BERLIN (Reuters) - While its European partners agonize about recession, austerity and rising unemployment, Germany is shifting its attention to a very different, and yet familiar, source of angst - inflation.
Despite recent data showing German consumer prices rose by just 2 percent in April, the slowest pace in over a year, some economists see the beginnings of a dangerous price bubble that could come back to haunt the country in the years to come.
The high cost of oil and signs that German wages and property prices are on the rise, after stagnating for the better part of the last decade, are contributing to the anxiety.
But the main source of concern is the easy monetary policy of the European Central Bank (ECB), which has pushed interest rates down to a record low and provided massive amounts of liquidity to euro zone banks in a desperate bid to stem the debt crisis that has haunted the bloc since 2009.
The central bank's approach may be appropriate for countries like Spain and Greece, which are struggling with crushing recessions and unemployment rates approaching 25 percent.
But it poses a growing risk to healthy Germany, the argument goes, even if the true threat to Europe's largest economy may not become apparent for many months.
"In the years after the euro's launch, interest rates were too high for Germany and too low for countries like Spain and Ireland. Now the story has been turned on its head," said Joachim Scheide, head of forecasting at the Kiel Institute for the World Economy.
"There's nothing dramatic happening at the moment, but the inflation dangers for Germany over the next two to three years are very high," he said. "There is a significant risk that this ends in disaster."
The Kiel institute was one of eight think-tanks to warn last month in a twice-yearly report that the dire state of some euro members could make it difficult for the ECB to return to a more normal policy stance in time to prevent a strong rise in German inflation.
A week later, in an unusual public foray into the realm of monetary policy, German Economy Minister Philipp Roesler called - in a written statement approved by the cabinet - for the ECB to return to "normal mode" and focus on its "clear mandate" of price stability.
That made it official - the German government itself was worried about inflation.
Why is this significant? After all Germans have had a visceral aversion to higher prices ever since hyperinflation under the Weimar Republic in the early 1920s eviscerated the savings of an entire generation. Worrying about price rises is nothing new for Germany.
The big difference with the current bout of angst is that it could have huge implications for Europe and its hopes of emerging from its debt crisis.
Higher German wages, some economists believe, are precisely what are needed to get the bloc back on track.
If German consumers had a bit more disposable income, it could boost demand for imported products from Europe's ailing periphery, bolstering growth there. If German workers cost a bit more, Germany's competitive advantage might be reduced, making it easier for other European countries to sell their goods.
If there was ever a time for Germany to tolerate higher prices, it may be now.
That's why public expressions of inflation anxiety in Germany are worrying to some. Should the fears harden over the course of this year, pressure on the ECB to rein in its expansionary policy - from the Bundesbank, politicians and the German media - would surely grow.
If that pressure led to a more restrictive monetary policy, it could render moot the soon-to-be-unveiled growth strategy European leaders have been talking about so much in recent weeks.
"If the people in charge - mostly the Germans at this point - insist that the adjustment must come entirely through a fall in the absolute level of wages and prices in countries with current account deficits and large amounts of debt, then Europe is in for a difficult, and perhaps lost, decade," MIT professor and former IMF chief economist Simon Johnson wrote this week.
"But if part of the adjustment can come through higher German wages - recognizing productivity gains and consistent with continued prosperity - the path forward will be easier."
So does Germany really have an inflation problem?
German wages are certainly on the rise. Last month, Chancellor Angela Merkel's conservative party said it would try to introduce a new nationwide minimum wage law in parliament by the end of the year, a move which would push up salaries in one fell swoop.
In March, the two million workers in the German public sector received a pay increase of 6.3 percent over two years. IG Metall, which represents 3.6 million workers in the engineering sector, is demanding a 6.5 percent raise for this year alone.
The union's readiness to launch warning strikes this week and the bolder rhetoric of its leaders underscores just how strong its position has become in a sector where many firms are delivering robust profits, working at full capacity and struggling with skilled labor shortages.
"It's our turn now," Michael Sommer, head of the DGB federation of German unions, said in a May Day speech.
Still, fears of a German wage-price spiral seem overdone to many economists. Data published by the Federal Statistics Office last month showed that hourly labor costs in the German private sector rose at the lowest rate - 19.4 percent - of any country in the European Union over the past decade.
In France, the increase was 39.2 percent, more than double that of Germany. The EU average was 36.1 percent.
"Wages are rising, but this follows a prolonged period of restraint," said Andreas Rees, chief German economist at Unicredit in Munich.
"I honestly can't see any reason to worry about these wage deals nor to think the inflation rate will rise significantly in the next years. German growth simply isn't strong enough to generate runaway prices."
Worries about overheating in the German property market also seem premature. Like wages, German real estate prices stagnated over the past ten years, even as those in countries like Ireland and Spain shot to astronomical levels, before crashing hard.
That changed in 2011. Rock-bottom domestic interest rates and safe-haven buying from abroad at the height of the debt crisis fuelled a mini-buying frenzy, sparking double-digit price increases in some German metropolitan areas.
But Alexander Koch, a colleague of Rees at Unicredit who published an in-depth study of the recent price gains in March, sees no evidence of a bubble.
In Koch's "Overheating Barometer", an index of five real estate market indicators which measures market excesses on a zero to five scale, with five signaling the highest alert level, Germany scored just one - below France and in line with Italy and the United Kingdom.
Analyses like these do not reassure experts like Scheide from the Kiel institute, who believes persistently low interest rates over a period of years have the potential to produce a Spanish-style housing bubble in Germany.
"We could see inflation of 4 or 5 percent in Germany if wages and property prices get out of hand. This would lead to a massive correction, to a recession," Scheide say. "This is a real test for the ECB."
The last time Germany had inflation rates that high was in the years after reunification in 1990, when massive amounts of money were pumped into the former communist East. Over the past 15 years, annual inflation has averaged a mere 1.5 percent and never exceeded 2.6 percent.
And that may be the crux of the issue, says Holger Schmieding, chief economist at Berenberg Bank.
"Germany is used to having less inflation than its neighbors," he said. "Now, because of its economic strength, it needs to get used to having more."
Reporting by Noah Barkin; editing by Janet McBride