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EUROPE

Greece talks have ‘lost ground’: Merkel

Chancellor Angela Merkel warned on Thursday that talks between Greece and its creditors were losing ground as a final deadline for avoiding the country's bankruptcy approaches.

Greece talks have 'lost ground': Merkel
Angela Merkel in Brussels on Thursday. Photo: DPA

“We haven't made the necessary progress” on Greece during the finance ministers' meeting earlier in the day and “in some places we've actually fallen back,” Merkel told reporters as she arrived in Brussels.

“It's very important that Greece continue to work with the three institutions and that the finance ministers decide. The European Council [of heads of government] won't get involved in the negotiations.”

Merkel and other EU leaders are meeting on Thursday for a summit slated to address refugee policy, the future of the trading and currency union and the demands of the UK for reform.

Greece's troubles are not on the agenda, but are certain to come up in the discussions.

Turning to address the refugee crisis in Europe, Merkel said that “we must remember the extraordinary summit we held” days after hundreds drowned off the Libyan coast in April.

“We've made progress in our collective efforts too, but now it's about finding sustainable, long-term solutions, that means more solidarity among the [EU] member states, that means decisive fighting of the causes,” the Chancellor said.

“There are serious tensions emerging between the different countries – we can't afford that in Europe,” she added.

Schäuble warns deal slipping away

Finance Minister Wolfgang Schäuble warned earlier on Thursday that the Greek government and its European creditors were moving apart as he arrived for yet another round of talks in Brussels.

“There is rather a larger difference than a rapprochement,” Schäuble told reporters as he arrived at a finance ministers' meeting held in advance of the leaders' summit.

Greece's creditors, the European Commission, International Monetary Fund (IMF) and European Central Bank (ECB), have not accepted a fresh batch of Greek proposals for cutting government spending and reforming the country's economy, instead offering their own set of suggestions.

Now the finance ministers must decide which document will form the basis for the leaders' discussions later, Brussels diplomats said.

If Greece does not receive a final tranche of €7.2 billion in emergency loans, the government will be unable to repay a loan installment to the IMF at the end of June and will be officially bankrupt.

There is a chance that leaders of eurozone member countries may be called out of the summit for a separate meeting about Greece's future in the single currency.

Greece's left-wing Syriza government has “not moved, or rather moved backwards, and therefore I'm not very optimistic for our session today,” Schäuble said.

A previous meeting of the finance ministers on Wednesday produced no result.

Prime Minister David Cameron has promised the British public a vote on whether the UK should remain a part of the EU and has been touring Europe hoping to win allies – including during this week's royal visit to Germany by Queen Elizabeth II.

But a note of optimism was struck by European Parliament president Martin Schulz.

“I have complete confidence that we can bring about an agreement,” the Social Democratic Party (SPD) politician said.

 

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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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