The nightmare doesn't stop. At 7.5 percent, inflation in Germany remains at an unbearably high level, even though the trend in July was slightly downward for the second month in a row. Because the minimal weakening of the currency depreciation was bought dearly by the federal government with the 9-euro ticket and the tank discount.
And because both special regulations expire at the end of August, the opposite effect threatens in autumn. The traffic light is also under enormous pressure to launch new relief packages so that consumers feel less of the inflation.
The SPD and the Greens are openly speculating that the liberal Finance Minister Christian Lindner will give in and that the debt brake will be suspended again in 2023.
But fighting inflation on credit is an absurd idea. The national debt is currently 2.3 trillion euros at the highest level ever measured in Germany. If the policy pursued in Corona times is maintained, to compensate citizens and companies for all hardships with public money, then this will feed inflation. History teaches that excessive government debt and currency devaluation are inextricably linked.
If inflation is to be combated effectively, fiscal policy must become sound again. The elimination of all non-essential tasks and a clearly growth-oriented policy would be indispensable for this. When, if not in this crisis situation, would there be the most convincing arguments for this? However, monetary policy has to do the main part.
The European Central Bank (ECB) should follow the example of the American Federal Reserve, which has been rigorously fighting currency devaluation since the spring. With their renewed interest rate hike, the Americans are hurrying further and further away from the Europeans. If the ECB does not do more for its credibility, then the euro will become more and more consumptive. And that, too, would fuel inflation.
