Germany’s Lindner sees risk of inflation becoming entrenched -FAZ
German Finance Minister Christian Lindner is worried about a wage-price spiral leading to higher inflation in the medium-term and wants to pursue “supply-oriented” policies to stave off the risk of stagflation, the Frankfurter Allgemeine Zeitung said.
In a new strategy paper, Lindner warns of the risk “that increased inflation expectations among companies and trade unions will flow into wage and other contract negotiations and that the currently high inflation will thus solidify into higher inflation rates in the medium term”, according to the newspaper.
The higher uncertainty stemming from inflation put pressure on riskier investments and narrowed the scope for corporate financing, the newspaper added, citing the strategy paper.
Lindner was also concerned about low productivity growth, demographic change and the climate-neutral restructuring of the economy, the Frankfurter Allgemeine said, reporting extracts of his strategy paper, “Financial Policy at the Turn of an Era”.
In response to these challenges, the newspaper quoted Lindner as writing in the paper: “The current environment must be understood as a signal for a strengthening of supply-oriented economic policy.”
It did not detail what this policy would involve, but the Frankfurter Allgemeine ran its story under the headline “Lindner wants to make tax system competitive”. He is due to present the paper later on Wednesday.
Bundesbank President Joachim Nagel said on Wednesday inflation in Germany will come in close to 7% this year.
Lindner’s liberal Free Democrats (FDP) are the junior partner in Germany’s ruling coalition government with Chancellor Olaf Scholz’s Social Democrats (SPD) and the ecologist Greens.
Source: Reuters (Writing by Paul Carrel; Editing by Hugh Lawson)