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Schäuble: Worst of the euro crisis ‘behind us’

German Finance Minister Wolfgang Schäuble said he believes the embattled eurozone is already past the peak of its three-year-long debt crisis, citing positive developments in Greece and France.

Published: 28 December 2012 07:05 CET

Schäuble: Worst of the euro crisis 'behind us'

Photo: DPA

In an interview with mass-circulation Bild newspaper on Friday, Schäuble said: “I think the worst is behind us.”

“The government in Athens knows that it must not overburden other eurozone

member states. Therefore it is pressing ahead with reforms,” he said.

He also expressed optimism about the pace of reform in fellow eurozone powerhouse France, saying Paris “was well aware that every country must constantly carry out reforms in order to stay competitive.”

Schäuble, 70, appeared more optimistic on what lies ahead for the eurozone than Chancellor Angela Merkel who has steadfastly refused to sound the all-clear.

Speaking after the EU picked up its Nobel Peace Prize earlier this month, Merkel said she could not “completely” declare the crisis over, describing herself as a “prudent optimist.”

In contrast, French President Francois Hollande has repeatedly said the eurozone crisis, which has at times threatened the very existence of the 17-country currency union, was past.

Turning to the German economy, the bloc’s largest, Schäuble said he was counting on “decent” growth next year, driven by trade with the United States and Asia.

“The situation is better than expected because of stronger trade with the US and Asia, among other things. The German economy will therefore grow at a decent rate in 2013,” Schäuble said.

AFP/mry

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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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