Even if the inflation rate is back below the two percent mark, inflation remains a problem for many people. Families in particular are struggling with the price levels that have been reached.
Jens Diezinger is not in a good mood. The 46-year-old is on his way to do the weekly shopping for the whole family. He and his wife Carolin have five children. “I used to always study the brochures of supermarkets and discounters for offers. Life is becoming more and more expensive,” says the educator from Stadecken-Elsheim. Tagesschau.de reported three years ago about the family and their problems with the steep rise in inflation at the time. How are things looking for them now?
Even at the discounter minced meat from five euros
The wage increases have all been “eaten up” by the inflation of the past few years. “The cheapest butter currently costs 2.09 euros. But fruit and vegetables are now at a completely different price level than a few years ago,” complains Jens Diezinger. His wife Carolin is also an educator and is currently completing additional qualifications in this area. Shopping for the family is her husband’s job, says Carolin Diezinger. “When I’m out and about, I’m almost shocked. Even at the discounter, minced meat costs upwards of five euros. We hardly buy anything at the weekly market anymore. The prices there are even higher.” Good husbandry conditions and animal welfare are important to the couple. “But the best form of husbandry is practically no longer affordable for us,” says Carolin Diezinger.
But it’s not just about food, but about everyday goods. “Today three boxer shorts cost as much as ten used to cost,” says Jens Diezinger. Clothing is also an important expense with five children. The family lives in an apartment of 84 square meters. That’s pretty tight, according to the couple. “In the neighboring town there was recently a beautiful five-room apartment for 2,500 euros cold. With the warm operating costs, my husband’s salary would practically be gone. So we have to stay here,” calculates Carolin Diezinger. The eldest daughter has now moved out and that at least creates some space.
Inflation affects the everyday lives of many people
“The Diezinger family’s personal experiences are true. You can see that when you look at the development of the consumer price index,” says Gunther Schnabl. He is an economist at the University of Leipzig and the Flossbach von Storch Research Institute. “Prices today are at a significantly higher level than before the Corona period,” notes the researcher. Declining inflation rates as recently did not mean a falling price level. “Then we would have a drop in prices for most products, and the European Central Bank – ECB for short – would definitely want to prevent that in order to avoid an economic crisis,” explains Schnabl.
The actual cause of the inflation, explains the economist, was the ECB’s expansionary monetary policy in the wake of the euro crisis from 2010 and in the Corona crisis. The central bank wanted to stabilize the markets. The enormous amounts of money are finding their way – after real estate and stocks, it’s now time for everyday goods, says Schnabl. And the increasing bureaucracy also has its price. “Companies have high expenses for workers who have to take care of the growing administrative burden. The public service has also been greatly expanded. These workers are now missing from the labor market and wages are rising due to the lack of skilled workers. This is driving inflation further,” explains Schnabl.
Where could the state relieve people?
There are very different proposed solutions to counteract inflation. The Taxpayers’ Association fundamentally criticizes the high levy and tax burden in Germany. According to a study, on average 52.6 cents of every euro earned go to the state – only 47.4 cents remain for free use. Statutory health insurance and nursing care insurance are also more expensive than last year. The sales tax rate on natural gas and district heating has been back to 19 percent instead of seven percent since April. And the levies on electricity are also slightly higher overall than in 2023.
“In order to relieve people’s burden in the short term, the sales tax rates for heat and electricity in the private sector should be reduced to the reduced rate of seven percent because they are essential goods,” demands BdSt President Reiner Holznagel. “In addition, the electricity tax in Germany, which is high compared to the EU, would have to be reduced.”
The German family association also comes to a sobering conclusion, especially for parents and children. “Families up to middle income levels are heavily burdened by inflation,” says Federal Managing Director Sebastian Heimann. “The federal government has announced that it will increase child benefit by five euros – i.e. by two percent – from 2025. There was already a zero round for families in 2024. This means that the child benefit increase from 250 to 255 euros will be completely swallowed up by inflation.”
New Inflation worries
When asked what they specifically imagine as a solution, the Diezinger couple have a similar opinion. “We need a completely new federal government and a major tax reform. The middle class in particular needs to be relieved. Top earners should pay more,” says Carolin Diezinger. “In addition, the VAT could be reduced again to 16 percent. All food and everyday goods should be reduced to seven percent of the tax – or even lower,” says her husband Jens. The Diezingers have not noticed anything about the federal government’s previous relief measures against inflation.
Economist Schnabl can give the Diezingers little hope for the future. “We are facing an era of currency devaluation worldwide.” Schnabl is worried about the social consequences: “The welfare state takes care of low-income earners. Top earners can move away from Germany. But the middle class is the one who suffers the most. That is dangerous. You can also see this in political developments at the moment – throughout Europe.”