Soaring prices fuel anti-ECB sentiment in Germany

As inflation soars to its highest level in three decades in Germany, people are worried about whether the European Central Bank has things under control.

The ECB headquarters in Frankfurt.
The ECB headquarters in Frankfurt. Photo: dpa | Boris Roessler

Simon and Lena Wendland, parents of newborn twins, say that their lives have become more uncertain. Their power supplier has just announced it is doubling its electricity prices, while property prices are looking “rather scary”.

“We don’t know where this is going to lead us,” Simon Wendland told AFP.

From energy and food, to paper and rent, prices have been marching mercilessly higher both in Germany and across Europe.

Latest data put inflation in Europe’s biggest economy at five percent year-on-year, a level not seen in the last 30 years.

Bild, the country’s biggest-selling newspaper, blames the European Central Bank for failing to rein in prices and even adding to the problem with its cheap money policy.

The Frankfurt-based ECB has argued that its record-low interest rates and 1.85-trillion-euro ($2.15-trillion) pandemic emergency bond-buying programme are necessary to prop up an economy ravaged by the coronavirus crisis.

In Germany, however, savers believe the ECB’s zero-interest-rate policy is eating away at the value of their assets.

Bild recently branded ECB chief Christine Lagarde as “Madame Inflation”, saying she “wears Chanel clothes” but “mocks the fate of pensioners, employees and savers”, even if the central bank president has herself expressed concern about the rising price of basic foodstuffs in supermarkets.


With its ultra-loose monetary policy of recent years, the ECB has long been a bugbear for Germany’s savers.

Bild had nicknamed Lagarde’s predecessor Mario Draghi “Draghila”, comparing him to a vampire “sucking our accounts to the last drop”.

After the devastation wrought by the inflationary crises of the 1920s and 1970s, Germans have an ingrained fear of inflation, said ING economist Carsten Brzeski.

Lagarde’s repeated assertion that recent price surges are transitional is met with disbelief in Europe’s most populous country.

“According to Madame Lagarde, we will have overcome all that by the middle of next year, but that’s just what she says,” said Marlott Kroeber, a 72-year-old former teacher.

German bankers, too, have voiced scepticism about Lagarde’s assessment.

“There are more and more indications that this price surge is not temporary and we will have to live with it beyond this year,” said Commerzbank chief Manfred Knof.

Christian Sewing, his counterpart at Deutsche Bank, has similarly urged central banks to “find a way to exit their very accomodative monetary policy,” and the “sooner the better”.

Last defender

Germany’s central bank chief Jens Weidmann recently dropped a bombshell by announcing his resignation from the powerful Bundesbank at the end of this year.

Weidmann, who has headed the Bundesbank for a decade, was often seen as a lone voice against the ECB’s ultra-loose policy.

So with him leaving, “the last defender of the German saver has given up,” said Die Welt newspaper in a tribute to the central banker.

Nevertheless, analysts argue that the ECB has safeguarded the eurozone’s prosperity with its policies.

Critics forget “that the institution has also ensured that the economy continues to be given support, that the eurozone is maintained and the German job market sees a boom” not seen in 20 years, said Brzeski.

Employees have also been able to benefit from a strong economy while the state has been able to take out loans at negative rates.

Some consumers are therefore still in the camp of the ECB.

Pensioner Hermann Vogt for one believes that the central bank is “doing mostly what is necessary” in the interests of the 19-nation zone.

SEE ALSO: How to protect your savings against inflation in Germany

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.