BERLIN (AP) – German Chancellor Olaf Scholz said on Wednesday that he wants to join employers and unions in “concerted action” to find ways to mitigate the effects of rising prices by preventing a spiral of inflation in Europe’s largest economy.
In Germany, as in other European countries and abroad, there is already a sharp acceleration in inflation after Russia’s invasion of Ukraine pushed up fuel and food prices. An official estimate this week showed that the country’s annual inflation rate jumped to 7.9% in May, the highest since the winter of 1973-1974.
“This rise in prices is probably still due to one-off shocks, but we must take care that this does not turn into long-term development with excessive inflation,” Scholz said in the German parliament.
He said state aid financed by loans is not a long-term solution, especially since Germany next year seeks to enforce the rule on limiting government borrowing after it was suspended during the coronavirus pandemic.
In Germany, wage deals are usually negotiated between employers’ organizations and unions covering an entire industry sector.
Scholz noted the recent agreement in the chemical industry as a “very interesting” solution. Employers and workers’ representatives have agreed on a one-time payment of 1,400 euros ($ 1,500) per worker to help counter rising prices. But they also postponed talks on a formal wage increase until October, hoping that by then the economic outlook will be clearer.
Scholz said the government plans to call on employers, unions and workers’ representatives to unite with the government for “concerted action against price pressure”. The proposal repeats a similar effort in 1967 to counter West Germany’s first economic crisis.
“Everyone will have to contribute,” to resolve the current situation, the chancellor said.
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