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ECONOMY

Deutsche’s Ackermann calls for European financial safety net

Europe should prepare a financial markets safety net similar to one being cobbled together in the United States, the head of the biggest German bank, Deutsche Bank, said on Wednesday.

Published: 1 October 2008 16:12 CEST
Deutsche's Ackermann calls for European financial safety net
Photo: DPA

“If the United States has a rescue plan, Europe should be ready to offer similar solutions” in the event of an emergency, Deutsche Bank’s CEO Josef Ackermann said according to Dow Jones Newswires.

Private banks and governments should be able to respond to “systemic risks” to financial markets, the German banker said.

Some economists have warned that leading European banks have high leverage ratios of total assets to shareholders’ equity, which in the event of trouble could mean they would need help similar to that extended to banks in the United States, Iceland, Ireland and the Benelux countries.

The German government said on Wednesday it expects swift approval by the European Commission of a rescue plan for property lender Hypo Real Estate.

“We are sure of … a swift and positive response by the European Commission,” a Financy Ministry spokesman told a press conference. He said the German plan was “no different from what has been done recently in the Benelux countries or Great Britain,” in reference to bailouts of the Franco-Belgian bank Dexia and British lender Bradford & Bingley.

On Monday, the German government and private banks unveiled a rescue plan for Hypo Real Estate, the future of which nontheless remains uncertain.

Berlin is to guarantee a large part of a €35-billion ($50-billion) credit line drawn up to keep Hypo Real Estate in business.

In Brussels meanwhile, the Commission said it was opening an in-depth investigation into the German government’s rescue plan for another German financial institution, the regional bank WestLB.

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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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