G-7 meeting: Lindner abstains from “strong signal” towards Ukraine

EMinister of Finance, who always and everywhere thinks about how he can keep citizens’ money, Christian Lindner (FDP) likes to present himself as such. It doesn’t always have to be big billions, it can also be how much the operator of the large hotel in the former guesthouse of the federal government on the Petersberg near Bonn has to pay to the State in lease.

In view of the general evolution of market prices, the hotel was “too cheaply rented”, joked the Minister of Finance on the red carpet while waiting in front of the majestic building for his guests, the other Ministers of Finance and the governors G7 central banks. , the group of major industrialized nations. The hotel above the Rhine is the only property of the federal government.

When US Treasury Secretary Janet Yellen was the last to arrive shortly before 9 a.m., the big issues were discussed behind closed doors: the different roles of central banks and governments in fighting inflation, plans of central bank digital currency, the one envisaged Climate Club with common objectives and solidarity with developing countries in the supply of vaccines.

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The representatives of the G-7 discussed this subject with scientists, the concrete decisions were not planned from the start. This happened in the afternoon, when it came to stabilizing the finances of the Ukrainian state – and it was very precisely about money. By billions.

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Ukrainian Prime Minister Denys Schmyhal and his finance minister Serhiy Marchenko were also linked. During the meeting in Washington a month ago, both had explained to the finance ministers that their country needed around five billion euros per month to operate the state apparatus despite the war. There was talk of support for three months, or 15 billion euros.

billions for Ukraine

In the afternoon it was at least clear how much Germany wants to tax: one billion euros. It is about ensuring the ability of the war-torn Ukrainian state to act, Lindner said in a brief statement. He left open the question of whether the G-7 group would actually come up with the targeted €15 billion.

It was a good thing that the budget committee of the Bundestag met in Berlin at the same time to agree on the last open items in the federal budget for 2022. Experience has shown that the meeting lasts until the next morning.

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The billion euros for Ukraine does not change the known new debt of 139 billion euros this year, there was a sufficiently large reserve in the draft budget – new aid payments should also be possible if necessary , without Lindner having to initiate an additional budget in the coming month.

US pays most of aid to Ukraine

One billion euros can hardly be considered the announced “strong signal” that Germany wanted to send as host of this year’s G-7 meetings. Most of the cash aid will be provided by the United States in an account with the International Monetary Fund: US Treasury Secretary Janet Yellen had already pledged 7.5 billion euros ahead of the meeting of the G-7.

Again, there are big differences in aids. Representatives of the federal government regularly praise themselves for having helped Ukraine a lot – Lindner is also happy to do so. Reference is then made to the support given to Ukraine since the annexation of Crimea. Between 2014 and 2021, Germany was the “world’s largest bilateral donor to Ukraine”, according to Lindner’s ministry, although not all funds have yet been disbursed.

Compared to this year, the balance of the billions is different Figures from the Kiel Institute for Economic Research (IfW) Ukraine aid tracker cast doubt on whether Germany actually has a reason to show up as particularly generous.

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From the end of January to May 10, Germany provided direct aid in the amount of 2.3 billion euros – financial, military and humanitarian support. This puts Germany behind the United States (42.9 billion euros), Great Britain (4.8 billion euros) and Poland (2.6 billion euros). If you look at the absolute amounts, Germany ranks fourth among the 37 Western countries that have pledged aid so far.

However, the picture changes when aid is compared to a country’s economic strength. According to IfW statistics, Germany then fell to 14th place. Commitments through May 10 were just 0.06% of gross domestic product (GDP).

Christian Lindner (FDP, middle) with participants at the G-7 Finance Ministers and Central Bank Governors Meeting

Christian Lindner (FDP, M) with participants in the meeting of G-7 finance ministers and central bank heads

Those: dpa / Federico Gambarini

Estonia (0.8% of GDP), Latvia (0.7%) and Poland (0.5%) lead in this respect. The United States follows in fourth place. US aid to Ukraine amounts to 0.2% of US economic output.

The importance of such rankings should not be underestimated. The fact that the United States has so far mobilized 43 billion euros and all European countries combined, despite the geographical proximity of the war zone, barely 16 billion euros, should also play a role at least subliminally at meetings like the one in Petersberg. So why should faraway Japan make a significant contribution?

Lindner sees central banks as having an obligation

Major industrial nations pursue common interests in the face of the global economy, which is weakening around the world due to high energy prices and fragile supply chains. Now it’s about tackling risks to the economy, Lindner said at the G-7 meeting.

“It affects inflation, but also the lack of recovery after the pandemic,” the minister said. There should be no stagflation, ie a phase of low growth rates combined with high inflation.

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In recent weeks, Lindner has made no secret of the fact that he sees central banks as primarily responsible for fighting inflation. ECB President Christine Lagarde should have heard it again, and not just from Lindner on the Petersberg.

While the US central bank has already reacted to the strong upward trend in interest rates with significant rate hikes, the European Central Bank intends to raise interest rates in July at the earliest – and only slightly.

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Measures against inflation

At the meeting, Lindner made it clear where he sees the policy task now: “It’s about reducing price pressure,” he said. The goal must be to ensure more productivity and a wider range of businesses.

According to him, consumer subsidies are not the right way to fight inflation, because they tend to stabilize the high level of prices. This is why he prefers to abolish the financing programs for the renovation of buildings and the bonuses for the purchase of electric cars as soon as possible.

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