A passenger purchases a ‘9 euro ticket’ at Berlin Station, Germany on June 1. ⓒAP Photo Representatives of the German labor and management gathered to solve the inflation problem. On the afternoon of July 4, Prime Minister Olaf Scholz, DGB Chairman Yasmin Fahimi, and BDA Chairman Rainer Dulger held a joint press conference. It was an opportunity to report on the first meeting of the ‘cooperative action’, which was prepared at the suggestion of Prime Minister Scholz. At the meeting, Prime Minister Scholz emphasized that “the current crisis will not be resolved in a few months” and that close cooperation among members of society is needed to solve the problem of long-term inflation. After the meeting, Scholz’s cabinet announced that it would hold regular ‘cooperative actions’ meetings to come up with measures to alleviate the social suffering caused by inflation. Fahimi, chairman of the Federation of Trade Unions, said, ‘It is a historical situation that requires joint efforts, and both households and businesses are experiencing difficulties.’ He said that the problem of a vicious cycle in which a rise in wages leads to inflation does not currently exist, and he made a remark conscious of some public opinion criticizing the demand for a wage increase in response to inflation. Dulger, president of the Business Association, also said in support of Fahimi, saying, “The current inflation is caused by supply problems, not because of wage increases.” Chairman Dulger suggested that it is necessary to raise wages after tax deductions through policies such as reductions in taxes and social security contributions as a way to relieve the current household burden. Regarding the issue of wage negotiations between labor and management, he drew a line saying, ‘It is a matter that requires negotiations between the parties, not the prime minister’s office.’ Although the first ‘cooperative action’ meeting was held, the German media predicted that it would not be easy to solve the problem of inflation through this meeting. Not only is the situation dire, but there are differences of opinion between the government and the government and the coalition partners of the government cabinet. In Germany, the consumer price index in May rose 7.9% year-on-year, the highest in 50 years. In June, the CPI growth rate fell slightly due to the lower fuel tax and lower public transportation fares, but there are concerns that inflation may intensify again after the policy is over. The biggest factor in inflation is energy prices, and the rate of increase in consumer energy prices in June reached 38% compared to the same period of the previous year. Food prices also rose by 12.7%. Germany experienced murderous inflation in the 1920s. It is also evaluated that the economic turmoil at the time influenced Hitler’s rise to power. At that time, inflation was so severe that the price of one dollar (USD) reached 4.2 trillion marks. For this reason, price stability after World War II has been one of Germany’s important economic goals, and Germany’s inflation rate for the past 30 years has stood at 0.3-3.1%. Tickets for unlimited use of short-distance public transport The German government has already implemented a policy to reduce the burden on households caused by inflation. A typical example is the ‘9 euro ticket (about 12,200 won)’, which aims to reduce household burden and energy consumption at the same time. The ticket is available for a limited time from June to August and whoever purchases the ticket for 9 euros can use unlimited short-distance public transport throughout Germany for one month. According to a report by German public broadcaster ZDF, about 21 million tickets were sold in June, and in the case of trains, the number of passengers increased by about 15% compared to pre-COVID-19. According to a survey by the German Association of Transport Companies (VDV), about 89% of respondents who used a 9-euro ticket gave a positive evaluation of the ticket. The 9-euro ticket sales are expected to cost the German government 2.5 billion euros. In addition, as a policy to ease the burden on households, the German government will lower the gasoline price by 35.2 cents per liter and 16.7 cents per liter in the case of diesel from June to August. In addition, in July, a one-time bonus child allowance of 300 euros will be paid in addition to the existing child allowance. Here, the share of renewable energy was abolished from July. According to a report by the German Federal Ministry of Economy and Climate Protection, the share of renewable energy that had to be paid in 2021 was 227.50 euros when using the standard annual electricity consumption of 3500 kW/h for a two-person household. Nevertheless, concerns about the burden on households due to inflation are not diminishing. According to the ‘Poverty Report 2022’ of the German Fair Welfare Association (DPW), the number of people living in poverty in Germany in 2021 was 13.8 million, the highest since unification. The growth rate of the poor in 2020 and 2021 was unprecedented, and among those who were engaged in professional activities, those who did not earn enough to at least enjoy a social and cultural life increased significantly. Citing the report, Der Spiegel predicted a greater increase in the poor in 2022, when inflation is severe. In particular, it is predicted that the youth, pensioners, and low-income groups with a high proportion of basic living expenses in their income will be more likely to fall into poverty due to inflation. Given this situation, within the Social Democrats and Greens, both of which are participating in the coalition government, there is a demand for an increase in the amount of long-term unemployment benefit recipients, an extension of the 9-euro ticket, and active measures for pensioners. In addition, in order to reduce the financial burden of various tax cuts and support measures, there are also demands such as a tax increase for high-income earners or companies making more money during the COVID-19 pandemic or inflation. But the problem is with another coalition partner, the LDP. Finance Minister Christian Lindner, a member of the LDP, has been strongly opposed to the government’s debt increase as well as tax hikes since the beginning of the coalition negotiations. In addition, Lindner is of the view that the effect of the already implemented policies will be seen during the second half of this year and that the new support policy will not be implemented until 2023. He is holding out strong, saying that enough support has already been given to many people and the state budget for 2022 is no longer left. In addition, Lindner was strongly criticized for saying that in order to revitalize the economy, more start-ups and people need to work more.
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Memories of Horrible Inflation Germany’s ‘Catching Prices’ War
