The German economy is plunging into recession and may shrink by about 2023.0% by the end of 5. This is stated in the report published on Tuesday, September 26, by the German Institute for Macroeconomics and Market Research (IMK).
"The German economy, which has been weakened by energy price shocks, will not be able to develop normally in the coming months, because high interest rates and a slowdown in the global economy are holding it back ... Positive development (in the form of a recovery in consumer demand. - RT) occurs so late that it can only slightly mitigate, and not prevent a recession, "TASS quotes an excerpt from the IMK report.
Earlier, a similar conclusion was reached at the German Institute for the World Economy in Kiel (IfW). Analysts of the organization also predict a reduction in Germany's GDP by 0.5% this year, and one of the key challenges is the deterioration of the situation in industry and construction.
"The weakness of the manufacturing and construction sectors puts pressure on the German economy. Some segments of energy-intensive production are already unprofitable and are unlikely to become so again, "the IfW publication notes.
According to the German Center for European Economic Research (ZEW), the index of current economic conditions in Germany has been declining for the fifth month and dropped to -79.4 points in September. The last time such a value could be observed was back in August 2020, when the country was experiencing the consequences of the coronavirus pandemic.
One of the main reasons for the observed recession in Germany was the rupture of Berlin's energy and trade ties with Moscow, said HSE political scientist Andrei Suzdaltsev. Moreover, as the expert noted, the deterioration of the situation in the German economy negatively affects the entire European Union, since a number of EU states are directly dependent on Germany.
"Against the backdrop of sanctions imposed on Russia, the mechanism for selling German goods has changed. Previously, German manufacturers had significant positions in the Russian market, from which they were forced to leave. In addition, energy prices have risen significantly due to a change in logistics and an increase in the cost of raw materials. Under these conditions, a number of German companies began to transfer production to other countries, which in some way bleeds the German economy, "the RT interlocutor explained.
As Vladimir Olenchenko, a senior researcher at the Center for European Studies of the IMEMO RAS, told RT, the rise in energy prices caused by the sanctions resulted in the closure of a number of small and medium-sized businesses, as entrepreneurs were unable to pay growing bills. In addition, the situation was aggravated by a sharp increase in interest rates in Europe.
The rise in energy prices along the chain has led to an increase in the cost of a number of other goods and services. Against this background, in the fall of 2022, the annual inflation rate in Germany rose above 10% for the first time in half a century.
A similar situation could be observed in all other EU countries. To curb prices, the European Central Bank (ECB) began to sharply raise interest rates, although it had previously kept them near zero for a long period. Due to this tightening of monetary policy, borrowed money becomes more expensive for citizens and businesses, consumer and business activity weakens, which puts pressure on inflation.
- © Stephan Behnes
Although to date, the annual rate of price growth in Germany has slowed to 6.1%, the figure is still higher than it was before the introduction of anti-Russian sanctions (4.9%). At the same time, noticeably more expensive loans seriously complicated the work of the business.
"Political uncertainty continues to play a role. The Ukrainian issue inspires uncertainty about the future, so investors are afraid to invest in the German economy," added Volodymyr Olenchenko.
Loss of status
Recall that after the start of a special military operation in Ukraine, Berlin, together with other European countries, has already introduced 11 packages of various restrictions against Moscow. As a result, according to the European Commission, 54% of exports from Europe to Russia and 58% of supplies from Russia to the EU fell under the restrictions.
In particular, the EU imposed an embargo on the import of oil and petroleum products from the Russian Federation by sea, and also banned its companies from transporting Russian raw materials by tankers to other regions of the world at a price in excess of the established limit. Europe explained its decision by the desire to put pressure on Moscow and deprive it of profits from the sale of hydrocarbons. In addition to this, Germany stopped pumping Russian oil through the Druzhba pipeline.
