Following the Covid-19 pandemic and massive stimulus packages, German inflation is soaring in the midst of the Ukraine-Russia war. According to official data from Germany’s consumer price index (CPI), inflation jumped to an annual rate of 10.9% in September, the first time the country has seen double-digit inflation since World War II.
German Inflation Spikes Double-Digit in September
Around the world, inflation is rising significantly. Many economists believe that one of the main reasons is the energy crisis in Europe, which is tied to the Ukraine-Russia war. However, as in the U.S., the U.K. and Europe also implemented massive stimulus packages to leverage their economies amid the Covid-19 pandemic. In Germany, a huge number of stimulus packages were implemented to avoid the economic consequences of government closures and shutdowns of businesses.
On Thursday, Germany’s official CPI datashowedthat the country’s inflation rate jumped at an annualized pace of 10.9% in September. Germany’s inflation rate rose from 8.8% the previous month and is the highest inflation rate since 1951, or almost the end of World War II. When the European Union introduced the euro in 1999, Germany experienced near double-digit inflation. According to statistics, German energy prices in September were up a whopping 44% compared to the same period last year.
Torsten Schmidt, head of economic research at the Leibniz Institute for Economic Researchtold the New York Timeson Thursday that “high energy and food prices are likely to rise further in the future, causing a significant loss of purchasing power.”
Germany spearheaded stimulus and subsidies to combat rising prices Parliament adds $195 billion new package In addition to the financial disaster caused by the Ukraine-Russia war, Germany was a leader when it came to leading the stimulus Between February and May 2020, Germany rolled out an $84.4 billion recovery package, with roughly $175 billion earmarked for stimulus and $675 billion for loans. The German government also introduced a wage subsidy program that maintains a standard of providing 60% of employee wages.
A three-month payment moratorium on German-based consumer loans was also introduced, and at the end of June the German parliament introduced another $146 billion stimulus package. Congress further created a $56 billion rebate package for German citizens who purchased electric vehicles. While red-hot inflation in Germany is high and economists believe it stems from three issues tied to Covid-19, the stimulus package, and the war in Europe, German bureaucrats are plotting to drop another subsidy package.
At the same time, German inflation jumped to 10.9% and members of the German parliament revealed another package of $195 billion. Germany’s latest subsidy package placed a price cap on natural gas. The German government aims to “mitigate rising energy costs and the most serious consequences for consumers and businesses,” officials said Thursday. Chancellor Olaf Scholz told a news conference that “prices have to come down. The chancellor added: “We are deploying a broad defensive shield to force prices down.”
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