While inflation in most European countries finally appears to be declining slightly, things are moving in the opposite direction in Germany. In June, inflation in our eastern neighbors was no less than 6.4% higher than a year earlier and 0.3% higher than last month.
And that has everything to do with the effect of economic support packages in Germany, says Carsten Brzeski, ING’s chief German economist. ‘Last year, Germany implemented a budget package. These include cheap public transport throughout the country (9 euros for a day’s travel, ed) and a reduction in excise duties », he explains. It took three months. So if you compare that to this summer – where there was no package – inflation automatically goes up a lot.’
“Germany could follow the European trend from September”
Brzeski expects inflation to be higher than last year until at least August, after which Germany could follow the European trend from September. “Then inflation will drop sharply again.”
Three percent
At the end of 2023, German inflation is expected to be around 3 percent again, is the forecast. Therefore, according to Brzeski, Germany will not benefit from further interest rate hikes by the ECB. “The German economy is already in a recession at the moment,” he says. And the second quarter doesn’t look to be much better either. So there is probably economic contraction throughout the year.’
However, he stresses that the ECB is not just looking at Germany, or at what ING economists expect in terms of inflation. “The ECB mainly looks at current inflation,” he continues. “It’s not good in principle, but the ECB is doing it because it has been wrong about its inflation forecasts in recent months.”
Checkpoint
And that’s why the ECB takes the current percentage as a benchmark, thinks Brzeski, which raises the possibility that not just Germany, but the entire European economy will fall into recession.
Industry leaders in Germany have already discussed this with German Chancellor Olaf Scholz and have threatened to leave Germany if something doesn’t change soon. However, no concrete changes were imminent. Brzeski: They’re actually sleepwalking into the next structural crisis. On the table is a proposal regarding a price cap for industry, which would allow companies to stay in Germany. But in the end we see that the current coalition is constantly under tension, which explains why there is too little movement and why the economic situation will not improve in the coming months”.
Source: BNR
Sharon Rock is an author and journalist who writes for 24 News Globe. She has a passion for learning about different cultures and understanding the complexities of the world. With a talent for explaining complex global issues in an accessible and engaging way, Sharon has become a respected voice in the field of world news journalism.
