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Opel rescue summit planned for Tuesday

German Finance Minister Peer Steinbrück has called for a meeting between managers at carmaker Opel and the leaders of German states where the car maker has major production centres after the GM unit asked for help from the government.

Published: 15 November 2008 10:12 CET

Opel rescue summit planned for Tuesday

Photo:DPA

The meeting is scheduled for Tuesday, Steinbrück said late on Friday night from Washington where he is taking part in the world finance summit.

“We are dealing with it, that is right,” he said.

Opel became the first German car manufacturer to call for help on Friday when it approached the federal and state governments asking for state loan guarantees.

Rhineland-Palatinate minister president Kurt Beck said he thought Opel needed around a €1 billion in guarantees, while his North Rhine-Westphalia counterpart Jürgen Rüttgers told this weekend’s Welt am Sonntag newspaper he supported state help for the car industry.

“We will not let Opel go under… North Rhine-Westphalia will put forward guarantees along with the other states and the federal government,” he said, adding other help would be needed to keep the car industry afloat, but did not elaborate on what this might be.

The company has plants in these two states as well as Thuringia and Hesse.

Hesse state premier Roland Koch says his government will offer half a billion in guarantees, and that this will be processed on Wednesday.

This will affect not just Opel but its suppliers too, which together employ 50,000 people in Hesse alone.

Beck told ZDF’s news programme Heute on Friday evening that he had already spoken with the other state premiers of affected states and they were prepared to offer up to 40 percent of the guarantees, if the rest was met by the federal government.

Opel boss Hans Demant has stressed that the request for guarantees was only for the “theoretical case” that finance flows from the USA dry up.

There Opel’s US owner General Motors recently warned of a possible bankruptcy after recording a loss of billions and a collapse in turnover.

There are reports of supply problems in the USA with some insurers refusing to cover costs for parts supply, leading GM and Ford to rely on payment up front or hopes that suppliers might deliver without guarantee of payment.

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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