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Germany changes rare minerals strategy over China spat

Germany has unveiled a new strategy to help firms in Europe's top economy obtain vital minerals, amid concern that China is curbing exports of rare earths crucial for high-tech industries.

Germany changes rare minerals strategy over China spat
Photo: DPA

Economy Minister Rainer Brüderle this week said that securing a reliable supply of these minerals, used to produce goods from iPods to hybrid cars, was of “pivotal importance” for Germany as an industrial power.

While individual companies are responsible for sourcing their own minerals, the government would back them up with foreign policy measures, Berlin vowed.

“Part of the raw materials strategy is building up partnerships with selected countries,” the German government said in a statement, without saying which nations were involved.

Japan has accused China, which has cornered 95 percent of the rare earths market, of restricting shipments amid a bitter spat between Asia’s top two economies sparked by a maritime incident in disputed waters six weeks ago.

Beijing has cut rare earth exports by five to 10 percent a year since 2006 as demand and prices soar, but strongly denies making any fresh cuts.

Earlier Wednesday, Chinese authorities lashed out at a report in the official China Daily, which cited a commerce ministry bureaucrat as saying Beijing would cut quotas by up to 30 percent next year.

“China will continue to supply the world with rare earths,” Beijing insisted.

The New York Times has reported that the United States and Japan are considering filing a case against China at the World Trade Organisation.

On a visit to Asia this month, Brüderle pledged to help Japan gain access to rare earths and said Berlin and Toyko would examine joint efforts to explore new sources for the minerals.

And Chancellor Angela Merkel said in a speech last week that Europe must formulate a policy to ensure a steady supply of minerals.

“In Central Asia, there is a broad spectrum of interesting deposits, including of rare earths which we need for things like electrical batteries,” said the chancellor.

AFP/mry

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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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