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GREECE CRISIS

EUROPE

Greek offer ‘no basis for discussion’: Schäuble

German Finance Minister Wolfgang Schäuble said Wednesday crisis-hit Greece was sending mixed signals in debt talks and called on its government to "clarify its position" before negotiations with creditors can resume.

Greek offer 'no basis for discussion': Schäuble
Pro-EU Greeks demonstrate outside the Athens parliament on Tuesday. Photo: DPA

Schäuble pointed to conflicting reports on whether Athens still plans a referendum Sunday on bailout terms and whether it would support a yes or no vote, noting that “all of this is no basis for discussions on serious measures.”

“That's why first of all Greece must clarify its position on what it wants, and then we will have to talk about it, under conditions that are now far more difficult,” Schäuble told a Berlin press conference.

Schäuble pointed out that the proposal “to be rejected or accepted doesn't exist anymore and never existed” — because the European offer in question was rejected by Athens last week and the aid programme formally expired on Tuesday night.

Since the programme ended at the stroke of midnight, “the legal and actual facts” had entirely changed, he said.

“We are ready for any eventuality, but we are in a really difficult situation,” he said, blaming “entirely the behaviour of the Greek leaders, which is no longer comprehensible to anyone”.

German Chancellor Angela Merkel told MPs in the Bundestag (German parliament) later on Wednesday that “the future of Europe is not at stake” from the Greek crisis but warned against striking a compromise at any price that could weaken the EU.

“Yes, these are turbulent days. And the stakes indeed are high,” Merkel said, a day after debt-laden Greece crashed out of an EU aid programme and became the first advanced economy to default on an IMF payment.

„The world is watching us. But the future of Europe is not at stake. The future of Europe would be at stake if we forgot who we are and what makes us strong – a community based on rules and responsibility,” she said.

“If we forgot that, the euro would fail, and with it Europe,” said Merkel, who through years of eurozone turmoil has championed tough reforms and cost-cutting in return for bailout cash from the EU, European Central Bank and International Monetary Fund.

She said that after years of crisis Europe had become “more robust” and that although the present situation was difficult “it is primarily a source of agony for the people of Greece”.

Merkel said Europe could now “calmly” await the outcome of a referendum called for Sunday by Greek Prime Minister Alexis Tspiras on the country's bailout terms, because the bloc was “strong”.

With the second Greek bailout now expired, negotiations will have to start again from the beginning to try and find agreement for a third programme under the European Stability Mechanism (ESM).

Merkel and Schäuble's remarks came after crisis-hit Greece sought to revive collapsed talks and requested a two-year rescue deal with the EU, just hours before the European part of its international bailout expired at midnight.

An International Monetary Fund (IMF) spokesman confirmed that a payment of €1.54 billion – a “bundle” of weekly payments slated for June that the Greek government had been allowed to delay – did not arrive by the deadline, with the Greeks warning the IMF beforehand.

That makes Greece the first developed country to miss a payment to the IMF.

Eurogroup finance ministers are due to meet in Brussels at 11.30am on Wednesday to discuss the situation in Greece, after the group dismissed Tsipras' new reform proposals out of hand in a conference call on Tuesday evening.

“Under these circumstances it would be crazy to extend the bailout programme. That's why it's ending tonight,” Eurogroup president and Dutch finance minister Jeroen Dijsselbloem told the Netherlands parliament on Tuesday.

German MPs are due to hold their own debate on the Greece crisis at 1pm on Wednesday. Merkel, her deputy Sigmar Gabriel and finance minister Wolfgang Schäuble are all expected to speak.

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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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