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ECONOMY

Steinmeier says Europe warned US on financial crisis

German Foreign Minister Frank-Walter Steinmeier said during a visit to Wall Street on Wednesday that European states had long tried to convince the United States to approve measures that would have averted the current financial market crisis.

Published: 25 September 2008 08:09 CEST
Steinmeier says Europe warned US on financial crisis
Steinmeier visiting Wall Street. Photo: DPA

Steinmeier offered his version of “I told you so” during a visit to the US Stock Exchange and said that Germany, Europe’s biggest economy, had run into an American brick wall when it called for more checks on international finance.

“I must say that we, and the finance minister (Peer Steinbrück) in particular, were right in the recommendations that we have been making for two years,” he told reporters on Wall Street.

“First of all, to ensure more transparency on international finance markets and secondly, to demonstrate more sensitivity to risk.”

Steinmeier said he was pleased to hear in his talks with US bankers and traders this week on the sidelines of the UN General Assembly’s annual debate that there was now “strong support” for market regulation to avert crises like the current one.

“It is a discussion that we have had for a long time in Europe, that the completely unregulated parts of the international financial market must be more closely monitored and that we must try to reach an agreement on common regulations,” he said. “There is agreement here on that now.”

He cited greater monitoring of new products available on finance markets and the need to ensure banks have sufficient capital as areas where there was now growing international consensus.

“All of this is going to stay on the agenda for a long time,” Steinmeier said, noting the ripple effect was being felt in leading emerging markets such as China and Russia. Steinmeier said the crisis was dominating the UN General Assembly debate and said African leaders in particular were concerned that the tightening of credit in the West would force cuts in development aid.

He said it was too soon to tell whether their fears were justified but noted that aid was “not significantly based on the financial markets” although their role in such budget earmarks had grown in recent years. Germany headed the Group of Eight industrialized nations last year and

advocated greater transparency in international financial transactions, especially in hedge funds. But it was thwarted by US and British resistance.

US lawmakers have proposed a $700-billion rescue package to avert calamity in the financial market after the bankruptcy of investment firm Lehman Brothers and an 85-billion-dollar aid package for insurance and financial giant AIG last week.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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