Carsten Linnemann, the CDU’s general secretary, warned that the Iran crisis could lead to a doubling of inflation driven by higher oil prices. Speaking on the TV channel “Welt”, he highlighted that the situation has already become alarming. “We were around $60 a barrel in the fall and now we’re at $80. If prices swing to $100 this summer, the odds of inflation doubling-pushing it toward four percent-are significant” he said.
Linnemann noted that such a rise would force the European Central Bank to lift interest rates, a move that could choke economic activity. “This creates a very difficult scenario right now” he added. “All we can do is hope the war doesn’t last too long”.
He admitted that this scenario is realistic and that the government cannot simply pretend it can fight against it. “We’re already taking steps to support industry, such as easing electricity costs and other relief measures. But if oil prices hit $100, the impacts won’t be contained within those measures” Linnemann explained.
Linnemann underscored the tragedy of this potential outcome, especially as the economy is gaining momentum. “We’re experiencing a delicate sprout in industry-orders are improving, and the country is seeing more entrepreneurial activity. Direct investment is flowing in more than it’s leaving. If this fragile growth were to be stifled, it would be bitter” he said. “That’s why it’s important to prepare for such a scenario”.
