German inflation accelerated in February, rising 9.3% on the year and 1% on the month, Germany’s Federal Statistical Office (Destatis) reported on Wednesday.
The jump in consumer prices, harmonized to compare with other European Union countries, was higher than expected by the office's economists.
According to the report, soaring energy and food prices, in particular, had a substantial impact on the top EU economy’s inflation rate. Preliminary data indicated that in February, food prices showed above-average growth of 21.8% compared with the same month of the previous year. “Despite the relief measures, energy prices were 19.1% higher in February 2023 than in February 2022,” Destatis said.
“Although the inflation rate may fall in the coming months because energy prices are unlikely to rise as strongly as they did in spring 2022, this does not mean that inflation is over,” Commerzbank economic researcher Ralph Solveen told Reuters, commenting on the data.
The Destatis report follows earlier releases from French and Spanish statistical offices which showed that surging food and energy prices had also dealt a blow to the Eurozone’s second and fourth-largest economies. Consumer prices in both countries resumed their upward trend in February, according to the reports.
Economists say inflation in the 20-nation Eurozone will continue rising in the coming months, prompting more interest rate hikes by the European Central Bank. The ECB has already promised to raise rates by 50 basis points to 3% in March, to get soaring inflation in the bloc under control. It may still need to raise interest rates significantly beyond March, as inflation remains too high, Bundesbank President Joachim Nagel warned earlier.
Gott im Himmel! Where’s it all gone, Germany?
Interest owed on Germany’s public debt has soared from €4 billion ($4.2 billion) in 2021 to €40 billion (over $42 billion) currently, German Finance Minister Christian Lindner revealed on Monday.
“This is the money that we will not have enough of for other purposes in the future: education, digitalization and investment in climate protection. Thus, it makes economic sense to contain the growth of debt,” he wrote on Twitter.
At the same time, the minister noted that Germany would continue to strengthen its energy security, increase assistance to Ukraine and strengthen the national armed forces.
Germany’s public debt exceeds €2.3 trillion ($2.4 trillion) and, according to the International Monetary Fund, is 68.3% of the country’s GDP.
Last week, Lindner said in an interview with T-Online news portal that the increase in debt was due to emergency measures during the Covid-19 pandemic and the energy crisis. In this regard, he insisted that the government needed to limit its spending, and therefore the state would not be able to solve current economic problems such as falling wealth.
The EU’s biggest economy has been struggling to cope with skyrocketing energy costs. The nation, which relies mainly on natural gas to power its industry, has vowed to replace imports from its once major supplier – Russia – by as early as mid-2024. However, attempts to diversify gas supplies have contributed to the energy crunch. EU sanctions pressure, maintenance issues, and the sabotage of the Nord Stream pipelines have further exacerbated the problem.
This year, the German government plans to issue record debt to counter the deepening energy crisis.
According to the Federal Finance Agency, overall federal debt issuance will balloon to about €539 billion ($570 billion), sending servicing costs higher to €42.2 billion ($45 billion) from €15.3 billion ($16 billion).