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German consumer prices climb again in May

Germany reported another jump in inflation in May as the war in Ukraine continued to push up food and energy prices, heaping pressure on the European Central Bank to speed up interest rate rises.

People pay for shopping in a Bavarian store.
People pay for shopping in a Bavarian store. Photo: picture alliance / dpa | Armin Weigel

In Europe’s top economy Germany, the annual inflation rate quickened to 7.9 percent to reach the highest level since reunification in 1990, according to preliminary data from federal statistics agency Destatis.

The last time inflation accelerated at a comparable pace was in West Germany in January 1952.

n Germany, Destatis said energy prices rose more than 38 percent in May, while food prices were up 11 percent.

In Germany, Destatis said energy prices rose more than 38 percent in May, while food prices were up 11 percent.

“Energy prices, in particular, have increased considerably since the war started in Ukraine and have had a considerable impact on the high inflation rate,” Destatis said.

“Another factor with an upward effect on prices is interruptions in supply chains caused by the Covid-19 pandemic,” it added.

Analysts surveyed by FactSet had expected a lower inflation rate of 7.7 percent for Germany.

Meanwhile, Spain’s inflation rate hit 8.7 percent year-on-year in May, after slightly cooling to 8.3 percent in April, according to the INE National Statistics Institute.

As in other countries, the increase was driven by soaring costs for energy and commodities despite efforts from the government to ease the burden on households.

READ ALSO: What to know about the latest price hikes in German supermarkets

July rate hike

Monday’s figures suggest the 19-nation currency club has yet to reach peak inflation, with many European nations highly reliant on Russian gas and oil imports. Heavy Western sanctions against Russia have also added further upheaval to already strained global supply chains.

The latest eurozone inflation data will be released on Tuesday.

In April, eurozone inflation soared to an all-time high of 7.5 percent – well beyond the European Central Bank’s two-percent goal.

The ECB has signalled it plans to hike interest rates in July for the first time in over a decade in a bid to tame inflation, following similar recent moves by other major central banks.

ECB chief Christine Lagarde has said that the bank aims to end negative interest rates by September.

The ECB currently has a bank deposit rate of minus 0.5 percent, meaning lenders pay to park their excess cash at the central bank.

“The ECB has clearly passed the stage of discussing whether and even when policy rates should be increased,” said ING bank economist Carsten Brzeski.

“The only discussion seems to be on whether the ECB should start with a 25 basis point rate hike in July or 50 basis points.”

READ ALSO: Five ways Germany’s soaring inflation could affect your life

Member comments

  1. There is nothing the ECB or any of the central banks can do about this current bout of inflation as it not being caused by an overheating economy. It is not demand led. Real wages are not increasing and people do not have excess cash sloshing around. Yes the war and Covid have affected the supply chain to sum degree, and this is being exacerbated by the crass stupidity of sanctions, but the real cause of the increase in the cost of living is corporate gouging and profiteering.

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READER QUESTIONS

Reader question: Why haven’t I received my €300 payment yet in Germany?

Many working people in Germany will have received their energy relief payment by now. But if you haven’t got yours yet, there’s no need to worry, here are some reasons why that could be and what you can do.

Reader question: Why haven’t I received my €300 payment yet in Germany?

The €300 payment – known as the Energiepreispauschale or EPP – is one of the German coalition government’s relief measures intended to help people with rising energy costs. It goes out to everyone who lives and works in Germany, including those in part-time and temporary employment, trainees and students in paid internships as well as freelancers.

READ ALSO: What you need to know about Germany’s €300 energy relief payout

Those who have already received the payment as part of their September pay packet will have had an item on their pay slip marked as sonstiger Bezug (“other remuneration”) or “E” for Einmalbezug (“one-time payment“).

The EPP is subject to payroll tax, so only those who earn below the basic tax-free allowance (that means they don’t earn enough to pay any tax) will benefit from the full amount.

According to the Ministry of Finance, employees will receive on average €193 from the €300 allowance.

However, if the EPP didn‘t appear on your pay slip in September, here are a couple of reasons why that could be:

You have a mini-job

Mini-jobbers need to make clear to their employers that their mini-job is their main means of income, as often a mini-job is carried out alongside another job. If you haven’t received your €300 payment yet it’s best to discuss this with your employer and to confirm that it is your main job in writing.

A waiter carries a tray with used glasses and empty bottles. Photo: picture alliance/dpa | Jonas Walzberg

Your employer is not required to make the payment

There are some cases where the flat-rate energy allowance is not paid out by the employer at all. The Federal Ministry of Finance mentions the following exceptions, for example: if the employer is not required to file income tax returns, or the employee is employed on a short-term basis or is a temporary worker in agriculture and forestry.

In these cases, you have to file an income tax return for 2022 and claim the EPP there.

The payment may come later

The Ministry of Finance says that, if an employer misses the payment “for organisational or accounting reasons,” for example if you started your job in August and the payroll department missed you out, then the payment can be made later.

At the latest, however, it should come when the employer sends the Lohnsteuerbescheinigung (wage tax statement) – which is usually sent in December. In this case, too, it’s advisable to clarify with your employer or the payroll department why you haven’t received the payment yet. 

You work for a small company

Sometimes employers are not obliged to pay out the energy flat rate in September, but can still do so in October. This is the case if the employer submits its payroll tax returns to the tax office on a quarterly rather than monthly. Smaller employers, for example, who pay less than €5,000 in advance wage tax per year, only have to submit the advance wage tax payment once a quarter. This is not due until October 10th, so the employees concerned will not receive the €300 lump sum until October.

What other support will people get from the German government?

On Tuesday, Germany’s 16 state leaders are meeting with Chancellor Olaf Scholz to discuss which measures the €200 billion package announced last week should include.

READ ALSO: Germany to thrash out details of €200 billion energy support package

It’s expected that a Gaspreisdeckel – or a cap on the price of gas households would pay this winter – will soon come into force when the details are worked out, while plans for a cheap follow-up to the popular €9 ticket will also be presented later this month.

Benefit payment recipients will receive a one-off top-up to their existing benefit payments to pay for the higher cost of heating and pensioners will receive a €300 payment on December 1st. They do not have to apply for this, it’ll simply be added to the payments they receive from their pension insurance funds.

READ ALSO: KEY POINTS: Everything Germany is doing to help relieve rising energy costs

A €200 one-off payment is also planned for students, although each federal state may end up paying the amount slightly differently in a process that’s still being defined.

From next year, parents will see an increase in the amount of child benefit (Kindergeld) they receive, up to €237 per month, per child, up to and including the third child.

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