Tue, Aug 22, 2017 - Page 10 News List

Emissions issue a risk to economy: German ministry

Reuters, BERLIN

The emissions scandal ensnaring German carmakers is a risk to Europe’s largest economy, the German Ministry of Finance said yesterday, adding that it was impossible at the moment to quantify its impact.

In its monthly report, the ministry named the issue, which broke out almost two years ago after Volkswagen admitted to cheating US diesel emissions tests, as a threat to Germany, along with Britain’s decision to leave the EU and protectionist trade policies by the US government.

The car industry is Germany’s biggest exporter and provides about 800,000 jobs.

“Risks linked to how Brexit will shape out and future US trade policies remain,” the ministry said. “In addition, the so-called diesel crisis should be classified as a new risk to the German economy even though its effects are not possible to quantify at the moment.”

Strong household and state spending provided most of the impulse for the German economy in the second quarter, when growth was measured at 0.6 percent. Weaker net foreign trade dampened growth, as exports grew less strongly than imports.

The ministry said it expected the industrial sector to continue its upswing in the third quarter, pointing to robust orders and strong business sentiment indicators.

However, the diesel crisis could cloud the German growth outlook, it said.

“Given the importance of the automotive industry they [the effects of the diesel crisis] must be classified in the medium term as a risk to the overall economic development,” it said.

German politicians and auto company bosses agreed earlier this month to overhaul engine software on 5.3 million diesel cars to cut pollution and try to repair the industry’s battered reputation.

EU antitrust regulators are also investigating allegations of a cartel among a group of German carmakers, a measure that could result in hefty fines for the companies.

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