The energy crisis is driving Germany into a recession. The federal government lowered its economic forecast significantly on Wednesday. “These are serious times,” said Economics Minister Robert Habeck (Greens) in Berlin. “We are currently experiencing a severe energy crisis that is increasingly becoming an economic and social crisis.” The federal government wants to counteract this with the announced billion-dollar “defense umbrella”. Habeck welcomed proposals from a commission of experts on the planned gas price brake.
In its autumn projection, the federal government expects only small economic growth of 1.4 percent for this year, and the economy will shrink by 0.4 percent in the coming year. An increase in gross domestic product of 2.3 percent is expected for 2024. In the spring projection, the federal government had expected an increase in gross domestic product of 2.2 percent this year and 2.5 percent next year.
The crisis was triggered by Russian President Vladimir Putin’s attack on Ukraine, Habeck made clear. Russia stopped gas supplies. Putin’s goal is to destroy the economic and political stability of Germany and Europe through high energy prices. “I am firmly convinced that Putin will fail in this attempt to destabilize the basic economic order, just as he is failing on the battlefield in Ukraine.”
High prices slow down production and consumption
The high energy prices are increasingly burdening many companies in Germany and, according to the forecast, are slowing down industrial production. The loss of purchasing power is also leaving its mark on price-adjusted private consumption, which is likely to decline next year. The job market remains robust.
According to Habeck, without the extensive countermeasures taken by the federal government, the forecast for this year and next would have been even more dramatic. The gas storage facilities have been filled and the first terminals for importing liquefied natural gas will go into operation in northern Germany at the end of the year.
According to Habeck, the danger of a gas shortage in winter has not been averted. 20 percent of gas would have to be saved. Industry cannot do all of this, because otherwise less would be produced. Private households would also have to make their contribution.
“Defense shield” of up to 200 billion euros
There is no sign of a noticeable relaxation in gas prices. Although they have fallen recently, they are still at a high level. Habeck underlined the need for comprehensive countermeasures by the federal government, also so that companies could continue to invest. The federal government’s “defense shield” is said to have a volume of up to 200 billion euros to support consumers and companies because of the high energy prices. This should also finance the relief for gas customers.
The expert commission set up by the government presented a phased model on Monday. In December, the experts propose a one-off payment for gas customers in private households and businesses and price brakes for a basic quota of gas from March for these groups. According to the proposals, a gas price brake should take effect for major customers in industry from January.
criticism of the proposals
Habeck said he warmly welcomed the Commission’s proposals. You have opted for “flat rate” and speed. Trade unions and social organizations had criticized that the proposals were not socially balanced.
The federal government has announced that it will now enact the proposals as law as soon as possible. An electricity price brake is also planned.
According to the autumn projection, the gas price brake will dampen the rise in consumer prices in the coming year. The federal government expects an inflation rate of 8.0 percent in the current year and 7.0 percent in the coming year. In 2024, the inflation rate should then be 2.4 percent.
Lindner: Can’t be satisfied with the development
Finance Minister Christian Lindner (FDP) said on the fringes of the fall conference of the International Monetary Fund in Washington that Germany cannot be content with having the weakest economic development of the industrialized nations. On the one hand, this is due to the special energy policy dependency and the international exposure as an export nation. At the same time, however, there are also “longer-standing deficits in our competitiveness, which we will have to work on systematically over the next few years”. It’s not just about industry, but also about medium-sized companies.
Leading associations of the German economy also expressed concern. “The high energy prices and the weakening economy are hitting the German economy with full force,” said the Federation of German Industries. The Central Association of German Crafts commented: “It’s five past twelve.”
