Energy Crisis Caused Germany Went From Envy Of The World To Worst Performing

[RAMROD 90,207]

For most of this century, Germany racked up one economic success after another, dominating global markets for high-end products like luxury cars and industrial machinery, selling so much to the rest of the world that half the economy ran on exports. 

Jobs were plentiful, the government’s financial coffers grew as other European countries drowned in debt, and books were written about what other countries could learn from Germany. 

No longer. Now, Germany is the world’s worst-performing major developed economy, with both the International Monetary Fund and European Union expecting it to shrink this year.

It follows Russia’s invasion of Ukraine and the loss of Moscow’s cheap natural gas — an unprecedented shock to Germany’s energy-intensive industries, long the manufacturing powerhouse of Europe.
 

The sudden underperformance by Europe’s largest economy has set off a wave of criticism, handwringing and debate about the way forward.

Germany risks “deindustrialization” as high energy costs and government inaction on other chronic problems threaten to send new factories and high-paying jobs elsewhere, said Christian Kullmann, CEO of major German chemical company Evonik Industries AG.

From his 21st-floor office in the west German town of Essen, Kullmann points out the symbols of earlier success across the historic Ruhr Valley industrial region: smokestacks from metal plants, giant heaps of waste from now-shuttered coal mines, a massive BP oil refinery and Evonik’s sprawling chemical production facility.

The loss of cheap Russian natural gas needed to power factories “painfully damaged the business model of the German economy,” Kullmann told The Associated Press. “We’re in a situation where we’re being strongly affected — damaged — by external factors.”

After Russia cut off most of its gas to the European Union, spurring an energy crisis in the 27-nation bloc that had sourced 40% of the fuel from Moscow, the German government asked Evonik to keep its 1960s coal-fired power plant running a few months longer. 

The company is shifting away from the plant — whose 40-story smokestack fuels production of plastics and other goods — to two gas-fired generators that can later run on hydrogen amid plans to become carbon neutral by 2030.

One hotly debated solution: a government-funded cap on industrial electricity prices to get the economy through the renewable energy transition.

A second blow came as key trade partner China experiences a slowdown after several decades of strong economic growth. 

These outside shocks have exposed cracks in Germany’s foundation that were ignored during years of success, including lagging use of digital technology in government and business and a lengthy process to get badly needed renewable energy projects approved.

Now, clean energy projects are slowed by extensive bureaucracy and not-in-my-backyard resistance. Spacing limits from homes keep annual construction of wind turbines in single digits in the southern Bavarian region. 

A 10 billion-euro ($10.68 billion) electrical line bringing wind power from the breezier north to industry in the south has faced costly delays from political resistance to unsightly above-ground towers. Burying the line means completion in 2028 instead of 2022. 

Massive clean energy subsidies that the Biden administration is offering to companies investing in the U.S. have evoked envy and alarm that Germany is being left behind.

Germany grew complacent during a “golden decade” of economic growth in 2010-2020 based on reforms under Chancellor Gerhard Schroeder in 2003-2005 that lowered labor costs and increased competitiveness, says Holger Schmieding, chief economist at Berenberg bank.

“The perception of Germany’s underlying strength may also have contributed to the misguided decisions to exit nuclear energy, ban fracking for natural gas and bet on ample natural gas supplies from Russia,” he said. “Germany is paying the price for its energy policies.”

Schmieding, who once dubbed Germany “the sick man of Europe” in an influential 1998 analysis, thinks that label would be overdone today, considering its low unemployment and strong government finances. That gives Germany room to act — but also lowers the pressure to make changes. 

The most important immediate step, Schmieding said, would be to end uncertainty over energy prices, through a price cap to help not just large companies, but smaller ones as well.

Whatever policies are chosen, “it would already be a great help if the government could agree on them fast so that companies know what they are up to and can plan accordingly instead of delaying investment decisions,” he said.

