Price spikes make life difficult for many consumers. In some companies, air is also becoming thinner. Expectations for concerted action are correspondingly high – but so are differences of opinion.
Berlin (dpa) – Before the joint action began, Chancellor Olaf Scholz (SPD) called on those involved to act together against inflation in Germany. Some economists and politicians have called for permanently higher wages. On the other hand, other economists have warned of a spiral in prices and wages.
Scholz said in a video podcast: “We have to join hands and stick together.” Rising prices are a major problem and rightly grappling with many citizens today. “And there, too, we must act together,” warned Scholz. Therefore, he invited trade unions, employers, the Bundesbank and academics to “talk about what we do” as it was in the 1960s and 1970s. The campaign will start on Monday at the Chancellery.
The president of the German Institute for Economic Research (DIW), Marcel Fratzscher, told the German Press Agency in Berlin: “Only higher wages and social benefits can permanently compensate people with middle and low incomes.” On the other hand, one-off payments are not accurate as many people don’t use them at all.
A week ago, the Law Firm’s plans for one-off tax-free payments became known. In return, trade unions may forgo some wage increases in collective bargaining rounds so as not to fuel inflation.
Debt brake extension requested
Fratzscher said one-off payments could only be temporary, but not a permanent relief. “The best economically and socially effective way to deal with inflation is – in addition to higher wages and incomes – tax breaks and higher social security benefits for middle- and low-income people,” said Fratzscher.
According to Fratzscher, the federal government should also decide on the package of future investments. The debt brake should also be suspended in 2023 – the federal government wants to apply it again.
“Economic wise” Veronika Grimm told DPA: “The idea of one-off payments can also backfire.” If you forgo wage increases for one-off payments, they will have to be very high. “Of course, this could immediately increase demand and thus increase inflation again.”
SPD leader Saskia Esken told the press of the Funke media group: “One-off payments and temporary relief measures help in the short term, but are not a long-term solution.” Prices, especially energy prices, will remain high. “As a welfare state, we must therefore adapt benefits to rising inflation.” In addition, labor market wages, especially in the low-wage sector, would have to “increase significantly and sustainably”.
Other possible instruments should also be on the table in the Concerted Action. This includes money for the social climate proposed by Labor Minister Hubertus Heil (SPD), according to government circles. Heil wants climate money once a year for single people who earn less than € 4,000 gross a month and for married people who collectively earn less than € 8,000.
CDU economics expert Julia Klöckner has criticized that the joint action falls under the “If I don’t know what to do, I’ll set up a working group” category. Instead, you should permanently lower, among others energy taxes and duties.
Fratzscher: the wage and price spiral is a “false myth”
Meanwhile, the social wing of the CDU demanded: “VAT on basic food products, which has become up to 40 percent more expensive, must be temporarily lowered.” A bag of crisps shouldn’t be cheaper than carrot juice, the Funke media group papers cite an article from the CDA of the Workers’ Wing.
According to “wise man” Achim Truger, joint action can help prevent an impending recession in Germany. As for the content, “the unions are not making excessive wage demands so that there is no price-wage spiral,” he told Bayern media group. On the other hand, Fratzscher said the wage and price spiral was a “false myth”. Both Truger and Fratzscher demanded more collective agreements from employers.
Chairman of the Association of German Chambers of Commerce and Industry, Peter Adrian, told DPA that monetary policy and wage development were important. However, he mainly attributed the current price spiral to increases in energy and raw material costs and to bottlenecks in supply chains. “So we must first and foremost address the measures that widen these supply-side bottlenecks.” This included speeding up the approval process. “With the price explosion, any additional government burdens and unnecessary regulation that can be eliminated are a helpful relief.”
© dpa-infocom, dpa: 220702-99-885204 / 3