insists Germany vetoed a merger bid by British arms maker BAE Systems and European aerospace giant EADS, British newspapers reported Saturday.

Britain insists Germany vetoed BAE deal
Photo: DPA

Although observers agree Germany this week torpedoed talks to create the world’s biggest aerospace and defence group, the comments by Chancellor of the Exchequer Osborne were the strongest yet by a British minister on the matter.

They also contrast with comments by Germany’s economy minister Philipp Rösler, who rejected accusations that Germany should be blamed for the botched tie-up attempt.

“We have been a bit disappointed, primarily by Germany’s attitude, which in effect vetoed the deal,” Osborne was quoted as saying in British newspapers after briefing reporters on the sidelines of an IMF meeting taking place in Tokyo.

“I would like to have seen if we could have progressed those talks, even if that still meant the deal did not go ahead,” Osborne said, according to The Times.

“It is not that we (Britain) were committed to the deal — we just thought it worth discussing.”

The $45-billion (€34.7-billion) merger plan collapsed on Wednesday, leading the chief executive of EADS, Tom Enders, to express surprise at the level of resistance in Germany to the tie-up.

Analysts said Germany feared being sidelined after any such deal and was worried that jobs and factories could go with only one year until a general election in Europe’s top economy.

The merger talks had been reliant on agreement between the British, French and German governments. EADS is dominated by key stakeholders France and Germany, while Britain has a “golden share” in BAE that allowed it to block the tie-up.

The two companies had hoped to create a global champion in the fields of civil and defence aviation, that would compete more effectively with fierce US rival Boeing at a time of deep government cuts to defence spending.

AFP/mbw

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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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