As rising energy and food prices continue to fuel inflation, the economies in industrialized countries are beginning to stagnate. The mix, known as stagflation, presents politicians and central bankers with virtually insurmountable problems. The European Central Bank is meeting Thursday. It is expected to raise interest rates to try to deal with inflation. A leading politician sometimes encounters real life on the premises of his own ministry. One such place is the grand chamber of Germany's Finance Ministry. That was where Finance Minister Peer Steinbrück, a member of the center-left Social Democratic Party (SPD), had summoned his workforce to a general meeting the Friday before last. The minister expected his staff to arrive in good spirits, especially since this year Germany's public sector employees are getting their first perceptible pay increase in a long time. But the civil servants Steinbrück encountered seemed less than enthusiastic, bluntly informing their minister that while they may be getting a raise, the rising cost of fuel and food is eating up most if not all of their additional income. "Inflation is really getting to my people," Steinbrück concluded. They aren't the only ones. Workers everywhere are complaining that they are deriving little or no benefit from pay increases. Although wages and salaries increased by 2.8 percent in the first quarter in Germany, prices rose even faster, by close to 3 percent, reflecting a tendency that has been in place for some time. In the eurozone as a whole inflation hit a record 4 percent in June.
As rising energy and food prices continue to fuel inflation, the economies in industrialized countries are beginning to stagnate. The mix, known as stagflation, presents politicians and central bankers with virtually insurmountable problems.
The European Central Bank is meeting Thursday. It is expected to raise interest rates to try to deal with inflation. A leading politician sometimes encounters real life on the premises of his own ministry. One such place is the grand chamber of Germany's Finance Ministry. That was where Finance Minister Peer Steinbrück, a member of the center-left Social Democratic Party (SPD), had summoned his workforce to a general meeting the Friday before last. The minister expected his staff to arrive in good spirits, especially since this year Germany's public sector employees are getting their first perceptible pay increase in a long time.
But the civil servants Steinbrück encountered seemed less than enthusiastic, bluntly informing their minister that while they may be getting a raise, the rising cost of fuel and food is eating up most if not all of their additional income. "Inflation is really getting to my people," Steinbrück concluded. They aren't the only ones. Workers everywhere are complaining that they are deriving little or no benefit from pay increases. Although wages and salaries increased by 2.8 percent in the first quarter in Germany, prices rose even faster, by close to 3 percent, reflecting a tendency that has been in place for some time. In the eurozone as a whole inflation hit a record 4 percent in June.
FRANKFURT: As Treasury Secretary Henry Paulson Jr. travels through Europe this week, he wants to reassure jittery audiences that the United States will right its economy and its financial markets. But with both sides of the Atlantic now suffering from a similar combination of sagging growth, rising inflation and shaky banks, Paulson's visit is turning into a case of misery loves company. "There's no doubt that the second quarter will be a tough quarter," Paulson said during an interview after meeting with the president of the European Central Bank, Jean-Claude Trichet. "There's no doubt in any of our minds that the high oil prices are going to have an impact." The meeting in Frankfurt came on a day when the European economy, which had recently been more resilient than that of the United States, began showing signs of an American-style slump. Manufacturing activity in the 15 countries that use the euro shrank in June for the first time in three years, according to an influential survey of purchasing managers released Tuesday.
FRANKFURT: As Treasury Secretary Henry Paulson Jr. travels through Europe this week, he wants to reassure jittery audiences that the United States will right its economy and its financial markets.
But with both sides of the Atlantic now suffering from a similar combination of sagging growth, rising inflation and shaky banks, Paulson's visit is turning into a case of misery loves company.
"There's no doubt that the second quarter will be a tough quarter," Paulson said during an interview after meeting with the president of the European Central Bank, Jean-Claude Trichet. "There's no doubt in any of our minds that the high oil prices are going to have an impact."
The meeting in Frankfurt came on a day when the European economy, which had recently been more resilient than that of the United States, began showing signs of an American-style slump.
Manufacturing activity in the 15 countries that use the euro shrank in June for the first time in three years, according to an influential survey of purchasing managers released Tuesday.
with both sides of the Atlantic now suffering from a similar combination of sagging growth, rising inflation and shaky banks,
Last quarter growth, on a yearly rythm: Germany 6%, USA 1% Shaky banks: the European banks with the most spectacular losses are Swiss or British. In the long run, we're all dead. John Maynard Keynes
