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ECONOMY

U-turn on minimum wage for foreign drivers

Germany temporarily hit the brakes Friday on applying its new minimum wage to foreign truck drivers transiting the country in a move welcomed by Poland, which vigorously opposed the system.

Labour Minister Andrea Nahles said after talks with her Polish counterpart in Berlin that the decision was taken "out of consideration for (Germany's) neighbours". 

The suspension will continue until European rules on the issue have been clarified, she told reporters.

Polish transport companies and the government in Warsaw raised objections after neighbouring Germany introduced a national minimum wage of €8.50 an hour on January 1, including for lorry drivers passing through the country even just for a few hours.

Germany is the only European country not to exclude transit workers from its new minimum wage which it has argued was needed to stave off wage dumping.

An association of Polish transporters last week slammed the German measure as "discriminatory and disproportionate" for requiring Polish-based firms to pay their drivers the German minimum wage for the period they are on the country's soil, or face a fine.

The Polish government had urged Berlin to change the system and complained to Brussels, where the European Commission last week opened a preliminary case to look into whether it complied with European law.

Polish trade unions however had written to Nahles to appeal to her to stand firm.

Polish Labour Minister Wladyslaw Kosiniak-Kamysz called Berlin's suspension "a good decision" and urged Brussels to clarify the legal situation "as quickly as possible".

The suspension only applies for transit journeys and not to deliveries by foreign truckers in or from Germany.

SEE ALSO: Poland bridles at German minimum wage

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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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