Dying industry, mass poverty, furious winter: Germany indulges in doomsday scenarios. A sober look at the economy shows how exaggerated that is. We can still avert a deep crisis.
Germany is staring into the abyss: the stock exchange prices for electricity and gas have jumped to unprecedented heights. Business associations are warning of a collapse in central sectors and massive job losses. Even in the government there are whispers of the threat of mass poverty and possible popular uprisings if citizens are burdened by rising prices. The euro is losing value, inflation is eating away at our savings. People fear that they will no longer be able to heat their homes in winter.
The list of acute problems could be continued for a long time: supply chain problems, China's tough corona lockdowns, labor shortages, drought due to climate change...
But does that justify the growing desperation? no The German fear of crisis is so great that we no longer even consider the possibility that the catastrophe will not occur or that we can avert it. What is frightening is not only the exaggerated expected extent of the impending injustice, but above all that in many comments and analyzes the impression shines through that Germany, the largest and most powerful economy in Europe, has already come to terms with the supposedly imminent economic collapse as an inevitable fate.
The misjudgment that "we can't do anything about it" has become a mantra: Reacting to the gas shortage in an innovative way, saving, finding alternatives? we can't! Without Putin's gas we will all go bankrupt! fight inflation? That will stall the economy completely! the financial market wails. Effectively cushion the consequences of the energy crisis for consumers and also for companies with aid packages? We can't afford that, the debt brake forbids it, according to the Ministry of Finance. The only thing Germany can do now, it seems, is manage a shortage of everything.
There are some indications that the obituaries for the German economy have been misguided and that we will by no means plunge into a deep crisis in the coming months:
Gas consumption in German industry has already fallen sharply in recent months, according to current data from the Federal Network Agency in July by more than 20 percent compared to the average of previous years. At the same time, the German economy continued to grow in the second quarter and, as far as the data from the Federal Statistical Office are available, the production of the industry that is so important for Germany was at least stable until July. Like reports from individual sectors and companies, this indicates that, contrary to all prophecies of doom, the gas savings that would be necessary in the event of a Russian supply stop are possible without triggering a deep economic crisis. In addition, the filling of the gas storage facilities will probably be completed faster than planned and more gas could be available for consumption in the coming months than feared. As a result, energy prices could also fall slightly again.
The most feared symptom of a deep economic crisis is mass unemployment. Despite the general fear of recession, the labor market is currently booming. Companies are desperately looking for staff. According to surveys such as the IFO labor market barometer, there are no signs of a turnaround. Economists predict that even if Germany goes into recession - a contraction in economic activity for a period of two quarters or more - mass unemployment will not return.
This in no way means that people will not feel any burdens or loss of prosperity as a result of the high energy prices. However, the state could absorb such losses in prosperity for a large part of the population and prevent the feared uprising of freezing citizens in the "winter of anger". Even in the event of a prolonged recession, Germany's public finances would be extremely stable, as the rating agency Scope has just established.
Rising tax revenues and lower corona subsidies have caused the German government deficit to fall sharply in the first half of the year. According to the Federal Statistical Office, the federal, state, local and social security funds spent 13.0 billion euros more than they earned by the end of June. The deficit corresponds to 0.7 percent of the gross domestic product. Germany can afford significantly more help for consumers and companies than Finance Minister Christian Lindner suggests and than has been initiated so far. The debt brake is not an obstacle to this, it expressly provides for exceptions for situations like the current one.
Germany's economy can master the current problems, such as those that survived the corona pandemic and before that the global financial crisis. We must act now and not indulge in doomsday scenarios!
