Analysis of the IFO Institute: Energy crisis costs Germany 110 billion euros

The high energy prices are hitting the German economy hard: The IFO Institute expects a real income loss of almost 110 billion euros between 2021 and 2023.

Analysis of the IFO Institute: Energy crisis costs Germany 110 billion euros

The high energy prices are hitting the German economy hard: The IFO Institute expects a real income loss of almost 110 billion euros between 2021 and 2023. That would be the sharpest decline since the second oil crisis in the late 1970s.

According to calculations by the IFO Institute, the increased gas and oil prices are sucking almost 110 billion euros out of the German economy. This corresponds to 3.0 percent of the annual economic output. The Munich economists estimate that correspondingly less will have to be distributed to employees in collective bargaining and salary negotiations. The institute published the study against the background of the current collective bargaining round in the metal and electrical industry.

Real incomes are incomes adjusted for inflation. The lost billions are therefore the sum that flows out of Germany to pay for the much more expensive energy imports abroad - 35 billion euros last year, 64 billion this year and another nine billion in 2023.

Only during the second oil price crisis in the years from 1979 to 1981 was the loss of real income even higher at 4 percent of economic output, said IFO economic researcher Timo Wollmershäuser. The overall economic loss of purchasing power over the three years could not have been compensated for until 1986. At that time, the price of oil began to fall sharply, while at the same time the Deutsche Mark appreciated noticeably against the dollar. As a result, energy imports, most of which are settled in US currency, became cheaper.

"The current decline in real income is likely to continue in the coming years," said Wollmershäuser. "On the one hand, energy prices will remain high after Russia is no longer a supplier. On the other hand, Germany's dependence on imported energy will not change anytime soon."

Wollmershäuser and his colleague Wolfgang Nierhaus assume that German companies will initially be able to increase their export prices much less sharply than import prices. "A good part of the higher prices for imported energy should therefore be borne by domestic end users," the scientists wrote.

The quantification of real income losses is important in all distribution discussions, emphasized Wollmershäuser. The high prices for goods and services produced in Germany are not the result of a boom, but primarily reflect the high costs of imported energy and primary products. The income to be distributed between employees and entrepreneurs "must therefore be corrected for the real income losses".

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