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German Economy Seen Shrinking Next Year Due to Energy Crisis

beijingwalker

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German Economy Seen Shrinking Next Year Due to Energy Crisis​

Kamil Kowalcze, Bloomberg News

Sep 29, 2022, 1:00 PM CDT


bc-german-economy-seen-shrinking-next-year-due-to-energy-crisis.png

BC-German-Economy-Seen-Shrinking-Next-Year-Due-to-Energy-Crisis , Kamil Kowalcze

(Bloomberg) -- Germany’s economy will likely contract by 0.4% next year due to the impact of the energy crisis, according to the nation’s leading research institutes, who slashed their forecast from April of a 3.1% expansion.

German output will be €160 billion ($154 billion) lower this year and next than projected five months ago partly due to the drastic increase in energy costs, the four institutes predicted Thursday in a twice-yearly report which the government uses as guidance for its own outlook.

“The Russian attack on Ukraine and the resulting crisis on the energy markets are leading to a noticeable slump in the German economy,” said Torsten Schmidt, head of economic research at the RWI Institute and spokesman for the Joint Economic Forecast Project Group.

Germany is one of the countries hardest hit by the energy emergency triggered by the Ukraine war thanks to a reliance on Russian fuel imports built up over decades. Chancellor Olaf Scholz’s ruling coalition is racing to cut back that dependence but Germany still faces a tough winter with the prospect of gas rationing and blackouts.

The government has assembled three packages of aid measures worth nearly €100 billion to offset the impact on households and companies but has also cautioned that it doesn’t have the resources to ease the pain completely.

“Record inflation rates, especially exploding energy prices, are hitting many companies hard,” Martin Wansleben, managing director of the DIHK industry lobby, said Thursday in an emailed statement.
“The consequences are production stops, losses in value creation, the relocation of production abroad and even plant closures,” he added. “The number of companies that either do not receive any energy supply contracts at all or only receive them at extreme prices is currently increasing.”

Although the energy crunch is expected to ease over the medium term, gas prices are likely to remain well above pre-crisis levels, meaning “a permanent loss of prosperity for Germany,” the institutes warned.

They cut their growth estimate for this year to 1.4% from 2.7% and said they expect inflation to accelerate in coming months, climbing to an average rate of 8.8% next year -- compared with 8.4% this year -- before gradually falling back toward 2% in 2024.

Europe’s biggest economy will likely return to growth in 2024, with expansion of 1.9%, the institutes predicted.

The four institutes which compile the twice-yearly forecasts are Munich-Based Ifo, the IfW in Kiel, the IWH in Halle and the Essen-based RWI. The Wifo and the IHS institutes in Vienna also contribute. The government is expected to publish updated economic projections next month.

 

beijingwalker

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Germany on the Brink as middle class shrinking, inequality growing: Spiegel​

Sunday, 25 September 2022 11:32 AM

Germany is expecting its worst economic crisis in 50 years, with diminishing prosperity, a shrinking middle class and growing inequality, according to top news magazine Der Spiegel’s recent report.

In the report published on Thursday, high inflation, skyrocketing energy prices and a slowing economy are counted as Germany’s recent crises that have worsened after Russia began a military operation in Ukraine in February.

“The losses in prosperity will be permanent. Germany, according to the forecasts, is in decline,” said economist Michael Fratzscher, adding that the German economy will slide into recession this winter with a tenfold increase in the exchange electricity price, numerous corporate bankruptcies and a permanently damaged economy.

A tough decade is looming for the German middle class or better to say, everyone, but the top 10 percent of the country, after nearly two golden decades of rising incomes, steady economic growth and little unemployment.

“I'm afraid that soon we won't be able to afford the nice life we live. We’re nervous,” said Nicole Geithner, working as a paramedic and living a family of four in Dewsden with the gross household income of 90,000 Euros.

Families with two children and a net income of 3,000 Euros per month, for example, are worried about social justice in the country as citizens must pay 1,000 Euros more a month for gas and electricity and purchase prices of 1 million Euros for a two-bedroom apartment.

The report revealed that during the second quarter of this year, real wages fell by 4.4 percent. The Sparkassenverband savings banks association estimates that 60 percent of households in Germany soon will no longer be able to put money aside.

In recent weeks, thousands have taken to the streets in protest in the cities of Leipzig, Magdeburg and Pforzheim, and it’s possible this is only the beginning.

Politicians are warning of the possibility of a “hot autumn,” some of a winter of rage, referring to possible protests and unrest.

Spiegel wrote that inequality is growing as the incomes have been drifting apart since the 1990s and the wealthy own more and more as the number of low-income earners is growing. It added that almost three-quarters of Germans fear that they will be worse off economically in the long term.

The federal government is trying to smother the problems and calm the lower middle class with money and is working on its third relief package within just a few months, the report said.

The plan calls for things like a flat-rate energy price for pensioners, a flat-rate national public transportation ticket (for somewhere between 49 and 69 Euros a month) and increased monthly child benefit payments for parents.

Although the German government has now approved around 95 billion Euros in aid, 60 percent of Germans feel that the relief packages are not socially just, according to a survey conducted by pollster Civey on behalf of DER SPIEGEL.

Olaf Scholz, German Chancellor, won his election campaign based on promoting more societal fairness, but according to the poll, almost 50 percent of respondents said they were “very dissatisfied” with the chancellor's work.

At the same time, though,economists say that expectations of the government should be realistic and that solution in these extraordinary times don't have to be perfect. They just need to have a clear effect, as this summer's 9-euro monthly national public transportation pass did.

