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CHINA

Merkel pledges to avert EU-China trade war

German Chancellor Angela Merkel pledged late Sunday to take steps to avoid a brewing trade war between China and the EU during a first visit by China's new premier to Germany, with both leaders calling for dialogue.

Merkel pledges to avert EU-China trade war
Photo: DPA

Germany will push in the next six months for discussions on resolving the disputes between Brussels and Beijing over Chinese telecom products and solar panels to avoid it ending in mutual tariffs, Merkel said.

Both she and Premier Li Keqiang, who is on his first foreign tour since taking office in March, told a joint press conference that they rejected trade protectionism which hurt both sides.

Under pressure from German industry, Merkel said Germany would do its utmost to resolve the issues by pushing for talks to avoid “lapsing into a kind of dispute which finally only ends in mutual tariffs”.

“I will, as head of the government, advocate that we, at the European level, as quickly as possible have intensive discussions with the Chinese side on the questions at issue,” Merkel added.

Germany is by far China’s biggest European trading partner. While German motor vehicles and auto parts, machinery and electrical goods find a vast export market in the world’s second-largest economy, China needs technology from Germany.

German exports to China amounted to €66.6 billion ($86 billion) last year, according to official German data.

But as both the EU and China suffer the knock-on effects of a sharp economic slowdown, the slew of looming trade disputes – over telecoms, solar panels and steel tubes – has turned up the heat.

Li, whose tour has also taken in Switzerland, India and Pakistan, said China “resolutely” rejected the European Union’s plans to probe the country’s telecom products and impose taxes on solar panels.

He said the move would not only threaten jobs in China and hit the branches concerned, but also affect the interests of European companies, consumers and industry.

“To this effect, this measure is a measure that doesn’t serve the particular interests and also damages others,” Li told reporters through an interpreter.

“Therefore we hope that through joint efforts and through dialogue and consultations, the trade disputes between China and the EU can be settled acceptably,” he added.

And he said that the EU decisions sent the “wrong signal” that trade protectionism had made a “comeback”.

Germany is the only stop among the EU’s 27 member states for Li on the trip, in a sign that Beijing wants to continue their special relationship, analysts say.

“From the German side, it’s all about trade. Germany sees China essentially as a large export market on which it’s increasingly dependent,” Germany expert Hans Kundnani, of the European Council on Foreign Relations, told news agency AFP.

Merkel made two trips to Beijing within just seven months last year and said Sunday the two sides wanted to further bolster their already “close” relations, citing four areas – industry, IT, urbanisation and agriculture.

But for China, Germany is not only economically important in providing much-needed technology but also plays a strategic part in helping to combat Beijing’s fear of the US and Europe teaming up against it, Kundnani said.

Li said his visit to Germany was also about visiting the EU. “We want through the intensification of cooperation with Germany, to also advance the relations and cooperation with the EU,” he said.

EU exports to China totalled $212 billion, with imports of $334 billion in 2012.

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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