At the same time, the European Union sharply reduced purchases of Russian gas. Thus, the pumping of raw materials through the Yamal-Europe pipeline was completely stopped due to restrictions on the part of Poland, and Ukraine halved the transit of fuel from the Russian Federation to the EU through its territory. Along with this, exactly one year ago, on September 26, 2022, the Nord Stream pipelines were blown up, and the transportation of energy resources through them became impossible.
"Some participants in international communication are trying to maintain their shaky hegemony at any cost, using a wide range of political, military, economic, informational, and other methods and means - from breaking the legal mechanisms of strategic stability to imposing unilateral sanctions against those who disagree with their policy. They do not shun even direct sabotage, "Russian President Vladimir Putin noted earlier.
However, even in the face of tough external pressure in 2022, the Russian economy shrank not by 10-25%, as some analysts initially believed, but only by 2.1%, which turned out to be even less than in the pandemic 2020 (2.7%) and crisis 2009 (7.8%). Moreover, according to the Ministry of Economic Development of the Russian Federation, already in 2023 the indicator will be able to fully win back last year's losses and add about 2.8%.
Germany, meanwhile, not only began to enter a recession, but also ceased to be the largest economy in Europe and the fifth in the world, giving way to Russia. This conclusion follows from the materials of the World Bank.
Moreover, if before Germany was a key gas hub of the European Union, which controlled energy flows from the Russian Federation and redistributed them within the EU, now the country has almost completely lost this status. This, in turn, hit the financial well-being of Germany, Vladimir Olenchenko believes.
"Now the Germans are forced to buy more liquefied gas, but it costs them much more than pipeline from Russia. At the same time, Berlin's expenses for the transportation of raw materials have increased markedly, since now gas is supplied first to Belgium, and only then it is delivered to Germany, "the RT interlocutor emphasized.
The case is a pipe
Although after the sabotage at Nord Stream, Germany, together with Denmark and Sweden, took up the investigation of the incident, to date, the perpetrators and organizers have not been officially identified. In turn, Russia's calls to clarify the circumstances of the case remain unanswered, as announced on Tuesday by Russian Ambassador to Germany Sergei Nechaev.
"In response to our calls to investigate this act of sabotage as quickly as possible, as it appears in Western terminology ... We do not receive any convincing answers - reasoned, substantive - . Our calls for cooperation in the investigation are rejected," the head of the diplomatic mission said.
According to him, "fables" and "implausible stories" are being spread in the West, which "are most likely aimed at leading the investigation to a dead end or, as they say, to a foggy distance." At the same time, as Nechayev noted, unfriendly countries "sweep under the carpet" the investigations of American journalist Seymour Hersh, who blames the United States for the terrorist attack.
- © Danish Defence / Anadolu Agency
According to Hersh, citing his own sources, by undermining Nord Stream, the administration of US President Joe Biden wanted to reduce Russia's influence on Germany. Moreover, according to the journalist, German Chancellor Olaf Scholz was aware of Washington's plans.
"This was due to the White House's fears that Germany would hesitate to turn on the flow of Russian gas and that Germany, and then NATO, for economic reasons, would fall under the influence of Russia and its vast and inexpensive natural resources. And, thus, the main fear followed: that America would lose its long-standing primacy in Western Europe ... The German leader was fully aware of the secret planning for the destruction of pipelines, "Hersh wrote in an article published on Substack.
According to Andrei Suzdaltsev, German politicians do not want to say who is guilty of the terrorist attack, because of solidarity with NATO partners. According to the expert, Berlin calmly reacted to the undermining of gas pipelines, since "they cannot rebel against the United States." A similar point of view is shared by Vladimir Olenchenko.
"European politicians are quite weak - they lack the political will to bring the investigation to an end and announce the results. There is also a commercial point: if the investigation is completed and it is officially confirmed that the organizer is the United States, the question of compensation for losses will immediately arise. And this is now unprofitable for the West either from a political point of view or from an economic point of view," Olenchenko concluded.