Consumer prices in Germany were 3.8% higher last month from the same month last year, the latest data from the Federal Statistical Office revealed. This is the highest level since December 1993 when it jumped to 4.3 percent. In June, the inflation rate was down to 2.3%. The latest figures will be of huge concern for the European Union, as Germany is home to the biggest economy in the bloc.
The huge jump in the latest inflation rate is largely attributable to rising energy prices, which rose 11.6%.
After the start of the Covid pandemic early last year, crude oil prices fell due to weak demand in the global market.
But as global economies continue to rebound from the pandemic, those prices are picking up quickly.
In July, the price of heating oil was up more than 50% from the same month a year ago.
Gasoline was also significantly more expensive, with prices jumping 24.7%.
Excluding energy products, the inflation rate would have been only 2.9% in July, almost a percentage point lower.
Also last month, food prices were on the rise, with consumers paying 4.3% more for their items.
Another key factor in the huge surge in interest rates can also be attributed to the so-called base effect.
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Marcel Fratzscher, president of the German Institute for Economic Research, believes that Germany’s economic model “is increasingly hampering our competitiveness and prosperity”.
The expert said that with the departure of Chancellor Angela Merkel next month after 16 years, the power of the EU is now at a “crossroads”.
He warned that the perception of the country’s successes over the past decade was “the result of good policy is a dangerous delusion.”
Writing in the German newspaper Die Zeit, Mr Fratzscher said: âIt was luck.
âGerman companies have been able to benefit more than others from the export boom in rapidly growing emerging markets in Asia.
“And they have benefited from the miracle of employment, which has brought over three million more people into the German labor market, mainly thanks to the immigration of highly motivated young Europeans and the growing employment of highly skilled women. .
âThe most important contribution of the economic policy of the four governments of Angela Merkel has not been the active support of the economic situation, but the guarantee of stability and a remarkably successful management of the four major crises of this period: the global financial crisis and the European economic crisis between 2008 and 2012, the strong immigration of refugees from 2015 and the corona pandemic.
“In doing so, the Chancellor has generally shown an excellent intuition to say and do the right thing at the right time, thus creating confidence and ensuring stability – not only for Germany, but also for Europe.”
Additional reporting by Monika Pallenberg.