“The risk that the EU economies will barely grow anymore is real.”
(Photo: dpa)
Berlin The employer-oriented institute of the German economy (IW Cologne) warns of a long phase of economic stagnation with simultaneous high inflation. “Europe is threatened with stagflation if politicians are not careful,” said IW director Michael Hüther of the “Welt” (Monday edition). “I’m not talking about this year or the next, but well into the decade that lies ahead of us.” A longer phase of stagflation is a real danger.
The ambitious climate policies of the EU and the federal government, which rely on constantly rising CO2 prices, could drive inflation in the coming years. “Our climate policy can trigger stagflation,” said Hüther.
If politicians take the German climate goals and those of the EU seriously, then the CO2 price, as the central control element, must rise in the next few years – and relatively quickly. In addition, there would be further price drivers with the shortage of skilled workers and rising wages. Rising wages and prices could continue to escalate. Experts speak of a wage-price spiral.
At the same time, there is a risk that the economy in Europe will stagnate. “The risk that the EU economies will hardly grow any more is real,” said the economist. “Then if we don’t manage to transform the economy and overwhelm companies in the energy transition.” Then a situation like that in the 1970s threatens, when automation and the oil price shock caused layoffs and bankruptcies with permanent unemployment.
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That could happen again now, especially as the aging and shrinking of the labor force weakens productivity. “If politicians aren’t careful and the companies are overwhelmed, we’ll slide from a golden decade into a very gloomy decade,” said IW Director Hüther.
More: Government lowers growth forecast for 2022 to 3.6 percent – and expects higher inflation