Rising prices and inflation are causing problems for many consumers. The air is also getting thinner for some companies. To counteract this, the federal government is planning a concerted action. Plans by the Chancellery were made public last week. Accordingly, there should be tax-free one-off payments to relieve the burden on citizens. In return, trade unions should refrain from demanding higher wages. The plans have met with criticism from business and politics.
The expectations of the concerted action are correspondingly high – but so are the differences of opinion. Before the start of the concerted action, Chancellor Olaf Scholz (SPD) called on those involved to take joint action against inflation in Germany. Scholz said in a video podcast: “We have to link arms and stick together.” The big problem that many citizens are rightly worried about at the moment is the rising prices. “And we have to act together there, too,” warned the Federal Chancellor.
A week ago, plans from the Chancellery for tax-free one-off payments became known. In return, trade unions could waive part of the wage increases in collective bargaining rounds in order not to further fuel inflation, it said.
But there are voices of criticism regarding the plans from the Chancellery. Some economists and politicians demanded permanently higher wages. Other economists, on the other hand, warned of a price-wage spiral.
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 compensate for the damage to people with middle and low incomes in the long term.” many did not benefit from it at all.
Fratzscher said one-off payments could only be temporary, but not permanent relief. “The economically and socially best way to deal with inflation is – in addition to higher wages and income – tax relief and higher social benefits for people with middle and low incomes,” said Fratzscher.
According to Fratzscher, the federal government should also decide on a package of investments for the future. The debt brake should also be suspended in 2023 – the federal government wants to comply with it again.
The “economic wise” Veronika Grimm told the dpa: “The idea of one-off payments can also backfire.” If you forego wage increases for one-off payments, they would have to be very high. “Of course, that could immediately fuel demand and thus inflation again.”
There has also been criticism of the idea from within its own ranks. The SPD boss Saskia Esken told the newspapers of the Funke media group: “One-off payments and temporary relief measures help in the short term, but are not a long-term solution.” The prices, especially for energy prices, would remain high. “As a welfare state, we must therefore adjust benefits to rising inflation.” In addition, wages on the labor market, especially in the low-wage sector, would have to “rise significantly and permanently”.
Other possible instruments should also be on the table at the Concerted Action. This includes the social climate money proposed by Labor Minister Hubertus Heil (SPD), according to government circles. Heil wants climate money like this once a year for single people who earn less than 4,000 euros gross per month and for married people with a total of less than 8,000 euros.
The CDU economics expert Julia Klöckner criticized that the concerted action falls under the category “If I don’t know what to do anymore, I’ll set up a working group”. Instead, taxes and levies on energy, among other things, would have to be permanently reduced.
The CDU social wing, on the other hand, demanded: “VAT on basic foods, which have become up to 40 percent more expensive, must be temporarily reduced.” A bag of chips should not be cheaper than carrot juice, the newspapers of the Funke media group quote a paper by the Workers’ Wing CDA.
According to the “wise man” Achim Truger, the concerted action can help to prevent an imminent recession in Germany. In terms of content, it is about “that the unions do not make excessive wage demands so that there is no price-wage spiral,” he told the Bayern media group. Fratzscher, on the other hand, said that the wage-price spiral was a “false myth”. Both Truger and Fratzscher demanded more collective agreements from employers.
The President of the Association of German Chambers of Industry and Commerce, Peter Adrian, told the dpa that monetary policy and wage developments are important. However, he attributed the current price spiral primarily to cost increases in energy, raw materials and bottlenecks in supply chains. “We must therefore primarily tackle measures that expand these bottlenecks on the supply side.” This includes speeding up the approval process. “In view of the price explosion, every extra government burden and superfluous regulation that can be eliminated is a helpful relief.”
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