Grocery prices in supermarkets continue to rise.
Photo: dpa/Sven Hoppe
Prices in the euro zone rose by an average of 5.3 percent in July compared to the same period last year. This is according to an estimate published on Monday by Eurostat, the EU’s statistical agency. In Germany, the inflation rate was around 6.5 percent. Prices rose the most in Slovakia, at 10.2 percent. Overall, however, inflation is declining, as shown by the preliminary figures from the EU authority. Compared to June this year, inflation fell by 0.2 percent.
This is primarily due to falling energy prices, which have fallen by around six percent compared to the previous year. The prices for industrial goods and services, on the other hand, have risen by almost five percent. Food prices, in particular, continue to rise drastically. They increased by around 10.8 percent compared to the previous year.
For workers, this means a high loss of real wages, as shown by a recently published study by the Economic and Social Science Institute of the Hans Böckler Foundation, which is close to the trade union. In their report, the economists Thilo Janssen and Malte Lübker speak of an “unprecedented loss of purchasing power”. According to this, real wages in the European Union fell by an average of around four percent last year. Economists expect a loss of 0.7 percent this year.
In order to get the price increases under control, the European Central Bank has been gradually raising interest rates since 2022. This should make credit more expensive and reduce the amount of money in circulation compared to goods and services. Last week, the ECB raised interest rates again by 0.25 percent. As of this Wednesday, it is at 4.25 percent, as high as it was shortly before the 2008 financial crisis. Critics of the rate hikes fear, however, that the central bank’s course will slow down economic growth.
There is also still disagreement about the underlying causes of the high inflation rates. While the Russian war of aggression in Ukraine is generally considered to be the trigger because it primarily drove up energy prices, this is currently changing from the central bank’s perspective: “Rising wages and strong profit margins are increasingly becoming an important driver of inflation,” said the central bank president Christine Lagarde at the ECB’s press conference last week, again warning of the so-called wage-price spiral.
In their study, Janssen and Lübker from the Hans Böckler Foundation deny that such a spiral exists. They emphasize the high profit margins in retail as the main reason. “Companies in many sectors have been able to keep their profits constant by passing on increased purchase prices to consumers or even making extra profits,” explains Janssen when asked by nd.
The wage demands of the trade unions, on the other hand, are moderate. At just under three percent, tariff increases in 2022 were well below the rate of inflation, especially for groceries. In order to mitigate the consequences of the high prices, Janssen proposes consistent implementation of the EU minimum wage directive and strengthening collective bargaining coverage. »Across the board collective bargaining agreements that counteract the loss of real wages can only be negotiated where there are well-organized collective bargaining parties in the area«, he explains.
In view of the high inflation figures, the Left Party had recently called for automatic adjustment of wages to the current rate of inflation in its catalog of demands »Our plan for a just country«. This so-called indexation exists in Belgium, for example. It ensures that wages in most companies and in the public sector are automatically adjusted to the inflation rate of consumer goods. The trade unions can thus concentrate more on negotiating real wage increases.
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