 

https://apnews.com/article/germany-economy-energy-crisis-russia-8a00eebbfab3f20c5c66b1cd85ae84ed

[Mother of Puppies 32,645]

If things here won’t change within the next 2 years we’re doomed & I will have to think about leaving my country 

[M i K E Y 4,604]

Things get worse over here. A lot of people are desperate and feel let down by our clumsy government 

[bpmMonkey 2,274]

Okay cool, but why do you have to write all in bold? 

[FATCAT 54,681]

Germany building up its military whilst being in a sudden economic downturn... Spooky.. 

[HermioneT 1,796]

Apart from the points mentioned in the article, the biggest problem is the mindset of the people here (I am German btw). People (and media, too) are non-stop complaining, crying and displaying a " Well, there is nothing we can do anymore" attitude as an answer to the crisis and it's driving me mad. Especially in your people.

Also, people here are generally extremely averse of change and don't want to try or adapt to new things. Recently I talked with someone about the challenges which Germany is facing and he said "I just want Germany back as it has been in the past" and went on hating on climate and diversity activists, digitalisation and immigrants. 

With a society whose one half refuses to let the past (and the admittedly good times) behind, things won't get any better.

[Simon 635]

Maybe turn on your nuclear power plant?

[Natalia Kills 185]

2 hours ago, Simon said:

Maybe turn on your nuclear power plant?

Yeah I don’t get why they’re so against nuclear. 

If Germany was an island in the middle of nowhere, I’d perhaps understand their caution.

But they’re sandwiched in between nuclear power producers, so they might as well join in. Especially since the alternative is funding Russia through gas and oil. 

Edited Tuesday at 09:14 PM by Natalia Kills

[Economy 42,936]

On 9/19/2023 at 11:23 AM, Mother of Puppies said:

If things here won’t change within the next 2 years we’re doomed & I will have to think about leaving my country 

Like theres so many wonderful alternate options WW these days

 

Sorry ur going thru a rough time tho

 

Edited Wednesday at 04:42 PM by Economy

[Dennis 5,660]

Unfortunately, Germany is the biggest casualty of the Russian war against Ukraine, other than Ukraine itself. They relied on cheap russian energy for too long. They should've seen this coming.

Edited Wednesday at 04:47 PM by Dennis

[LoliLux 975]

4 hours ago, Economy said:

Like theres so many wonderful alternate options WW these days

 

 

The glorious days of relevent modern Germany are over. Germany is falling and will hit hard the ground. The technology innovations now come from China or USA, sometimes Korea, Japan.

It is important to add that Germany has the SECOND HIGHEST taxes (!) in the developped world after Belgium. People work from morning till noon not for themselves... for the government. It is an absolutely unattractive country for highly qualified people. Not many better options exists, but nearby Switzerland is much better than Germany and many hq people migrated to Switzerland. Also some Germans migrate to Canada or Australia. By the way, talented Americans these days almost never migrate to Germany, they prefer Switzerland. Switzerland has many English natives in % contrary to much bigger Germany.

 

"The OECD calculated each country’s tax wedge - the gap between what employers take home in pay and what it costs to employ them, including personal income tax and social security contributions. Germany had a tax wedge for single, childless workers of 49.4 percent, behind Belgium at 54 percent. That means nearly half of a single person’s income goes towards taxes and social security contributions in Germany."

https://www.thelocal.de/20170411/germany-has-second-biggest-tax-burden-worldwide-report-shows

 

To these 49,4% must be added the 19% VAT because the government exploits and squeezes a person out one time with income taxes and a second time with VAT when buying products. This means two-thirds, 68%, of a people's money is stolen by the German government.  This is absolutely insane and record-breaking.

And then people have to deal with increased energy prices and barely have money left.

Also France and Belgium have to their west nuclear energy. To non-Europeans: In Europe the most of the time, the wind flies from west to east. This means in case of nuclear disaster, the nuclear radiation is likely flying west... from France to Germany and from Belgium to Germany. Since some French nuclear power plants are directly at Germanys border like Fessenheim , France carries less risks than Germany itself.

