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ECONOMY

Price growth slows as German inflation tumbles

Inflation in Europe's largest economy Germany fell back sharply in May, official data showed, returning to sluggish levels after a spike related to the Easter holiday.

Price growth slows as German inflation tumbles
A file photo of Deutsche Bank headquarters in Frankfurt. Photo: DPA

Price growth stood at 1.4 percent year-on-year, federal statistics authority Destatis said in preliminary figures, some 0.6 percentage points lower than in April.

Most of the items like food, energy and goods that feed into the inflation index saw relatively stable price growth compared with last month.

But services inflation plummeted, from 2.1 percent in April to just 1.2 percent in May.

Analysts had last month noted that higher April inflation was mostly due to a late Easter pushing up prices for package holidays.

Price growth data for individual states like Hesse and Bavaria showed a massive slump in prices for all-inclusive trips this month.

April's 2.0-percent inflation reading had marked a rare moment of inflation being bang on the European Central Bank's target for industrial powerhouse Germany.

Despite years of ultra-low interest rates and 2.6 trillion in stimulus, the Frankfurt institution has struggled to meet its price stability target of inflation close to, but below 2.0 percent across the 19-nation eurozone.

Price growth was just 1.3 percent in Germany in May when measured using the Harmonised Index of Consumer Prices, the ECB's preferred yardstick.

READ ALSO: Germany under increasing pressure to boost spending

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ECONOMY

Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.

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