Prices in Germany will continue rising for months, warns institute

People in Germany should expect inflation to continue to rise in the coming months, according to a group of economic experts.

A market in Oldenburg, Lower Saxony.
A market in Oldenburg, Lower Saxony. Photo: picture alliance/dpa | Hauke-Christian Dittrich

The Munich-based Ifo Institute said consumer prices in Germany will keep rising across the board.

According to the institute’s monthly survey, all companies in the food trade sector plan to raise their prices.

Gas and electricity costs will also continue to increase, according to the economists – as will prices in the restaurant industry.

“The wave of inflation is therefore unlikely to abate yet, unfortunately,” said Ifo economic head Timo Wollmershäuser, adding that gas and electricity in particular will be a major problem. 

Inflation has already reached around 7.9 percent in Germany, and many households are struggling with the cost of living. 

READ ALSO: How the cost of living is affecting people in Germany

For its economic forecasts, the Ifo Institute surveys several thousand companies every month and asks about their price expectations.

According to the survey, 100 percent of food retailers are planning price increases, and over 92 percent of drugstores.

For flowers and plant retailers, the figure was just under 90 percent, and for bicycles and stationery, it was well over 80 percent in each case.

In the catering trade, that figure stood at more than 87 percent, and at 62 percent for hotels.

Across industries, companies say they are struggling with high procurement and energy costs – some of which they are passing on to consumers through price increases.

Another factor for price increases is likely to be the minimum wage, which rose in October.

An Ifo survey published at the beginning of September showed that around 30 percent of companies have been directly affected because they paid some staff less than €12 per hour. According to the survey, 58.3 percent of them were planning price increases because of the minimum wage hike. 

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Germany reaches agreement on Bürgergeld – with a couple of catches

Members of Germany’s traffic light coalition government and the opposition Christian Democratic Union party have reached an agreement in the dispute over plans for a new citizens‘ income. There will be tougher sanctions against benefit recipients and fewer discretionary assets.

Germany reaches agreement on Bürgergeld - with a couple of catches

Last week, the German government’s plans to reform unemployment benefits with its new “Bürgergeld”, or citizens’ income, proposals were blocked in the Bundesrat.

The legislation was held up mostly by members of the Christian Democratic Union (CDU/CSU) which had been strongly opposed to the proposals for a six-month Vertrauenszeit (trust period) in which benefits claimants would not incur sanctions, as well as to the amount of assets recipients would be able to hold on to.

READ ALSO: EXPLAINED: Will Germany’s controversial Bürgergeld still come into force?

On Tuesday, politicians from the traffic light coalition parties and the CDU/CSU reached a compromise on the proposed reforms which means that some of the key measures will be scrapped.

No trust period

The CDU/CSU was able to push through its demand for more sanctions for recipients and the six-month trust period will now be scrapped completely.

Instead, it will be possible to enforce benefit sanctions from the first day of an unemployment benefits claim if recipients don’t apply for a job, or fail to turn up for appointments at the job centre, for example.

The CDU and CSU also demanded that unemployment benefits recipients be allowed to keep less of their own assets when they receive state benefits. The original plan had been for assets worth up to €60,000 to be protected for the first two years, but the compromise reached has knocked this down to €40,000 for one year – during which time benefits recipients will not have to use up their savings.

Following the announcement of the agreement, Green Party later Britta Haßelmann said “I regret it very much”. According to Haßelmann, the trust period was the core of the reform designed to stop people from having to take up “just any job”.

READ ALSO: Bürgergeld: What to know about Germany’s unemployment benefits shake-up

Other traffic light colleagues were more optimistic, however. Katja Mast from the SDP spoke of a “workable compromise in the spirit of the matter,” while FDP Parliamentary Secretary Johannes Vogel said that it had succeeded in “making a good law even better”.

CDU/CSU leader Friedrich Merz, meanwhile, sees the compromise as a great success for his party, though he also praised the willingness of the parties in the government to reach an agreement.

“The coalition was very quick and – to my surprise – very largely willing to make compromises here,” Merz said. 

What happens next?

Tomorrow, the Mediation Committee of the Bundestag and Bundesrat will meet to discuss the proposals. If the agreement is confirmed, the welfare reform could clear the final hurdle when it is voted on Bundesrat again at the end of the week. According to the federal government’s plans, if it’s approved, Bürgergeld will come into force in January and replace the current Hartz IV system.