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Saturday, August 13, 2022

Will the Slovenian government, with Germany just before the recession, give up socialist economic experiments?

By Domen Mezeg (Nova24tv)

The war, rising energy and food prices are warning Golob’s that this is not the time for holiday relaxation. This is not the time to stifle the economy with additional taxes and socialist experiments. There is even less time for salary increases. It will be necessary to save. Let us remind you that the government intends to raise public sector wages, which would only increase inflation and reduce the purchasing power of households. Germany is already heading into recession.

It is time for sobering up, not “holiday adventures”. This applies especially to the government of Robert Golob and its close associates (ministers and secretaries of state), who enjoy the highest possible salaries. We are facing serious challenges in the coming months. According to STA, the atmosphere in the German economy is at its lowest point in the last two years. The situation worsened especially in July. Ifo – the Munich Institute for Economic Research gave its findings.

The indicator, which measures the economic climate in the country, stood at 92.2 points in June, but fell to 88.6 points in July, which is the lowest since June two years ago. A sharp decline in employment is expected. Similar expectations were also announced by analysts, who on average predicted a drop in the index to a measly 90.1 points. The president of the Institute, Clemens Fuest, is convinced that Germany is on the brink of recession.

He sees the reason in the high prices of energy products and the threat of gas shortages. Both causes headaches for the economy. Ifo is the most important economic indicator in this Central European country. It records a sharp decline in all economic sectors. It is particularly noticeable in the field of processing. The number of orders also fell. The business climate is also unfavourable for the service sector, despite recent optimism. Deterioration is expected in tourism, hospitality, trade, and construction.

Are we in for an even bigger drop in purchasing power due to the government’s unwise moves?

Let’s remember: Golob’s government plans to raise the salaries of civil servants. How much this increase will be is not yet clear, as negotiations with the unions are still ongoing. But one thing is clear – wage increases are not based on actual economic conditions, and at the same time they can even be dangerous. It is a typical fire extinguishing with gasoline. The increase in wages comes at the request of the trade unions. They initially demanded a 12% salary increase, higher even than the predicted inflation. The Office for Macroeconomic Analysis has predicted 8% inflation for this year.

In the circumstances, any deal on wage increases reached by the government and the unions could worsen the situation in which consumers found themselves. Slovenia has historically high employment and consequently high demand for services and goods – only this is limited due to the breakdown of supply chains, and above all due to the war in Ukraine, which caused an increase in energy and food prices. The combination of circumstances creates an increase in prices (inflation), which effectively reduces the purchasing power of households, which, according to findings, are increasingly under pressure.

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