5 April 2025 – Inflation in the eurozone proved unexpectedly stubborn in April, remaining at 2.2 per cent. More and more new tariffs: inflationary pressure made in Brussels! Germany doesn’t need mega-factories, it needs good infrastructure. Demand from small and medium-sized companies must be strengthened.
Eurozone: constant inflation in April 2025
Inflation in the eurozone proved unexpectedly stubborn in April. Contrary to market consensus, it remained at 2.2 per cent and did not fall. Compared to the previous month, prices therefore rose by 0.6 per cent. Although energy prices fell by 3.5 per cent compared to the previous year, this was offset by a noticeable rise in food prices. For the European Central Bank (ECB), the fact that core inflation, which is more relevant for its monetary policy decisions and is adjusted for energy and food prices, rose more strongly than expected from 2.4 per cent to 2.7 per cent is likely to be unpleasant. The price of services rose by 3.9 per cent year-on-year, compared to 3.5 per cent in March.
As the unemployment rate in the eurozone remained at an all-time low of 6.2 per cent in March, wage pressure in the services sector could continue and make it more difficult for the ECB to cut interest rates further after the rate hike currently firmly priced in for June.
More and more new tariffs: inflationary pressure made in Brussels
The ongoing inflationary pressure is also likely to be due to the latest decisions by the European Commission, which is sticking to its misguided market protection policy and the introduction of new trade defence measures. The tightening of the EU Safeguard Measure on certain steel products and the provisional anti-dumping duties on hot rolled coil from Egypt, Japan and Vietnam are also contributing to the constant rise in inflation. Paradoxically, Brussels never tires of labelling the US tariffs as a driver of inflation and damaging to the economy, but at the same time is constantly imposing new tariffs on unwelcome imports from third countries.
Germany needs good infrastructure, not mega-factories
In an opinion article in the online edition of the German Handelsblatt, the Hamburg Institute of International Economics (HWWI) analysed the industrial policy of the outgoing and incoming governments. The experts from the HWWI come to the conclusion that Germany does not need any more mega-factories that are doomed to fail, but rather a consistent and sustainable expansion of the ailing infrastructure.
We can only agree with this opinion, as the authors state that the majority of these eight projects are now on the brink of cancellation. Regardless of whether they are battery and chip factories or multi-billion (grave) projects for green steel.
Mega-factories with no lasting effect on the economy
Mega-factories have no lasting effect on boosting the economy in Germany or Europe, especially if they have to import almost 100% of their raw materials to Europe. In addition, the establishment of such prestige objects demonstrably weakens small and medium-sized companies through an exodus of important skilled labour.
Demand from small and medium-sized enterprises must be strengthened
A real effect on economic growth in Germany would be a consistent stimulation of demand from small and medium-sized manufacturing companies and the important construction industry, which could be generated by urgently needed investments in the ailing German infrastructure. This would also make subsidies for large corporations unnecessary and relieve the federal budget, as the large industrial companies in Germany could increase their turnover through rising demand on the domestic market.
Because one thing is clear: demand is not created by prestigious lighthouse projects (which then either have to continue to be subsidised or die anyway). It therefore remains to be hoped that the new German government will not repeat the mistakes of the remaining red-green government.
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