Let’s check in on Germany.
Recently we have learned that a man gets stabbed by an Islamist and then gets fined for criticizing Islam.
We also learned that:
Then last week, another attack in Magdeburg on a Christmas market, the epitome of tradition in Germany.
But despite these worrying attacks on free speech, freedoms and ordinary citizens at least Germany has that excellent industrial economy that keeps the EU economy running, right?
Well, actually, no.
The state of the engine of German (and European) prosperity, the German economy, may be in irreversible decline says Bloomberg. “Germany is unraveling just when Europe needs it most” reads one of the latest headlines from the economic news agency, which cites high energy costs and slumping exports as causes for a decline that “threatens to become irreversible”.
Those high energy costs are mainly caused by German political policies. Germany’s access to reliable cheap gas, was dealt a terminal blow by the German leadership’s rush to sanction Russia as a counter to Russia’s invasion of Ukraine.
This could now be seen an injudicious gamble which was vigorously pushed by the German traffic light government, with notable vigour by the Greens’ Rober Habek and Analena Baerbock. The closure of zero carbon nuclear energy plants as a matter of (again) the Greens’ policy, even during this energy crisis, only hastened the crisis. And this all comes after a decade long mega investment in renewable energy which, despite all hopeful projections, has only increased the price of electricity as the problems with weather-dependent non-dispatchable energy become a greater part of the energy management issue.
Monthly energy costs in Germany, after an extraordinary peak during the initial stages of the Russian invasion of Ukraine, have settled back to roughly double what they were before Covid, and they are trending upwards.
In Germany everything is going wrong, it seems, all at the same time.
As energy prices continue to increase, Germany’s energy intensive heavy industry gets less and less competitive. As Bloomberg reports; after 5 years of stagnation, Germany’s economy is now 5% smaller than it would be on pre-pandemic growth levels, leaving every German household €2,500 worse off.
This does not bode well for an economy that operates on a growth model.
Manufacturing has always been the mainstay of the German economy, but high energy prices are driving industry out of Germany. German auto giant, Volkswagon, has been stuck in negotiations with unions since October when it announced plans to close three plants in Germany in a radical cost cutting strategy that included a 10% wage slash and massive layoffs. Those talks are presently stalled.
Germany’s largest steelmaker Thyssenkrupp AG, plans to reduce the labor force at its steel unit by about 40% this decade and shutter two blast furnaces. Their plan also includes “carbon neutral steel production,” which sounds like an accounting trick to satisfy green regulators rather than actual reduction in carbon emmissions.
Miele announced they would be cutting one in nine German jobs and moving 600 manufacturing jobs to Poland. Nice for Poland, I guess.
Energy dependent manufacturing has been exiting Germany for the past two years. Basf, the chemical giant, has been quietly closing German plants and opening plants in China. French steel pipe manufacturers, Valourec, announced the closure of their German plants in May.
There is a pattern of German manufacturers closing down in Germany and moving their production to other countries. Volkswagen, Basf, Mercedes, Miele, are just some of the famous German brands doing this.
Steel, chemicals, manufacturing. These are industries at the core of the real economy. If they go, Germany as an economy is in deep, deep, trouble.
But the energy crisis isn’t everything – which may be a blessing in disguise because there are other factors that could be addressed with budgetary measures and regulatory adjustments. Germany is also crippled by overbearing bureaucracy, which hinders development and investment. The German energy policy is a case in point. Driven by the ideological agenda of an overbearing and inflexible Green contingent, the German government have doggedly pursued inexplicable policies in this realm. The insistence of renewable investment; the lack of investment in dispatchable fossil fuel energy infrastructure; and the closure of nuclear power plants at precisely the point where the Russian invasion of Ukraine hastened an energy crisis; have all only exacerbated the effect of losing the supply of cheap Russian gas.
Tax burdens also have prompted Germany’s industrialists to move their investment ventures abroad. Siemens, one of the global leaders in power management and distribution, told a German parliamentary hearing that low growth and burdensome taxes encouraged them to make their investments primarily abroad.
Germany has other problems too. An ageing and retiring workforce could mean that a re-ignition of their industrial base will face insurmountable skills shortages. An ageing demographic, despite mass migration, places new burdens on their social services. With this demographic winter quickly coming upon the German nation, this is a very bad time to have ageing and failing infrastructure and a green ideology-induced energy crisis.
Also, what’s bad for the German economy is also bad for the European project.