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German banks wary of fresh Iran sanctions

German banks and companies are uneasy about proposals by an international anti-corruption body to require financial institutions to do more to curb exports to Iran, business daily Handelsblatt reported Tuesday.

German banks wary of fresh Iran sanctions
Iran President Mahmoud Ahmadinejad. Photo: DPA

The calls by the Financial Action Task Force (FATF), an inter-governmental body to counter illicit financial transactions that could be used to promote terrorism, could be adopted in February as part of a new round of sanctions against Iran over its nuclear programme, the paper reported.

The Association of German Banks (BdB), grouping private financial institutions, warned against the potential consequences of the FATF proposals put forward in November.

“If the cost is too high, we run the risk ultimately of seeing banks withdraw from doing business with certain countries or in certain sectors,” Bernd Brabänder of the BdB told Handelsblatt.

German industry has also raised objections to FATF proposals requiring banks to demand that companies that do business with Iran assure that their activities are “above reproach” before offering them financing.

But Oliver Wieck of the Federation of German Industry said that Germany already had effective checks on exports and argued that FATF regulations would undermine them.

According to federal statistics, German exports to Iran reached €291.4 million in September, with imports totalling €97 million.

The FATF task force secretariat is based at the Paris headquarters of the organisation for Economic Cooperation and Development.

Many in the West suspect Iran seeks to build a nuclear bomb, an allegation Tehran denies.

European Union leaders and the United States this month backed new sanctions against Iran, warning that Tehran’s refusal to negotiate over its nuclear programme must be met with a tough response.

Iran is already working under three sets of UN sanctions for refusing to stop uranium enrichment, a process to make both nuclear fuel and the fissile material needed for an atomic bomb.

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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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