Germany needs to learn to live with high inflation
2022.12.24 11:16
Germany needs to learn to live with high inflation
Budrigannews.com – According to a report published on Saturday, the head of the council of economists that provides advice to the German government, inflation is likely to remain high for another two years as businesses pass on higher input costs and, in some instances, overstate them.
With consumer price increases of approximately 11.3% in November, inflation in Germany reached its fastest rate since the early 1950s as a result of Russia’s invasion of Ukraine.
Even a planned price cap on gas and electricity may not be sufficient to reduce inflation below double digits, according to the Bundesbank.
According to the Rheinische Post, the head of the so-called “wise men,” Monika Schnitzer, “Inflation will also be an issue in 2024, and only thereafter will we possibly see it returning to 2%.”
“We are seeing second round effects, with companies passing on their higher costs – and some significantly exaggerating,” which is why inflation is still high.
Given the measured wage increases in the chemistry and metal industries, she stated that she was not concerned about a wage-price spiral.
In exchange for one-time compensation, workers in those industries agreed to pay increases that are likely to be below inflation.
However, she was concerned about the high cost of electricity and suggested that the government urgently investigate whether it would be practical to allow the remaining three nuclear plants to operate for two or three years longer than was originally planned.
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“It would seem OK to rapidly arrange new fuel poles now, that would give us greater security the following winter,” she said.
The largest economy in Europe had planned to phase out nuclear power by the end of the year. However, due to the current energy crisis, the government decided in October to extend the lifespans of the remaining three plants until April. Some members of the government would like to have a longer lifespan.
