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German finance minister warns of stagflation risk, pledges return to fiscal rigour

·1-min read
German cabinet's weekly meeting in Berlin

BERLIN (Reuters) - German Finance Minister Christian Lindner said there was a risk of a period of high inflation and low growth following Russia's invasion of Ukraine, which had driven already high inflation up further still.

"Stagflation is a possible scenario," he told a conference of family-owned businesses in Berlin on Monday.

He said the price pressure could best be countered by unwinding the subsidies that had previously been given out to prop up the economy and that Germany and Europe had to return to fiscal discipline.

He added that Germany's constitutional debt brake, currently suspended, would come back into force next year. That would imply a reduction in the level of new borrowing from this year's 140 billion euros ($146 billion) to just 10 billion euros.

($1 = 0.9591 euros)

(Reporting by Christian Kraemer; writing by Thomas Escritt; Editing by Christoph Steitz)

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