Things are tough all over as inflation is rampaging.
GERMANY’S INFLATION RUNS AT 40-YEAR HIGH, GROWTH FORECAST SLASHED
April 6 (King World News) – Gerald Celente: Inflation in Germany in March rose to 7.6 percent, year over year, its most dramatic jump since 1982, the Financial Times reported, and up markedly from 5.5 percent in February.
The chief culprit was a 39.5-percent spike in energy costs, the country’s Federal Statistics Office said.
“A similarly high inflation rate in Germany was last recorded in autumn 1981 when mineral oil prices had sharply increased as a consequence of the Iran-Iraq war,” the office said in a statement announcing the March numbers.
The German government’s council of economic advisors has cut its 2022 growth forecast from 4.6 percent this year to 1.8 percent and raised its expectation for inflation from 2.6 percent to 6.1 percent this year.
“The outlook for the economy in Germany and the euro area has worsened sharply,” the group said.
Germany receives 55 percent of its natural gas supply from Russia. Although Russian gas deliveries to Europe have not been sanctioned, those imports are now under threat, especially as Russia now demands payment for the gas in rubles (see related story in this issue).
If Russia cuts off its deliveries of natural gas to Europe, the country faces a “substantial” risk of a recession and inflation could climb to 9 percent, the group warned…
Due in large part to the war and its sanctions, “this will not be the end of accelerating inflation,” ING analyst Carsten Brzeski told the Financial Times.
“The only way is up and double-digit numbers cannot be excluded,” he warned.
Germany’s supermarkets have seen incidences of panic buying of flour, sunflower oil, and other staples, The New York Times reported.
Spain’s inflation shot to 9.8 percent last month, rising from 7.8 percent in February and passing analysts’ expectations.
The government’s chief economic advisers have cut their outlook for Germany’s growth by more than half while more than doubling their expectations for inflation’s pace, with sanctions against Russian exports as the latest aggravating factor.
Barring unforeseeable events or massive government intervention in national economies, Germany is likely to lead Europe’s economy over the threshold of a recession no later than the end of this year.
WAR ERASES PAY GAINS FOR EUROPEAN WORKERS
In last year’s final quarter, wages in Europe rose 1.5 percent as inflation galloped at 4.6 percent, cutting household purchasing power by the most in 14 years.
However, by February, Europe’s jobless rate fell to a record low 6.8 percent, the European Commission reported. Workers were ready to press for higher wages, strengthening their paychecks against the 5.9-percent inflation that marked the month.
Then Russia invaded Ukraine.
The war and resulting sanctions have helped drive inflation to 7.5 percent in March. Governments are mulling plans to ration fuel; manufacturers and their workers face the prospect of production shutdowns.
Meanwhile, the price of everything from gasoline to pet food continues to climb as the European Central Bank refuses to budge from its long-held negative interest rate.
“In the context of mounting growth headwinds—including supply-side disruptions and record high commodity prices but also China’s zero-COVID strategy—unions are likely to scale back their wage demands as corporate margins are bound to take a notable hit,” Allianz senior economist Katharina Utermöhl told the Financial Times.
Since the invasion, Germany’s union of chemical workers agreed to put off contract negotiations for a month.
“Every collective bargaining round is blown up,” Michael Vassiliadis, president of the union encompassing 580,000 German chemical, mining, and industrial energy workers, said to the FT.
Last month, car makers BMW and Volkswagen sent workers home as they ran out of parts that were being made in Ukraine. Last week, German truck maker MAN furloughed 11,000 workers on 80-percent pay after the supply of wiring harnesses from Ukraine dried up.
German companies’ plans to hire workers crumpled to their worst outlook since May 2021, according to a study by the Ifo Institute economic think tank.
“Especially under these circumstances, nominal wages won’t grow like prices,” Enzo Weber, chief researcher at Germany’s Institute for Employment Research, said to the FT.
“This means that we will have real wage losses in 2022,” he added.
To cushion households and businesses, Germany’s government has approved €4.5 billion in tax relief and other European governments also have pledged billions to offset higher energy bills.
As the war drags on and inflation rampages, it will be harder for European governments to convince citizens to “stay the course” with sanctions on Russian exports as the price for halting Russian aggression toward Europe. We forecast a strong rise in nationalist, anti-immigration, anti-establishment political movements.
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