Well, good morning, everyone. Thanks for for having me. And I think that that fits very well because
Lots of the things that I plan to say are very much in line with what SES just said but I'm gonna start with few figures the numbers but with the German perspective.
What we're having right now is truly dramatic. So this is the most recent forecast for Germany from the institutes last week,
In 2022 will be six. One% and that would be the highest inflation rate in 40 years.
Where's it coming from? Is it?
Only a Putin inflation just driven by the war and energy prices. Well, yes and no, while obviously, I mean, energy is the most important driver of the price increases but it's not only energy.
So first let me show you this slide which is produce a prices so not basic what you pay in the stores but basically the prices that that firms basically have when we're telling to other friends along the value chain
So, there are things are even more dramatic. So, this is numbers from I think 2 days ago and produce a prices. I up 30%.
Year on year in March 2022. So that's the highest ever. Basically since the status recorded.
But not only energy, it's basically the supply chain pensions. After the pandemic,
These supplies change tensions were slowly evaporating over time so that basically ships from China with would start arriving and so forth and like slowly these tensions would be kind of.
Don't play but that's not the case anymore. First of all, because of the war, the energy, and then secondly, I think one also has to keep in mind.
The problems we're facing in China, right? With oh COVID policy, which basically,
This this rap supply chain so ships that should be already on the way to Europe supply goods they are not on their way so basically we're having new supplies attentions coming up with a few weeks and all of that basically adds to
Pleasures and producer prices and slowly they will be passed on to consumer prices
May you still be like a optimistic.
Foremost of course energy, gas bills,
Price increases that they show up across the board for all sorts of goods so basically almost half of the goods in the consumer basket.
Already have price increases above three%,
And so well, as I said, it's already a dramatic situation.
Europe has decided not to do that.
Was a very important factor and was very skeptical about you know these these type of embargos. If we were to oppose it then,
Inflation wouldn't stop at six. One%, right? So, these are basically projections of what the full and bargain would mean for oil and gas prices and as you see, I mean, gas prices would roughly double.
If we were to impose an environment quickly oil prices would more than double and as you can imagine I mean that would.
GDP. I mean, there's discussion about what dramatic means. Let's say, if a drop of five% GDP, if you would call that dramatic or not,
I think I would call it dramatic especially because the projections of this five% decrease GDP sort of assume optimal policy response
I both in terms of physical policy and also turns off managing the shortages of fossil fuels that would pop up right?
Policy would not react to me then the shock could be much more dramatic than these five%.
We're looking at inflation.
So, all of that is long story short, pretty dramatic. And my last slide would be, okay, what to do about it? And yeah, very much agree with us, yeah.
What we certainly would not want to do is to impose any sort of price caps, right?
Be it for fuel, be it for gas. Simply because if we move to that embargo scenario, it's simply not possible, right? Because people have.
Physical shortage of energy. So, there's no way the government can basically make a promise that well, okay, you can consume gas or fuel at a guarantee price. It's just not possible to do that anymore.
At the moment we're not facing physical shortages because we're having a positive bargain yet but.
I mean with oil it's an open secret that we're moving into that direction and then frankly it's so possible to assure any sort of price caps okay,
Well, some people look at the ECB. And say, okay, we're having,
The ECB keeps the interest rated oh%,
Where we're basing already.
Oh had to be basically decrease significantly because we were all kind of expecting that we'll have a strong recovery after the pandemic now this is basically shifted into the future because of the wall,
So it's sort of a recessionary or stapulationary scenario and in such a scenario right an interest rate hike.
I think would be the the wrong medicine, right? Because we're not facing a dementia of inflation like in the US, in the US, inflation,
Has sort of different characteristics than in Europe there is much more demand driven coming from basically a very very sizable stimulus package right in Europe the inflation is.
At least to my perspective.
Are the wrong let's for the problem we're facing right and they would basically hit the same groups.
That are already hammered by the price increases as your talked about that.
Would be a hit,
My industry takes basically making the recession stronger and lead you to unemployment. I mean, you can imagine who will who will be hammered by those problems. So, basically, I'm skeptical that the.
I mean they can normalize.
Ensure markets that if we're moving into a wage price spiral like many commentators kind of fear,
That the ECB is that in that case ready to to act right also to anchor inflation expectations.
But I think at the moment the actor who has two basically do something about the situation's fiscal policy is governments.
Support measures for low incoming medium income families.
That basically low income middle income families.
Pretty much like with AA pandemic argue that we have to learn to live with the virus now we kinda have to learn to live with inflation this for a while.
And that requires
Short story in my the discussion we had in the German case right I mean one party from the coalition strongly was in favor of price caps
Like basically a price cap on fuels and are now also basically a reimbursement for energy costs for firms.
So I'm not going to say which party it was but you all know it anyway. So this is the completely the wrong way to go but.
It's a coalition. Government. So, basically,
You had to give that party something and so basically that's entered the package as a sort of a compromise but I think that was a totally wrong decision.
And you could do it like a gross payment and then basically make a textible income so that high income high income households pay tax on it and effectively have
So you think that would be simple and easy but Asia mentioned already it's.
It's it's not, right? It's very hard to administer. And there's no such tool in Germany yet. So, there's no way.
How the government can just hand out cash transfers to the entire population.
When you would think we would we should have instrument like that because it would also be part of climate policies because there's also part of the
Package you would want to introduce, right? So, I have COtwo prices and then they see take the text proceeds and just hand them hand them out in a lump some fashion.
It's sold trivia but it turns out it's not, right? So, therefore,
Basically as a top of a wages so it's better than nothing but
It's not the perfect tool. So, I would strongly urge the government to use the time because the the support packages that we have seen already will not be the last ones.
So, if we go for the environment, if inflation will increase even further, we will see further support packages so they should use the time to finally.
So, it's all going to be very expensive for the government. So, I see no scenario in which we could return.
To the deathbreak in 2023 I I just see no way and I think slowly even the FDP and the finance minister will have to realize this
So for now in the short term we have to do it by that financing but don't forever so I think we can discuss this.
Basically I think in the medium to long term we have to.
Text increases to basically.
Pay for for these type of support measures that are indispensable at the moment. So let me leave it here. Thank you very much for your attention and I look forward to the discussion.