Economy
DIW: Wage increases necessary to compensate for inflation
Considers a wage increase to be important “so that consumption can continue to be maintained”: Marcel Fratzscher. Photo: Bernd von Jutrczenka/dpa
© dpa-infocom GmbH
The voices for wage adjustments to compensate for the sharp rise in prices are getting louder. DIW President Fratzscher warns of a spiral of ever weaker growth and high inflation.
The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, considers wage adjustments to compensate for the sharp rise in prices to be “absolutely necessary”.
This is also important “so that consumption can continue to be maintained,” said Fratzscher on Deutschlandfunk. “Because if that doesn’t happen, then companies will have difficulties, unemployment will rise, and then we will end up in a spiral of ever weaker growth and high inflation,” explained the economist.
In view of the high inflation, politicians have to help people in a targeted manner, and in some cases they have already done so, for example with the energy allowance of 300 euros for each employee. “That’s a good step,” said Fratzscher. The wrong way, however, are “populist measures” such as the fuel price brake. Such a subsidy for the purchase of petrol is counterproductive, “it does not reduce the consumption of energy sources, but ultimately throws a large part of this money down the throat of the oil companies”.
Against the background of the Ukraine war and the resulting disruption in supply chains, a rethink is necessary. “Until now, we have had a globalization that was completely blind to which country you were trading with, you only paid attention to costs and efficiency.” Globalization must now be made smarter and more resilient. It is important to distribute production internationally to more locations and “perhaps to produce more in Europe again,” said the DIW President.