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FOREIGN POLICY

North Korea seeks German economic advice

North Korean leader Kim Jong Un is looking to Germany for advice on how to attract international investment to his isolated dictatorship in 2013, a newspaper reported on Saturday.

North Korea seeks German economic advice
Photo: DPA

The secretive Communist dictatorship of North Korea is planning to open up its economy for foreign investment this year – with the help of German business experts and lawyers, according to a report in the Frankfurter Allgemeine Zeitung.

“There’s a master plan,” one unnamed German business expert and university lecturer told the paper. “They want to open up this year.”

The report says a team of German lawyers and economic experts are involved in concrete plans to alter North Korean law to welcome investors into the country, which has been isolated from the global community since the Second World War.

In his New Year address Kim Jong Un announced radical changes intended to transform the backward nation into an “economic giant” and raise living standards for the North Korean population, which frequently suffers severe food shortages and power outages.

The strategy is likely to be based on the Vietnamese model of selecting individual businesses to invest in the country, the expert told the paper, rather than the Chinese model of targeting specific economic zones for foreign investment.

The news that German advice is being sought in Pyongyang comes amid a row in the US over plans recently announced by Google’s Chief Executive Officer Eric Schmidt to visit North Korea on what he claims is a private trip.

DPA/The Local/jlb

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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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