You don’t have to be an economist to know that a very hard winter is coming News and analysis from Europe | DW

Rarely have German economists and government advisers been so unanimous. Today, they all know: Germany is facing an extremely hard winter. And this is not a weather forecast, but an economic one. The economy will be in the red, growth will slow down. Such a prophecy does not even require a degree in economics, only common sense is sufficient.

Look, for example, at the terrifying number that was released last Tuesday. German producer prices (a measure that nobody cares about in normal times, except that today’s times are anything but normal) rose by almost 46% in August compared to the same month last year. This is happening for the first time in 73 years – ie. since statistics for this indicator have been kept. The production prices in question indicate approximately how much a company must pay for the products it needs to produce its goods. And this is used as a reliable indicator of the further course of inflation. In this situation, it is clear that there will be no improvement soon.

We are heading for stagflation

All over the world, central banks are fighting against the drastic increase in consumer prices and the accompanying devaluation of money. And, of course, the best way to fight inflation is to limit or stop the economy from overheating. But even that could lead to a recession. Think back to the United States 40 years ago, when then-esteemed Federal Reserve Chairman Paul Volcker was able to fight stubborn stagflation (ie, inflation plus economic stagnation – recession’s ugliest sister) only at the expense of a severe economic downturn . It is logical to predict that the same will be required this time. We are actually headed for just such stagflation.

Of course, the drastic increase in the price of a variety of products is due, in addition to the ongoing problems in global supply chains, to the extreme rise in energy prices. This is practically the second front that warlord Putin has opened. He used oil and especially gas as his weapon – something that for a long time no one wanted to imagine. With this he wants to cause division among European countries and societies. He hopes to cause social unrest. It is betting on the scenario that Europeans will rise up against their governments and accuse them of only prolonging the war by supplying arms to Ukraine and thereby contributing to higher energy prices.

A big test for Europe

In Berlin, Paris, London and other places, however, the authorities are resolutely opposed to just such a possible development. France and Great Britain are capping energy prices, and Germany is nationalizing companies that trade in gas.

At the same time, people in Germany are wondering what a gas supplement is and whether they will be able to pay it too, against the background of already terrifying gas prices. The country accepted aid packages worth billions. But they bring only partial relief. And the sieve is quite wide and the money doesn’t just go into the pockets of the most needy.

We should not lie to ourselves: the real test is yet to come – both for the Germans and for all Europeans. Because there is a new surge in the prices of all possible products due to increased production prices, bills that can no longer be covered and which will lead to the bankruptcy of companies. This whole spiral of horror will only begin to spin in the next year. This week, UN Secretary-General Antonio Guterres summed up the situation this way: “A winter of discontent is on the horizon.”

It is then that European solidarity will be decisive. And if Europe manages to get through the winter with little damage, chances are things will pick up again after that. Probably very slowly, but – and this is the good news – without Putin’s gas.

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See also this photo gallery from our archive:

  • Full shelves, empty wallets: in Germany everything is more expensive

    Energy carriers dragged down all other prices

    The main factor for the growth of inflation is the sharp increase in the prices of energy carriers – they have increased by 58 percent compared to last year. And because the market situation remains uncertain, no improvement can be predicted. The burden of high energy prices is borne by both industry and consumers.

  • Full shelves, empty wallets: in Germany everything is more expensive

    The price of heat

    The Germans must prepare for serious expenses in the winter. According to official government data, fuel oil for heating already cost 88 percent more in June than a year earlier. Its current price is higher than ever – 1.23 euros per liter. For comparison, just six years earlier, a liter cost 49 cents.

  • Car fuels have also become more expensive. In March, the price for a liter of diesel reached a record - 2.14 euros. The rise in fuel prices affects consumers directly and affects the price of many other goods. The tension at petrol stations was eased somewhat by the reduction in fuel prices introduced by the government. But this measure will be valid for now only until the end of August.

    Full shelves, empty wallets: in Germany everything is more expensive

    The car is about to become a luxury

    Car fuels have also become more expensive. In March, the price for a liter of diesel reached a record – 2.14 euros. The rise in fuel prices affects consumers directly and affects the price of many other goods. The tension at petrol stations was eased somewhat by the reduction in fuel prices introduced by the government. But this measure will be valid for now only until the end of August.

  • Inflation has also hit supermarkets, creating a serious problem, especially for people on lower incomes. In general, food products rose in price by 12.7 percent compared to last year, the Federal Statistical Office reported. Although it is expected that in the coming months inflation will fall, for now the prices in the shops do not cause any optimism.

    Full shelves, empty wallets: in Germany everything is more expensive

    Full shelves, empty purses

    Inflation has also hit supermarkets, creating a serious problem, especially for people on lower incomes. In general, food products rose in price by 12.7 percent compared to last year, the Federal Statistical Office reported. Although it is expected that in the coming months inflation will fall, for now the prices in the shops do not cause any optimism.

  • Some Germans may have to give up traditional sandwiches in the coming months - because in some places a standard packet of butter exceeds three euros. Dairy producers are suffering from the consequences of the war in Ukraine, which is leading to a rise in the price of imported feed and an increase in other production costs.

    Full shelves, empty wallets: in Germany everything is more expensive

    When you don’t have money for a sandwich

    Some Germans may have to give up traditional sandwiches in the coming months – because in some places a standard packet of butter exceeds three euros. Dairy producers are suffering from the consequences of the war in Ukraine, which is leading to a rise in the price of imported feed and an increase in other production costs.

  • Because of the war in Ukraine, not only oil has risen in price - Ukraine and Russia are the main exporters of sunflower oil. After Russia blocked supplies from Ukraine through Black Sea ports, in just two months - from April to May - oil in Germany rose in price by 23.2 percent.

    Full shelves, empty wallets: in Germany everything is more expensive

    Will there be something to fry with?

    Because of the war in Ukraine, not only oil has risen in price – Ukraine and Russia are the main exporters of sunflower oil. After Russia blocked supplies from Ukraine through Black Sea ports, in just two months – from April to May – oil in Germany rose in price by 23.2 percent.

  • Flour prices resemble a fighter jet taking off vertically. At the end of the first half of 2022, one kilogram cost 93 cents, which is 127 percent more than a year earlier. In addition to flour, many other goods are also rising in price - especially bread.

    Full shelves, empty wallets: in Germany everything is more expensive

    The vertical growth in flour prices

    Flour prices resemble a fighter jet taking off vertically. At the end of the first half of 2022, one kilogram cost 93 cents, which is 127 percent more than a year earlier. In addition to flour, many other goods are also rising in price – especially bread.

  • Along with the general increase in prices, there is also a decrease in the prices of public transport. This happened after the introduction of monthly cards with a price of nine euros, valid for the entire territory of Germany. But - this measure is valid only until the end of August.

    Full shelves, empty wallets: in Germany everything is more expensive

    However, there is also a discount

    Along with the general increase in prices, there is also a decrease in the prices of public transport. This happened after the introduction of monthly cards with a price of nine euros, valid for the entire territory of Germany. But – this measure is valid only until the end of August.

    Author: Nicholas Merle


The article is in bulgaria

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