Enlarge image
Foreign Minister Baerbock: Well kept up in the grim look
Photo: Kay Nietfeld / dpa
When Annalena Baerbock flew to Russia this week, the bleating from old men's groups was already pre-formulated.
What is "the girl" supposed to do against "the bad old Russian"?
toro.
At least when she looked grim, the Foreign Minister kept up well.
And more serious observers later diagnosed that the minister could have made a bigger impression than expected.
That's good.
Not only for a lot of people who live in Ukraine - even if behind the Russian march there is possibly more saber-rattling than real belligerence.
But also with regard to a completely different burden that has been causing a stir among (not only) old men in this country for months: the supposed return of inflation.
If you take a closer look at the data and causes of the price increases in recent months, it could well be that Annalena Baerbock can do more against rising prices in the coming months than Christine Lagarde, the head of the European Central Bank, whose job that is actually.
Sounds far-fetched?
Does not have to.
However, you really have to take a closer look.
In order to recognize whether and what is emerging as a deeper trend, it is important to see how prices develop from month to month - not how they compare to the previous year, i.e. the inflation number usually reported.
As is well known, the year-on-year comparison is currently distorted in several ways, because the prices in the second half of 2020 were unusually low (and it could not stay that way anyway) simply because of the reduced VAT and corona-related low prices for raw materials.
Always the energy
In contrast, there is no sign of a steady trend in the monthly data now available from the Bundesbank. And that makes a big difference in interpretation. There were noticeable price increases of 0.5 percent or more per month beyond the usual seasonal fluctuations in 2021 in only five fairly clearly identifiable months. And, no coincidence: In each of these months, energy prices in particular rose sharply - each time driven by new surges of shock on the world markets for oil, gas and other raw materials.
That was already and especially true for January, when energy prices alone shot up by a good five percent compared to the previous month - and the re-increase in VAT also had an effect. The next energy shock came in early summer – in June and July the statistics show consumer prices were 0.5 percent higher than in the previous month; no coincidence: energy prices increased by 0.8 and 1.3 percent in just these two months.
The fact that overall inflation in 2021 ended up being even higher than experts suspected – that too can be attributed quite unequivocally to energy prices: the next shock on the world markets followed in autumn.
For the Germans, energy was 4.1 percent more expensive in October alone compared to the previous month - which caused overall inflation to increase significantly from month to month (to 0.7 percent), and thus also inflation over five percent compared to the previous year.
If you take a closer look, you will notice that oil and gas prices in particular had the decisive influence on the ups and downs in energy prices.
Which brings us back to Russia.
The most breathtaking jumps were actually in gas prices in Germany in 2021 with almost 60 percent over the course of the year - which immediately explains almost a third of the overall inflation rate of 5.3 percent in December. One third. In addition, the prices for electricity on the energy markets are de facto closely based on those for gas - which in turn also explains the extreme increase in electricity prices. The same applies to some foodstuffs, which require gas to be produced, becoming more expensive. If you take all this together, it is no longer far from the conclusion that inflation is not only, but to a large extent, related to it - and in any case is anything but an all-encompassing tendency towards permanent inflation that has suddenly returned.
As a counter-check: Whenever oil prices fell, as they did at the end of the year, overall inflation in Germany also fell back to more normal values in a month-on-month comparison – to less than 0.2 percent in December. For manufactured goods, consumers had to pay less than 0.3 percent more if energy products are not included. The same applied to services. Rents even rose by just 0.1 percent in December. An important difference.
Again, that doesn't make past cost-of-living increases any better -- if prices are up 3 percent over the year, they're up 3 percent.
And there is also no guarantee that the many shocks will not at some point lead to inflation taking on a life of its own.
But it is not entirely unimportant for the question of whether what has been going on in the past few months is the beginning of a lasting trend - or whether it is essentially about more specific outliers.
And what are the reasons for this - whether and, if so, how these can possibly also be switched off.
Which brings us back to Russia and Annalena Baerbock.
Imported price boosts
If the prices for oil and gas have skyrocketed, according to energy experts, this is partly due to the fact that relatively little has been invested in new production capacities for years - and after the first corona shock, a lot of energy was suddenly needed again. The rise in energy prices has at least as much to do with the fact that one of the main suppliers of our gas is keeping supplies tight because it allows a lot of political pressure to be exerted. About the Europeans and especially Germans: so that they can start the controversial Nord Stream 2 pipeline for Russian gas to Europe faster. You can read more about it every day on spiegel.de.
If there is a really serious risk for the Germans of inflation taking on a life of its own in the future, it is certainly not because the employees in the country are already demanding higher wages; the plus is rather puny. Or because the economy is overheating – it would be good if economic output really started to pick up again after contracting at the end of the year.
The danger could be that the imported price surges for energy due to escalating geopolitical crises and new power gambles will continue every few months in 2022.
Then at some point it could also trigger a more dangerous spiral because everyone tries to pass on the prices.
On the other hand, it only helps very little if the European Central Bank raises its interest rates.
This will not impress Vladimir Putin and his foreign minister.
And that has nothing to do with »the« return of »the« inflation.
On the other hand, in case of doubt, it could actually be more helpful if the German foreign minister countered her counterpart from Moscow properly - and left a lasting impression.
Whether the odds are good for that now or not.
