Rarely have German economists, economists and government advisors been so unanimous: Germany is facing an extremely hard winter. And that is not meant meteorologically, but with a view to the economy.
The German economy will get into trouble, growth will flag. But you don’t even need a degree in economics for that, common sense is enough.
For example, looking at the horror number that made the rounds last Tuesday: producer prices (a number that doesn’t interest anyone in normal times, but the times are anything but normal) are almost 46 percent in August compared to the same month last year gone up. This has never happened since this value was determined – and it has been for at least 73 years.
Producer prices indicate what a company has to pay for the products that it wants to process and then sell. This makes them a reliable indicator for the future course of inflation. In this case, this means that inflation is eating its way deeper and deeper into the economic system.
All over the world, central banks are bracing themselves against the drastic rise in consumer prices and the accompanying devaluation of money. And of course, the best way to fight inflation is to cut the steam in the economy.
Even that can lead to a recession – as an example, refer to the USA 40 years ago, where the then highly respected head of the central bank, Paul Volcker, only managed to end persistent stagflation at the price of a severe economic collapse (i.e inflation plus a stagnating economy, the ugly sister of the recession, so to speak). It is foreseeable that this will also have to be the case this time. Because we are heading towards such stagflation.
But of course, the dramatic price increase is due to the ongoing problems in the supply chains as well as to the extremely high energy prices. This is effectively a second front opened by warlord Putin. For a long time no one wanted to believe that he used oil and above all gas as a weapon.
He wants to use it to divide Europe, he wants to use it to divide societies. He hopes for social unrest, meaning that Europeans will rise up against their governments and blame them for prolonging the war by supplying arms to invaded Ukraine, thereby driving up energy prices.
In Berlin, Paris, London and elsewhere, however, governments are braving this very scenario with might and main. The French and British are capping energy prices, the Germans are nationalizing gas traders. At the same time, people in Germany are trying to understand what a gas levy is and whether it is even possible to pay such an additional levy on top of the horrendous energy prices.
Of course, there are also aid packages worth billions in this country that bring a bit of relief – but rather with the watering can instead of specifically helping those who are really in need.
The real endurance test is still ahead of both the Germans and the Europeans. Because the really fat back payment demands for gas and electricity, the higher prices for all conceivable products resulting from the high producer prices (see above), the bills that can no longer be paid, which in turn will drive companies into bankruptcy, in short: these Spiral of horror, it will only really start rotating in the coming year. UN Secretary-General António Guterres summed it up this week: “A winter of dissatisfaction is looming on the horizon.”
That’s where European solidarity comes in, standing together in support of Ukraine and against the war mongers in the Kremlin.
If Europe gets through the coming winter relatively unscathed, the chances are not very bad that things will pick up again afterwards. Slowly, probably, but – and that’s the good news: without Putin’s gas.
Author: Henrik Boehme
According to a report, Federal Finance Minister Christian Lindner (FDP) questions the planned gas levy. According to “Bild am Sonntag”, Lindner does not consider the associated additional costs to be sensible given the economic situation.
As a result of inflation and war, energy and electricity prices are skyrocketing across Europe. Comparison portals have already calculated a price increase of around 30 percent for electricity. But the increases continue. FOCUS online shows the composition of the electricity price in Germany.
In order for Germany to become less dependent on Russian gas, private households will also have to take on more responsibility. From the. The second stage of the new Energy Saving Ordinance takes effect on October 1st. What does that mean for consumers?
The original for this post “A winter of dissatisfaction” comes from Deutsche Welle.