SHARE
COPY LINK

ANGELA MERKEL

Merkel predicts bailout ratification

German Chancellor Angela Merkel predicted Wednesday a eurozone bailout fund would be ratified this month despite rejection by Slovakia, and said all of Europe must help fight the crisis.

Merkel predicts bailout ratification
Photo: DPA

But she warned that dealing with the continent’s debt crisis – which has sent shivers around the world – will be long and even painful.

“The world economy is heavily affected by the financial crisis and every EU country must contribute its share to the fight against the debt crisis,” Merkel said at a business forum in Ho Chi Minh City in southern Vietnam.

She did not refer to events in Slovakia but her comments came a day after that country’s lawmakers rejected a revamp of the European Financial Stability Facility (EFSF) rescue fund.

Sixteen other nations in the currency bloc approved the revamped EFSF but the bailout mechanism requires unanimous endorsement of all 17 members to take effect.

“The EFSF will be ratified at the October meeting,” Merkel said, in an apparent reference to the European Union’s much-awaited summit on October 23.

Only 55 of 124 Slovakian legislators present in the 150-member chamber voted in favour, while nine were against and 60 did not vote, effectively blocking the revamp of the eurozone’s €440 billion ($600 billion) bailout fund.

The vote also toppled the centre-right government of Prime Minister Iveta Radicova.

The opposition left Smer-SD said it was ready in a repeat ballot to vote in favour of the EFSF fund, in exchange for a snap election.

Eurozone leaders agreed in July to boost the EFSF’s powers in the hope of stemming fallout from the bloc’s deepening sovereign debt crisis which now threatens the euro project, the bloc’s banking system and the economy.

The changes are key for going ahead with a second bailout for Greece and the emergency recapitalisation of banks.

EFSF was set up after Greece was first bailed out to save it from default in May 2010. Slovakia abstained from the first Greek bailout.

“The euro has been and will always be a strong currency. Given the public debt issues at some of the European Union’s member countries, I don’t want the EU to become a debt union, but a strong union instead,” Merkel said.

Billionaire investor George Soros and about 100 former European dignitaries Wednesday published an open letter warning that the eurozone debt crisis could bring down the global financial system.

The group, calling themselves “concerned Europeans,” appealed to governments to establish an institution that can provide liquidity to the whole eurozone, a strengthening of financial market oversight and a revised EU growth strategy.

Merkel arrived in Vietnam for an official visit on Tuesday, after weekend talks where she and French President Nicolas Sarkozy held a pivotal meeting aimed at calming Europe’s economic storm.

Global markets responded with relief after the two leaders insisted they were united on the goal of stabilising the eurozone and Sarkozy promised “lasting, global and quick responses before the end of the month.”

He said Europe must arrive “united and with the problems resolved” at a November 3-4 meeting of the G20, the world’s advanced and emerging economies.

In Vietnam, Merkel urged major economies beyond the EU to cooperate in the fight against the debt troubles, but she said the G20 talks “can’t be a one-stop solution to the crisis.”

US President Barack Obama has called on Europeans to act fast.

AFP/mdm

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

SHOW COMMENTS