“The government must be careful that the dramatic rise in energy price doesn't drive entire segments of the population into poverty,” Timo Wollmershäuser, chief economist at Munich’s Ifo institute, said.

Wollmershäuser believes it is a foregone conclusion that the economy will fall into recession from the winter half-year onward. He believes economic output will also contract in the coming year, by 0.3 percent according to the latest forecast.

 

Ich

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With nordstream bombed, it’s a guarantee that Germany will deindustrialize and sink into poverty

Yes, whereas the bombing was the only solution for the german gov to not import russian gas. The pressure from the streets was rising high days before bombing. It was to see that there would be clashes cause of not open Nordstrem 2. At this point the dumb ideologic german gov sides with the dumb us-gov and so together the bombing happend. Now, as you correct said, germany will vanish.

And if you wanna have fun, look at all these idiots with german flag in their account in the threads "ukrain-russia-war" now. The idiots who always said "we dont need russian gas". Germany consumed an energy equivalent of 1072 TWh gas in 2021. Now we have nearly none import of gas. All other EU countries need their gas for themself. Norway cant deliver more gas to germany, Netherland cant deliver more gas to germany, and the US will not deliver gas to germany - at least not this year and if ever then it will cost 6-8x times more than russian gas, what will destroy german industry also. No other will deliver gas to germany.

Look at these Idiots with german flag in their accounts in the threads "ukrain-russia-war". The idiots who always said "we dont need russian gas". Hahaha, everyone in their personal environment knows what they said about not needing russian gas. Everyone in their environment will suffer from cold, hunger, no work, no future. Hahaha, they will slaughter them 🤣 And i will help them slaughter them.
 

Ali_Baba

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With nordstream bombed, it’s a guarantee that Germany will deindustrialize and sink into poverty

Not deindustralise - that is silly - they will experience some economic pain until they develop infrastructure to buy gas from alternative sources. And they have to pay an economic cost for their sillyness to base so much of their energy requirements from Russia anyway !!!
 

Communism

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Not deindustralise - that is silly - they will experience some economic pain until they develop infrastructure to buy gas from alternative sources. And they have to pay an economic cost for their sillyness to base so much of their energy requirements from Russia anyway !!!
The only way to rationalize an increase in cost from cheap russian pipeline gas to expensive lng will be to lower the wages of german workers 50-70%+.


With Euro devaluation and rampant inflation, it's already gone down 30+%.


This process has been hindered by the labor strength in europe though, which has gotten the wage hikes they have demanded, which has blunted the benefit from the inflation and euro devaluation against the USD so far.


If the workers refuse to take those wage cuts, then germany will 100% deindustrialize.
 
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Ich

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Not deindustralise - that is silly - they will experience some economic pain until they develop infrastructure to buy gas from alternative sources. And they have to pay an economic cost for their sillyness to base so much of their energy requirements from Russia anyway !!!
You do not understand. There are no "alternative sources". Tell me some "alternativ sources"! I am eager to hear some. We get gas from Russia constant for 50+ years. Even in the coldest of the "cold war" they fulfill the contracts. Cheap and reliable. But under the pressure of the US ( germany is still occupied, has no peace treaty with "the allied" since ww2, politics here is always US politics) we have to sanction Russia.

The whole world, all countries, needs to kill ANY US what is in their countries. Then there will be peace in the world.
 

Ich

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The only way to rationalize an increase in cost from cheap russian pipeline gas to expensive lng will be to lower the wages of german workers 50-70%+.


With Euro devaluation and rampant inflation, it's already gone down 30+%.


This process has been hindered by the labor strength in europe though, which has gotten the wage hikes they have demanded, which has blunted the benefit from the inflation and euro devaluation against the USD so far.


If the workers refuse to take those wage cuts, then germany will 100% deindustrialize.

It has nothing to do with the wages. No gas means no industry, no productive agriculture, no heating, no anything. What's the use of high wages if there is no job where you can get them?
 

MH.Yang

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If it shrinks big enough India may jump from Economy #5 to Economy #4 no?

Regards
German industry was castrated by the USA. The automobile manufacturing industry, the last pillar of Japan's economy, was also defeated by China.

In fact, both Germany and Japan are bound to go into recession, and India will soon be the third place.
 

MH.Yang

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Love you MH Yang sahib!

Regards

This is not really worth your pleasure. It's not that India did well, but that Germany and Japan screwed up.


In 1994, China's GDP was 540 billion US dollars. The US GDP was 7290 billion US dollars. The global GDP was 27870 billion US dollars. The combined GDP of China and USA accounted for 28.1%.

In 2021, China's GDP was 17.8 trillion US dollars. The US GDP was US $22.9 trillion. The global GDP was 96.1 trillion US dollars. The combined GDP of China and USA accounted for 42.4%.



In 1994, India's GDP was 330 billion US dollars. India's GDP accounts for 11.9% of the global GDP.

In 2021, India's GDP was 3.17 trillion US dollars. India's GDP accounts for 3.2% of the global GDP.

In fact, India also screwed up. But Germany and Japan did worse, so India could get the third place.



BTW:
In 2014(Modi's term begins), India's GDP was 2.04 trillion US dollars. The global GDP was 65.8 trillion US dollars. India's GDP accounts for 3.1% of the global GDP.

In terms of economy, Modi's ability is good. At least during his tenure, India's economy has kept up with the average speed of global economic development. But the only time India's economic growth rate exceeded the average global economic development rate was during the reign of Manmohan Singh.
 
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Dalit

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LOL What I have been predicting for months now. It is funny how people only believe things when they are only reported. Europe as a whole is set to feel the pinch.
 

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