After the Covid-19 pandemic, massive stimulus measures and the Ukraine-Russia war, inflation in Germany has soared. Official data from the German Consumer Price Index shows that inflation reached an annual rate of 10.9 percent in September, the first time since the end of World War II that Germany has experienced double-digit inflation.
German inflation soars to double digits in September
Around the world, inflation rates have risen sharply. Many economists believe that the energy crisis in Europe, linked to the Ukraine-Russia war, is a major reason. However, like the U.S., the U.K. and Europe have deployed massive stimulus measures to support the economy in the context of the Covid-19 pandemic. Germany has enacted a large number of stimulus measures to avoid the economic fallout of government-imposed business closures and lockdowns.
On Thursday, official inflation data in Germany showed the country’s inflation climbed to an annual rate of 10.9 percent in September. Germany’s inflation is up from 8.8 percent the previous month. This is the highest inflation rate Germany has seen since 1951, roughly the end of World War II. Inflation approached double digits in Germany in 1999, when the European Union (EU) introduced the euro. Statistics show that energy prices in Germany rose 44 per cent in September compared to the same period last year.
“High energy and food prices, which are expected to rise further next year, are causing significant losses in purchasing power“, Torsten Schmidt, director of economic research at the Leibniz Institute, told The New York Times on Thursday.
Germany has taken the lead in stimulus and subsidies to combat rising prices. The legislature is adding another $195 billion package.
In addition to the financial disaster caused by the Ukraine-Russia war, Germany has been a leader when it comes to stimulus packages. Between February and May 2020, Germany deployed an $844 billion stimulus package, including about $175 billion in stimulus and $675 billion in loans. The German government also introduced wage subsidy programs that maintained a threshold of 60 percent of employee wages.
The country also introduced a three-month moratorium on payments on German-based consumer loans, and in late June, the German parliament passed another $146 billion stimulus package. The parliament also created a $56 billion rebate program for German residents who purchased electric cars. While Germany is experiencing high inflation and economists believe it stems from a three-pronged problem related to Covid-19, the stimulus package and the war in Europe, German bureaucrats are planning to drop another subsidy package.
At the same time, German inflation jumped to 10.9 percent, and members of the German parliament revealed another $195 billion package. Germany’s latest subsidy package also placed price limits on natural gas. The German government aims to “cushion rising energy costs and the more serious consequences for consumers and businesses“, officials said Thursday. “Prices must come down“, said Chancellor Olaf Scholz at a press conference. “To bring prices down, we are deploying a comprehensive defense shield“, the chancellor added.