German workers have gone on strike for higher wages as inflation rose

This letter: Europe Express

The majority of workers in Germany are demanding higher wages amid inflation, while others are striking, leading economists to worry that higher inflation could lead to higher inflation in Europe.

Germany’s recession hit a 29-year high of 4.1% in September, while inflation in 19 countries sharing the euro is expected to reach 13 years of 3.3% in September, when government notices will be published later on Friday.

Many economists believe that euro prices will increase by more than 4%, before the end of next year. That is the main message to date of leading central bankers such as Christine Lagarde, president of the European Central Bank.

However, such forecasts can be misleading if inflation increases the amount of pay that sends a rise in prices.

In one example this week, German carmaker workers in Carthago went on strike for want of pay, demanding that they receive a share of the damage caused by the growing epidemic of “housing”.

“Inflation prices in Germany continue to rise,” said Frederic Striegler, an employee at the country’s largest union, IG Metall, in describing the need to increase wages by 4.5% and to increase the cost of woodworking and plastics in Carthago and other companies. in the Baden-Württemberg region of southern Germany.

“Motorcycle companies have more orders and more profits and their partners only want one portion of the cake,” Striegler said, adding that other exhibitions were organized in two weeks for car manufacturers and travelers, as well as furniture companies across the region. the world.

Agencies are also making similar payments to employees in Germany in other areas, such as banks and government agencies. This week, retailers and mail companies in the Hesse region agreed to raise the salaries of their employees by 3% this year and another 1.7 percent increase in April next year.

Consumer price line chart Consumer pricing (change in %% annually) showing German inflation hit 29 years

“The issue of whether paid territories in Germany were achieved this year is historic,” said Carsten Brzeski, chief research officer at ING. “Recent announcements show that organizations are making incoming negotiations with demands in line with inflation, rather than anticipating inflation.”

Factors to promote price increases and barriers, which have already sent a high cost of shipping and left manufacturers with nothing from steel to semiconductors. On Wednesday, Lagarde said: “These problems have taken a long time to end with the question we are looking at and it is on our window.”

Another factor that could lead to a rise in inflation is widespread unemployment in Germany and Europe, with many companies claiming to be unemployed. The European Commission says the number of construction companies reporting on labor shortages has reduced their workload by 27% in a recent survey.

Summary chart of unemployment in the Eurozone (%) showing rapid market recovery in Europe

The German cargo company has warned of a shortage of more than 60,000 motorists, with an expected increase of 15,000 a year while more retirees than trained trainees.

However, salaries paid by German agencies are still lower than those published before the epidemic, according to Allianz economist Katharina Utermöhl. who said: “We expect the payment to continue to date.”

In addition, the country’s Kurzarbeit payment system supported payrolls of less than 1m in July, but should be reduced by the end of the year. Utermöhl said this meant that “the market that is operating today should be hit hard in the coming months”.

While central banks are debating how “temporary” inflation is, they are seeing the progress of wage negotiations in Germany and elsewhere with interest. Lagarde said the ECB would “look closely” at this, adding: “At the moment we do not see any damage to the prices going up to pay.”

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