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ECONOMY

Inflation in Germany hits highest rate since 1992

Consumer prices in Germany rose in December at their fastest pace since June 1992, official data showed on Thursday, pushed up by rising energy costs and supply bottlenecks.

A store manager stocks the shelves with new merchandise and inserts a price tag before the early morning opening.
A store manager stocks the shelves with new merchandise and inserts a price tag before the early morning opening. Photo: picture alliance/dpa/dpa-Zentralbild | Georg Wenzel

The annual inflation rate climbed to 5.3 percent, accelerating for the sixth month in a row, after a 5.2 increase in November, the federal statistics agency Destatis said in preliminary figures.

Over the whole of 2021, inflation came in at 3.1 percent, the highest year-end figure since 1993. The acceleration had a “number of reasons”, the agency said, including higher costs for energy, supply chain disruptions due to the pandemic and a temporary VAT cut in 2020, which lowers the base against which current price rises are measured.

READ ALSO: How will the cost of living change in Germany in 2022?

The December inflation figures were the last to factor in the tax holiday, introduced to mitigate the impact of Covid-19 lockdowns on the economy. The question that arose was whether inflation had reached its “summit” or if there would be a “further, hitherto unexpected rise”, said Fritzi Koehler-Geib, chief economist at the public lender KfW.

“Both are conceivable. There is much to suggest that price growth will cool off as a result of the elimination of base effects,” while it remains “uncertain” how quickly bottlenecks or energy price rises would ease.

READ ALSO: German consumer prices hit 29-year high in November

Gas prices have surged in Europe in recent months as demand has soared with economies emerging from their Covid-induced restrictions. The spike has been further fuelled by geopolitical tensions surrounding Russia, which supplies one third of Europe’s gas.

Western countries accuse Russia of limiting gas deliveries to put pressure on Europe amid tensions over the Ukraine conflict to push through regulatory approval for the controversial Nord Stream 2 pipeline set to ship gas to Germany.

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MONEY

Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.

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