Economists from leading German financial and economic institutions see an increased risk of permanent inflation due to the Ukraine crisis. “The risk of a wage-price spiral has increased significantly,” said economics expert Veronika Grimm in a dpa survey. “The probability is increasing that we will see a wage-price spiral in the medium term,” said Marc Schattenberg of Deutsche Bank Research. Fritzi Köhler-Geib, chief economist at the state-owned KfW Group, said: “Inflation can continue to rise and at least temporarily solidify.” In any case, the economic consequences of the Russian invasion of Ukraine are serious for Germany. Katharina Utermöhl from the Allianz Group assumes inflation will average six percent over the year. The ECB’s target is around two percent. Schattenberg also fears effects on the labor market: “It could be that the recovery on the labor market will be slowed down in the short term or even come to a standstill.” In March, however, another decline in unemployment is to be expected. According to Veronika Grimm, the Germans have to adjust to higher prices in the long term. “Even if there is no delivery stop, gas from other suppliers will be more expensive,” said Grimm. The task now is to rapidly expand renewable energies. “You have to do what you can.” However, compensation in this way before the end of three to five years is not realistic. The problem is exacerbated by higher prices for fertilizer and food. “This will lead to a hunger crisis that will hit emerging and developing countries in particular,” said Grimm.
Economists – Risk of persistent inflation – Economy
