Chancellor Olaf Scholz has prepared the citizens for a long-lasting crisis with high prices. “The current crisis will not be over in a few months,” said the SPD politician on Monday at the start of the so-called concerted action with top representatives of employers and trade unions in the Chancellery.
Russia’s war in Ukraine and supply chains disrupted by the pandemic created general uncertainty. “We have to be prepared that this situation will not change in the foreseeable future,” said Scholz. “We are facing a historic challenge.”
The aim of the talks are joint instruments to counter the price increases in Germany. “As a country, we will only get through this crisis well if we join hands, if we agree on solutions together,” said Scholz. Society is much stronger than is sometimes assumed. “The message that is important to me is that we stand together,” said the Chancellor.
The concerted action against inflation in Germany should have concrete results in the fall. This was announced by government spokesman Steffen Hebestreit on Monday in Berlin. The kick-off meeting in the Chancellery, which began on Monday afternoon, will be followed by a whole series of other meetings.
“We’re talking a long way,” Hebestreit said. But the situation is such that “you have to have results in the fall”. Chancellor Olaf Scholz (SPD) initiated the dialogue with the social partners, economists and the Bundesbank.
Hebestreit said: “This should not be a permanent facility in which all social groups gather to talk to the federal government.” In addition to Scholz, the government also included Economics Minister Robert Habeck (Greens), Finance Minister Christian Lindner (FDP), Labor Minister Hubertus Heil ( SPD) and Chancellery Minister Wolfgang Schmidt (SPD).
Hebestreit did not want to comment on individual proposals – such as an energy price cap from the German trade union federation. “It should take place there in order to keep it constructive and confidential.” According to the government spokesman, a working structure for the concerted action should also be discussed at the opening meeting. Below the executive level, there will be a “work structure underneath,” said Hebestreit.
In addition to Scholz, various cabinet members as well as Employer President Rainer Dulger, DGB boss Yasmin Fahimi and Bundesbank President Joachim Nagel wanted to take part. According to the federal government, the first step is to get a “general view of the situation”. The aim is to prevent or mitigate real income losses and at the same time to prevent the risk of a price spiral.
Scholz is very concerned about rising energy prices, as he said in an ARD interview on Sunday. “If the heating bill suddenly increases by a few hundred euros, then that’s a sum that many people can’t really cope with. That’s social explosives.” The chancellor is aiming for a long-term process. Observers expect that decisive rounds of concerted action will not follow until after the summer break – when the actual extent of the energy and price crisis becomes clearer.
The most pressing problem at the moment is the price of gas. Economics Minister Robert Habeck (Greens) warned of a price explosion at public utilities if Russia turns off the gas tap and large suppliers continue to get into trouble. A chain reaction with far-reaching negative consequences seems possible.
The biggest challenges in terms of prices overall – according to Scholz – will not follow until next year. “For this year, almost everyone who did the math says we’ve absorbed about 90 percent of the price increases among lower- and middle-income people through the many measures we’ve taken.”
1967 saw the first downturn in the economic boom of Germany. The SPD Economics Minister Karl Schiller therefore wanted to coordinate the anti-crisis policy in a concerted action with employers and trade unions. The state wanted to use its own measures to influence price developments and the economy.
Consensus with the social partners should help in the matter – and strengthen democracy and community spirit. Scholz wants that too – his motto: “We have to hook up and stick together.”
DGB boss Yasmin Fahimi campaigned on Sunday for a price guarantee for basic electricity and gas needs. She told the “Bild am Sonntag” that the basic needs of every adult and every child should be determined in advance. Left faction leader Dietmar Bartsch made similar demands at the editorial network Germany (RND).
In principle, the unions resist the idea that price increases are fueled by higher wages. Verdi boss Frank Werneke said: “Permanently rising prices must be fully offset by permanently effective collective wage increases.” This also applies to pension adjustments and the minimum wage. The relief must be delivered later.
Federal President Frank-Walter Steinmeier also called for further relief. “We haven’t experienced that before, four times higher prices, not only at the gas stations, but above all for the gas,” Steinmeier said on ZDF at the weekend. You will have to think about instruments to make life easier, especially for low earners.
The Chancellor is reticent. Scholz pointed out the previous relief measures amounting to 30 billion euros. “Right now all these measures are being rolled out,” he said. “It won’t work now by agreeing on a 30 billion euro package (…) and then we’ll discuss the next ones again.”
The unions were not very enthusiastic when it was reported that Scholz wanted to relieve the employees with a one-off payment – to be paid by the company, flanked by the state, which would waive taxes and duties on the money injection, and compensated a bit by union wage restraint in collective bargaining.
Scholz has now rejected such reports as “a free invention”. “Of course we thought about how we could support union activities, especially when prices go up next year,” he said. “But no one is suggesting that that’s why the actual pay rises shouldn’t happen.”
Basic security and generally small and medium incomes should be relieved – that’s what the Greens are demanding. Your deputy parliamentary group leader, Andreas Audretsch, has brought into play a contribution from the particularly wealthy. “Everyone must now ask themselves how they can make a contribution,” said Audretsch. “This is especially true for those who have a lot, for the richest.”
Federal Finance Minister Christian Lindner rejects more debt and higher taxes. This “would be toxic and an impoverishment program,” said the head of the FDP to the German Press Agency. Even massive increases in government spending are out of the question for him. “A central contribution of the state is to avoid additional price pressure through solid finances.”
Instead of just curbing the consequences of inflation, the state must fight the causes, according to Lindner. “At the same time, we should reduce price-driving subsidies and do everything we can for cheaper energy.”
“Only higher wages and social benefits can compensate for the damage to people with middle and low incomes in the long term,” said the President of the German Institute for Economic Research (DIW), Marcel Fratzscher, the dpa. The economist Achim Truger, on the other hand, told the Bayern media group that there should be no excessive wage increases. However, a continuation of the corona-related wage restraint does not make sense either.
“In principle, it would also be possible to curb inflation through temporary energy tax cuts or price caps,” says Truger. “However, that would be counterproductive because it would reduce the current savings incentives, which are so important.”
Employers are most concerned that the companies do not get into even more difficult waters – even if they suffer from supply bottlenecks and energy prices.
The social climate money proposed by Labor Minister Hubertus Heil (SPD) should come back to the table in the concerted action. According to the proposal, climate money should be paid once a year – for single people who earn less than 4,000 euros gross per month, and for married couples with a total of less than 8,000 euros.
