Clouds in the economic sky
Economists want less “watering can”
06/25/2022, 07:42 am
Ukraine crisis, scarce energy, inflation: something seems to be brewing for the German economy. Economists are therefore demanding that those in need must be supported by the state – and in a targeted manner, not with a watering can.
In view of the dark clouds on the economic horizon, leading German economists have called on politicians to provide more targeted support for needy households. The tank discount failed and was wrong from the start. “An attempt was made to make fossil fuels cheaper – with moderate success. You have to cushion that for those who cannot bear this hardship,” said the “economic wise” Veronika Grimm in a survey by the German Press Agency.
Marc Schattenberg, economist at Deutsche Bank Research, and Katharina Utermöhl from the Allianz Group also called for a stronger focus on state aid. “The support for needy households could be even more targeted than last time,” said Schattenberg. Overall, the economic situation is difficult. “We must be aware that energy prices will remain high and that it will be a challenging phase,” said Grimm. “It’s not right to suggest to people that the status quo can be maintained.” This does not necessarily mean a deterioration.
Momentum is clearly declining
Christoph Siebecke from the Oldenburgische Landesbank sees it similarly: “The majority of companies are currently still looking positively at the economy. But the momentum is clearly declining,” he said. However, he also sees positive aspects. “The speed at which the German economy is adapting is amazing,” he said. Dependence on Russian gas has already been noticeably reduced. Allianz economist Utermöhl explained that a “comeback of insolvencies” is also coming to Germany. “The number of company bankruptcies will increase significantly from 2024,” she said. “Here, too, we are experiencing a turning point. I have the impression that we have not yet understood what is changing.”
Citizens must also be aware that saving energy must be the order of the day. Reducing gas consumption by one percentage point would bring gross added value of 2.5 billion euros and secure 25,000 jobs, she said.
Fritzi Köhler-Geib, chief economist at the state-owned KfW Group, explained that it was already clear that less gas would be available in the medium term – despite all efforts. And it will be more expensive. If the wage demands of the employees are also very high and can be enforced, there is a risk of a wage-price spiral – and a multi-year stagflation in Germany. This danger is fueled by the tendency of many companies to secure staff on the empty labor market by paying higher wages.
“Especially the tariff areas, in which many employees earn less than 12 euros, agreed in advance on wage increases, you could see that with the temporary work agencies, you could see it in the building cleaning trade a few weeks ago,” said Deutsche Bank economist Schattenberg . He agrees with his colleague Grimm that this is likely to drive inflation further. “I would not say that we are already in a wage-price spiral. But there is a risk,” said the “economic way”.