German Chancellor Olaf Scholz met representatives of business and trade unions in Berlin on Monday to chart a course through difficult economic conditions amid rising prices.
"We are facing an historic challenge," Scholz said after the meeting, as he made clear that the government was seeking to avoid a recession in cooperation with employers.
"The current crisis will not pass in a few months," Scholz said, pointing to the Russian invasion of Ukraine and supply chains disrupted by the coronavirus pandemic as the main causes for general uncertainty.
"We have to get used to the idea that this situation will not change in the foreseeable future," he added.
The main objective of the talks is to find ways of dealing with price increases. Monday's talks are being seen as the start of a lengthy process of dialogue with several follow-up meetings.
"We will only come through this crisis well as a country if we join forces, if we agree jointly on solutions," Scholz said. German society was stronger than was often believed, he said. "What is important to me is the message that we stand together."
Rainer Dulger, head of the Confederation of German Employers' Associations, said Germany was facing the toughest economic and social crisis since reunification more than 30 years ago. The crisis could only be overcome through joint action, he said.
"Difficult years lie ahead of us. The constant economic growth that we saw before the coronavirus pandemic and the war in Ukraine is no longer a given," Dulger said.
Yasmin Fahimi, head of the German Trade Union Confederation (DGB), said: "This is about the outlook for 2023, and it is primarily about doing everything to avoid a recession, to stabilize production, to maintain value-creation chains and to ensure employment."
Fahimi said there had been agreement on avoiding a wage-price spiral to ensure that inflation was not driven by higher pay.
Dulger added: "Pay is not currently a driver of inflation, but people are feeling inflation." Employers and the unions could absorb part of the inflation, he said.
"We are currently seeing the drivers of inflation on the supply side: energy costs, shortages of raw materials and lack of pre-production goods resulting from interrupted supply chains," he said.
The government could help by cutting taxes and social contributions so that people receive "more net pay from their gross pay."
Scholz described the meeting as a "good beginning" and emphasized that similar meetings should take place regularly. He also said that the Russian invasion of Ukraine had changed everything.
