Merkel says euro zone crisis far from over

Updated 01 January 2013
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Merkel says euro zone crisis far from over

BERLIN: The euro zone sovereign debt crisis is far from over even though reform measures designed to address the roots of the problem are beginning to bear fruit, German Chancellor Angela Merkel has said in her New Year's address.
In a taped interview to be broadcast yesterday evening, Merkel urged Germans to be more patient even though the euro zone crisis has already dragged on for three years. She drew a line linking German prosperity to a prosperous European Union.
"For our prosperity and our solidarity we need to strike the right balance," Merkel said. "The European sovereign debt crisis shows how important this balance is.
"The reforms that we've introduced are beginning to have an impact," she said. "Nevertheless we need to have further continued patience. The crisis is far from over."
Merkel indirectly contradicted Finance Minister Wolfgang Schaeuble with those comments. In an interview on Friday in Bild newspaper Schaeuble said the worst of the crisis was over.
Germany has been the paymaster in the euro zone crisis, to the chagrin of many German voters and a growing bloc of conservative lawmakers in Merkel's coalition. Germans remain wary of euro zone bailout efforts but give Merkel high marks for what they consider to be her judicious handling of the crisis.
Merkel, who is seeking a third term in an election in September, proudly pointed out that unemployment in Germany had fallen to its lowest level since reunification in 1990 while the number of people employed had also risen to record highs.
"That means that many hundreds of thousands of families have a secure future," said Merkel. "And that means that a lot of young people have the security of training and jobs and thus will get off to a good start in their careers."
But in face of slowing economic growth, Merkel also warned that conditions could be more difficult in 2013 than in 2012.
"I know that many people are naturally concerned going into the new year," she said. "And the economic environment will not in fact be easier but rather more difficult next year. But we shouldn't let that get us down; rather it should spur us on."
Even though Merkel's conservative party holds a commanding 10-point lead in opinion polls over the Social Democrats (SPD), the center-left opposition SPD and their Greens allies have a chance of taking power because Merkel's coalition allies, the Free Democrats (FDP) have slumped badly and may not win seats.
Political analysts believe Merkel nevertheless still has the most options to form a government after the vote. She could lead a right-left grand coalition with the SPD as she did from 2005 to 2009 or a coalition with the pro-environment Greens party.
Merkel said she hoped there would be more controls next year on international financial markets — a popular issue in Germany that the SPD is planning to make a central plank of its 2013 election campaign.
"The world hasn't sufficiently learned the lessons of the devastating 2008 financial crisis," she said. "Never again can we allow irresponsibility like back then to happen. In a social market economy, the state is the guardian of order — and that is something people should be able to count on."


Iran sanctions shadow falls on smaller German banks

Updated 27 May 2018
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Iran sanctions shadow falls on smaller German banks

  • Some German companies plan to press on with Iran dealings
  • German exports to Iran rose 15.5 percent last year

Germany’s biggest lenders have shied away from business with Iran after past penalties for breaching US sanctions, but smaller banks have leapt on opportunities afforded by the nuclear deal rejected by Donald Trump.

There are just months to go until a November deadline issued by Washington after the US president abandoned a hard-fought agreement that loosened business restrictions on the Islamic Republic in exchange for Tehran giving up its pursuit of nuclear weapons.

But some firms plan to press on in their dealings with Iran despite the looming threat of penalties.

“We will continue to serve our clients,” for now, said Patrizia Melfi, a director at the “international competence center” (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.

The center, which supports companies operating in sensitive markets like Iran or Sudan, has seen demand “rising sharply in the last few years, from firms listed on the Dax (Germany’s index of blue-chip firms), from all over Germany and from Switzerland,” she added.

German exports to Iran have grown since the nuclear deal was signed in 2015, adding 15.5 percent last year to reach almost €2.6 billion ($3.0 billion) after 22-percent growth in 2016.

Such figures remain vanishingly small compared with Germany’s €111.5 billion in exports to the US — its top customer.

Nevertheless, the KCI will “wait and see what the sanctions look like” before turning away from Iran, Melfi said.

Already, firms dealing with Tehran must take great care not to fall foul of US restrictions.

Transactions are carried out in euros, and the KCI does not deal with businesses that have American citizens or green card resident holders on their boards.

What’s more, products sold to Iran cannot contain more than 10 percent of parts manufactured in the US.

One of the most important inputs for the business is “courage among our managers” given the high risks involved, Melfi said.

Germany’s two biggest banks, Deutsche Bank and Commerzbank, avoid Iran completely after being slapped with harsh fines in 2015 over their dealings there, with Deutsche alone paying $258 million in penalties.

DZ Bank, which operates as a central bank for more than 1,000 local co-op lenders, is withdrawing completely from payment services there, a spokesman told AFP.
That left KCI to seek out the German branch of Iranian state-owned bank Melli in Hamburg.

Even that linkage could break if Iran’s biggest business bank appears on a US list of barred businesses as it has before.

Meanwhile, among Germany’s roughly 390 Sparkasse savings banks, business with the regime is mostly limited to producing documents linked to export contracts.
“We will be looking even more closely at those” in the future, a person familiar with the trade told AFP.

Elsewhere in the German economy, the European-Iranian Trade Bank (EIH) founded in 1971 is another conduit to Tehran.

Also based in Hamburg, it for now remains “fully available to you with our products and services,” the bank assures clients on its website, although “business policy decisions by European banks may result in short term or medium term restrictions on payments.”

Neither does the Bundesbank (German central bank) believe that much has so far changed for business with Iran.

“Only the European Union’s sanctions regime will be decisive,” if and when it is changed, the institution told AFP.

Any payment involving an Iranian party would have to be approved by the Bundesbank if things return to their pre-January 2016 state.

German banking lobby group Kreditwirtschaft has called on Berlin and other EU nations to clarify their stance — and to make sure banks and their clients are “effectively protected against possible American sanctions.”

KCI’s Melfi said time is running out for EU governments to act.

“Many firms just want to stop anything with Iran, since they can’t calculate the risk of staying,” she noted.

On Friday for the first time since the Iran nuclear deal came into force in 2015, China, Russia, France, Britain and Germany gathered in Vienna — at Iran’s request — without the US, to discuss how to save the agreement.

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