From inflation to recession: Is Germany’s prosperity at risk?
Part of Ulrich Schneider’s job description, as chief executive of the Paritätische Gesamtverband, an association of German social movements, is describing the situation of the poor in Germany as being particularly precarious and threatening. He’s been doing so with great regularity for more than 20 years. But what he described last Wednesday at the presentation of the Poverty Report 2022, titled “Between Pandemic and Inflation,” in Berlin exceeded the usual warnings. Schneider spoke of “dramatic findings” and “brutal” effects, and warned: “Germany is in danger of simply disintegrating at the bottom.”
Not since reunification have there been as many poor people in Germany, Schneider said, with the number of impoverished in the country hitting 13.8 million in 2021. Never before have more children and elderly had to live in poverty in the country, and the poverty rate has never risen as rapidly as it did in 2020 and 2021, he said. Even among the employed, there is a growing number of people who don’t have enough money for a life with social and cultural participation. Among the self-employed, in particular, there has never been such a marked uptick.
And the figures Schneider cites are from 2021. Last year, inflation and rising energy prices played a much smaller role than they do now. What will the situation be like this autumn when back-payments for electricity and gas start to arrive in mailboxes around the country? Schneider believes that at the lower end of society, “sheer desperation” will then prevail, but he also believes that the usual supplementary bills for energy costs not covered by advance payments will also “hit home” for parts of the middle class.
There are many experts and politicians who paint a gloomy picture of Germany’s near future. But they’re not the only ones full of pessimism. Despite government measures to relieve the strain, such as the abolishment of the Renewable Energy Sources Act (EEG), a tax to subsidize the expansion of green energy in Germany, and one-off payments, almost a quarter of all Germans say they are “extremely heavily” or “heavily” burdened by their financial situation, according to a representative survey by the Hans Böckler Foundation, a think tank closely aligned with trade unions. Many Germans are already going without vacations, new clothing or even food.
Prices have already hit record highs in Germany and at 7.6 percent, inflation is higher than ever before in reunified Germany. Prices rose slightly less rapidly in June than they did in May. But that might merely be the result of a break in the gasoline tax and the introduction of a 9-euro-a-month nationwide public transportation ticket from June through August. Once these temporary subsidy campaigns expire, there could be another sharp upward jump in inflation. Exorbitant increases in energy prices, particularly, are a threat to both consumers and companies. The economy could also slide into a deep recession, with the threat of many job losses.
Is the German model of prosperity in danger? There is much to suggest that the crisis could also create difficulties for the middle class here. Politicians are viewing the situation with great concern because the middle class is a pillar of support for the state and democracy, with its political convictions, its commitment to work and its desire for stability. If the middle class falters, so too could everything else.