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ECONOMY

Works council officials says Opel needs European aid to survive

Opel, the German subsidiary of US car maker General Motors, will require European state aid to survive, the head of its works council said Monday amid reports the firm could go under with the loss of 25,000 jobs.

Works council officials says Opel needs European aid to survive
Photo: DPA

There will not be a “isolated German solution for Opel,” Klaus Franz told Deutschlandfunk radio. “If we find a solution, it will only be a European solution,” he added.

Opel needs more than €3.3 billion ($4.2 billion) to stay afloat, according to media reports, as auto sales have slumped around the world, especially in Europe. The company will go bankrupt by May or June if no state aid is forthcoming, mass circulation Bild reported over the weekend.

Before considering ploughing public money into the company, Berlin has insisted the company draw up a restructuring plan, which will be presented on Friday, according to Franz.

“A decision can only take place when a restructuring plan becomes available,” deputy government spokesman Thomas Steg told a regular briefing. “There can be no blank cheque.”

Nevertheless, politicians have raised hopes that some public money could be made available to save tens of thousands of jobs in Germany’s ailing economy. Finance Minister Peer Steinbrück told ARD public television Sunday there would be a high price to pay in terms of unemployment benefits and lost tax revenue if Opel’s 25,000 employees were made redundant.

“Would it not be more logical to provide aid (to the company) so that these people can continue to earn their living?” Steinbrück asked.

Frank-Walter Steinmeier, Germany’s foreign minister, appealed on Saturday for international aid for the carmaker.

“We have to look further than our own backyard. No car factory is capable of surviving alone in Germany or elsewhere,” he told the daily Rheinische Post.

General Motors has opened the door to spinning-off Opel as part of a broader restructuring plan which includes laying off 47,000 workers worldwide, slashing production and closing plants.

“We are on this path,” confirmed Franz.

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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.

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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