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TRADE

India channels funds to Iran via Bundesbank

India is set to pay Iran for billions of dollars worth of oil imports by channelling funds to Tehran via the German central bank, the business daily Handelsblatt reported Monday.

Published: 28 March 2011 15:08 CEST
India channels funds to Iran via Bundesbank
Photo: DPA

Under pressure from the United States to break direct commercial links with the Islamic republic, India intends to place money for its Iranian oil imports in an account with the Bundesbank, according to Handelsblatt.

The Bundesbank would then transfer the money to the European-Iranian Trade Bank AG (EIH), based in the northern German city of Hamburg, the paper said, quoting financial and political sources.

“We are in talks with the Bundesbank,” Neeta Bhushan of the Indian Finance Ministry told the paper.

The arrangement has been given the green light by two ministries in the German government, the Handelsblatt reported.

Two of the EIH’s main shareholders, Bank Mellat and Bank Refah, are subject to European Union sanctions approved last year in addition to UN restrictions, the paper said.

Contacted by news agency AFP, the Bundesbank declined to comment while a spokeswoman for the Economy Ministry told a regular government briefing that the EIH, also known as the EIHB, was itself not subject to EU or UN sanctions.

“The inclusion of a bank on the [sanctions] list is not something decided by the [German] government but the European Union council,” spokeswoman Sarah Schneid said.

“What counts is involvement of a bank in financing Iran’s nuclear and missile programme … The government investigates closely any indications [of such involvement].”

Chancellor Angela Merkel’s spokesman Steffen Seibert stressed that the bank was under “strict” supervision, with all transfers over €10,000 ($14,000) needing to be reported and all those above €40,000 requiring approval.

Germany has long been under fire for its close business ties with Iran, with the country’s exports there totalling €3.8 billion in 2010, according to official figures.

Berlin’s abstention this month over a UN Security Council resolution – it holds a non-permanent seat in the body – authorising military action in Libya has also angered Germany’s partners and put Merkel under pressure at home.

AFP/adn

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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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