In musical terms, Germany's peak is over. It is past its peak. Germany is a pop star whose good times are over and that is falling into irrelevancy. It will now rely on nostalgia like previous fallen pop stars (especially Italy, Italy glorious days are long, long over). Germany will make worldwide headlines from time to time with scandals and tragedies like ruined pop stars like this topic is an impression of what will follow and less often with achievements-news, less often being crowned for leading in science, more shadows than glory.

 

 

Edited Wednesday at 08:56 PM by LoliLux

[Nemo 3,764]

On 9/19/2023 at 2:16 PM, HermioneT said:

Recently I talked with someone about the challenges which Germany is facing and he said "I just want Germany back as it has been in the past" and went on hating on climate and diversity activists, digitalisation and immigrants.

Same idiots everywhere. In England, he would've voted for Brexit. In the U.S., for Trump.

[Economy 42,936]

19 hours ago, LoliLux said:

 

The glorious days of relevent modern Germany are over. Germany is falling and will hit hard the ground. The technology innovations now come from China or USA, sometimes Korea, Japan.

It is important to add that Germany has the SECOND HIGHEST taxes (!) in the developped world after Belgium. People work from morning till noon not for themselves... for the government. It is an absolutely unattractive country for highly qualified people. Not many better options exists, but nearby Switzerland is much better than Germany and many hq people migrated to Switzerland. Also some Germans migrate to Canada or Australia. By the way, talented Americans these days almost never migrate to Germany, they prefer Switzerland. Switzerland has many English natives in % contrary to much bigger Germany.

 

"The OECD calculated each country’s tax wedge - the gap between what employers take home in pay and what it costs to employ them, including personal income tax and social security contributions. Germany had a tax wedge for single, childless workers of 49.4 percent, behind Belgium at 54 percent. That means nearly half of a single person’s income goes towards taxes and social security contributions in Germany."

https://www.thelocal.de/20170411/germany-has-second-biggest-tax-burden-worldwide-report-shows

 

To these 49,4% must be added the 19% VAT because the government exploits and squeezes a person out one time with income taxes and a second time with VAT when buying products. This means two-thirds, 68%, of a people's money is stolen by the German government.  This is absolutely insane and record-breaking.

And then people have to deal with increased energy prices and barely have money left.

Also France and Belgium have to their west nuclear energy. To non-Europeans: In Europe the most of the time, the wind flies from west to east. This means in case of nuclear disaster, the nuclear radiation is likely flying west... from France to Germany and from Belgium to Germany. Since some French nuclear power plants are directly at Germanys border like Fessenheim , France carries less risks than Germany itself.

In musical terms, Germany's peak is over. It is past its peak. Germany is a pop star whose good times are over and that is falling into irrelevancy. It will now rely on nostalgia like previous fallen pop stars (especially Italy, Italy glorious days are long, long over). Germany will make worldwide headlines from time to time with scandals and tragedies like ruined pop stars like this topic is an impression of what will follow and less often with achievements-news, less often being crowned for leading in science, more shadows than glory.

 

 

Theres more to a Countries economic performance than just tax rates

 

In any case im not really arguing with u about their decline. Im talking about current conditions vs conditions where to immigrate to

 

When Countries become more (or less competitive) tax wise, attracting talent wise, innovation wise etc... it usually takes several years to really start to feel it in quality of life

 

U mentioned some immigrate to Canada. Do u know what an absolute hell it is for a new comer here considering we have one of the absolute worst housing crisis in the entire world?

 

Ppl who struggle just to afford a basement or a 1 bed room crappy apartment would find little confort atm that our electricity might be cheaper and that our tax rates are more favourable for international companies

 

Economic competitiveness does not equal an emidiate major impact on quality of life

Edited 18 hours ago by Economy