Analysis. For a few days now, in Germany, they have been dressing kiosks again, these “front pages” that we believed to belong to the world before. “Inflation eats our savings”, “The Germans fear having to work during their retirement”, “4% increase by the end of 2021, announces the Bundesbank”, headlines the daily Bild, in huge letters, edition after edition. In the pages, this time, no inconsistent Greeks nor Mario Draghi as Count Dracula [le président de la Banque centrale européenne d’alors était caricaturé ainsi dans l’édition du 13 septembre 2019]. The elusive culprit is the Covid-19.
Most German economists, like the European Central Bank, agree that the current price increase in Germany – 2.5% in May, its highest level in ten years – will only be temporary. It would be linked to a catching-up of long-contained consumption, strong demand for oil, raw materials and electronic chips which will not last. But the return of inflation that we thought had been forgotten is too good an opportunity for supporters of budgetary orthodoxy to give their voice back.
Quintessence of political virtue
Wolfgang Schäuble is arguably the most famous of them. The veteran of German politics, who will turn 79 in September, no longer occupies the seat of finance minister since 2017, as during the euro crisis. But he remains, in the eyes of many German conservatives, the “chancellor bis” of the Merkel era, the symbol of public finance management where the “black zero” (schwarze Null), strict budgetary balance, is the epitome of political virtue. The platform he published in the Financial Times, Thursday, June 3, recalled the most conflicting episodes of the euro crisis. “European social peace requires a return to fiscal discipline”, he hits it, advocating a “Debt reduction plan ” in Europe.
Significantly, Wolfgang Schäuble bases his remarks on John Maynard Keynes, the British economist who advocated the stabilization of economies in crisis by an increase in public spending. Even in Germany, Keynesian-inspired policies took hold with the pandemic. In a few months, Berlin lifted its “debt brake”, made a gigantic effort to support its economy, supplemented by a historic stimulus plan in Germany, and supported, for the first time, a joint debt in the European level. Like Germany, most countries have pushed their debt to support their economy.
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