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ECONOMY

Commerzbank slashes employee bonuses

Commerzbank said on Friday it would slash employee bonuses for 2012 with chief executive Martin Blessing foregoing his altogether following the bank's "unsatisfactory" performance last year.

Commerzbank slashes employee bonuses
Photo: DPA

“As a consequence of the unsatisfactory net profit, variable remuneration as a whole for 2012 will be 17.2 percent lower than in the previous year,” Commerzbank said in a statement.

Bonuses were cut by around 20 percent in the investment banking division alone. The move – which affects all employees including the executive board – helped bring down personnel costs last year by 5.3 percent to €3.96 billion ($5.3 billion) and came after a similar bonus cut of 12.1 percent in 2011.

“We are following a clear principle: the greater the responsibility, the lower the variable remuneration by comparison,” Commerzbank said. Indeed, CEO Blessing had already informed the bank’s supervisory board in December that he would forego “all his claims from variable remuneration for 2012,” it added.

Germany’s second-biggest lender confirmed its disappointing 2012 results, already released earlier this month. Net profit came out at only €6 million for the whole year compared with €638 million a year previously, after heavy write downs pushed it into the red in the fourth quarter.

However, underlying earnings, as measured by operating profit, increased to €1.2 billion in 2012 from €507 million. Last month, Commerzbank said it would axe 4,000-6,000 jobs – more than one in 10 of its workforce – over the coming three years as it tots up the toll from the financial and sovereign debt crisis.

Commerzbank shares were the biggest gainers on the Frankfurt stock exchange on Friday, adding 3.32 percent in a steady market.

AFP/kkf

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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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