A specter is haunting: inflation! One that spreads terror under all circumstances and everywhere – in politics, in business, but above all among citizens. Consumer prices are climbing to new heights, so-called inflation is now just under eight percent. There has never been an inflation rate of this magnitude in reunified Germany, the last time in West Germany was in 1973.
It won’t get much better in the short term. However, while the war in Ukraine is still raging, energy prices are rising, in May by 38.3 percent compared to the same month last year. In addition, the delivery bottlenecks due to the corona pandemic; they have meant that food, for example, has become more than eleven percent more expensive.
The relief packages, which are intended to moderate the rise in prices somewhat for private households and companies, will take effect by autumn. But the hope that the fuel discount, among other things, will help to fundamentally stop the rate of inflation is exactly that – a hope. There are enough experts who are skeptical.
The forecasts are accordingly: bleak. Imports from other countries as an alternative to Russian gas and oil are expensive; and they have to be sealed first. In addition, production keeps stopping due to broken song chains caused by Corona. Bottlenecks are the result.
And where demand is greater than supply, prices rise. In food retail, for example, price increases of almost eleven percent are expected over the year, which would mean more than 250 euros per person per year. What that means for private households – unthinkable.
Even higher standard wages have not prevented losses for employees in the past few months. Word of the loss of prosperity is making the rounds in the republic. Which means: The additional damage can lead to a boom in disenchantment with politics, and the shares of those in government could fall dramatically.
And so the already shaken Finance Minister Christian Lindner from the FDP says that the fight against inflation is his next big goal: to stabilize economic development, to tackle rising prices, to show responsibility towards the generation of children and grandchildren.
And how? Through a policy of scarcity. With the debt brake anyway, which should apply again from 2023, but also with the help of the European Central Bank. If interest rates were to rise, credit would become expensive and consumption slowed down. While that would be less favorable for the economy, prices fell as demand fell.
Because that’s what makes politicians even more afraid: If the high inflation persists, employees will derive wage demands that are too high. And what that leads to was shown in West Germany in the 1970s: to the danger for the government. Incidentally, the Chancellor also came from the SPD at the time.
