by Ralph Schoellhammer
Thursday, 8
September 2022
Analysis
07:15

Germany is turning against Olaf Scholz

Bad policy decisions and soaring energy prices have angered the public
by Ralph Schoellhammer
A man under pressure. Credit: Getty

There was an almost celebratory mood among German economists this week, triggered by the news that industrial gas consumption fell by 20% — something that supposedly seemed impossible just a few months ago. If one views this demand destruction as positive, there indeed is reason for celebration: German industrial orders are continuing to drop and heavy industries are reducing or stopping production, like the aluminium producer Speira that plans to halve its output, or Arcelor Mittal, the steel producer that will close down two blast furnaces indefinitely.

Outside of the economists’ bubble, however, the German people are less sanguine. In a disastrous interview on a popular German talk show, the Green Vice Chancellor Robert Habeck opined that German companies are not threatened by insolvency, they just might have to stop producing — for an unknown period of time. In the mind of many German politicians and journalists, the approach to the intensifying crisis appears to be to shut down industry, provide bailouts (to companies) and handouts (to the population). Then, once the war in Ukraine is over, things will return to the status quo ante before the Russian invasion.

This attitude has invited a lot of wishful thinking in Berlin. Despite immense pressure from the public, the phase-out of nuclear energy will remain on the agenda, including the absurd provision to keep two of the three remaining nuclear power plants “in reserve” until April for cases of emergency. In other words, Germany will now pay money to keep nuclear power plants on stand-by, while simultaneously preventing them from producing electricity. Adding insult to injury, neighbouring Hungary is building two new nuclear reactors — not with the help of European companies, but with Russian power giant Rosatom, since Russia’s nuclear industry is exempt from sanctions. And to make matters more absurd, due to the shutdown of European heavy industry, the EU is now importing more aluminium from Russia than in previous years.

There are no long-term plans on how to address these issues: neither fracking nor a significant expansion of nuclear power is planned, and all hopes are on the US to bail out Europe via LNG. Can the continent and its major economic player, Germany, really afford to just turn off large parts of its industry and turn it back on at will? This might work in economics departments and party offices, but no business can plan under such circumstances, so they will either leave or close down for good.

Pressure is now mounting on the German government, with more criticism of Berlin’s course of action surfacing in the public. Based on current polls the coalition of Social Democrats, Greens, and Free Democrats would no longer have a majority, while parties on the Left and Right fringes are creeping upwards. The Greens, who not long ago were riding high in the polls thanks to the personal appeal of Habeck and foreign secretary Annalena Baerbock, are sliding — even the most charismatic politician cannot compensate for the skyrocketing energy prices that are crushing small business and households as well as inflationary pressures on everything from food to toilet paper.

Some have been arguing we are at the peak of the crisis, but this is only the beginning. If current trends continue, European governments will start to fall to pressures from an unhappy public.

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Paul O
Paul O
24 days ago

It was once unthinkable to lock down people in their homes. Two years ago the masses accepted it as a sound government initiative.

Now in Germany they are locking down businesses indefinitely.

The western world, particularly Europe, has gone mad.

This will not end well.

People are finally starting to join the dots and ask questions.

polidori redux
polidori redux
24 days ago

“There was an almost celebratory mood among German economists this week, triggered by the news that industrial gas consumption fell by 20%”
Unless German industry was wasting gas on an epic scale how on earth can that be a good development?
Are German economists as bonkers as Germany’s political leaders?

Matt M
Matt M
24 days ago

These German politicians are crazy! We will find out today whether Liz Truss is too. Either she will get Britain fracking or she will be as bad as Olaf.

Matt M
Matt M
24 days ago
Reply to  Matt M

It looks (I stress looks – there’s many a slip twixt the cup and the lip) like she might not be as crazy as Olaf. Moratorium on fracking lifted and aim is to get moving asap.

Roger Ledodger
Roger Ledodger
24 days ago

It seems Liz has reversed bans on Fracking – not a bad start, but it isn’t an immediate help. Next is that Britain is currently using its 3 LNG terminals to pump record amounts of gas into the EU. Come winter that gas will be wanted in the UK, then what is the EU, particularly the productive industrial North to do, or you think they’ll out bid the UK for that gas? Germany effectively pays for the EU, without industry who pays? Today the BBC wondered if Sterling will collapse. Will the West collapse, the global economy even? Suddenly the ‘Great Reset’ starts to seem less like a conspiracy theory and more like a policy.

Saul D
Saul D
24 days ago

Shutting down industries doesn’t shut down demand. What happens is that prices rise and buyers shift to producers in other countries, particularly if those countries retain access to cheaper energy and so have lower costs.
The normal counter is then about a lack of expertise and quality standards. But many production facilities have already been offshored, and if the industry in Europe is closed down, there will be plenty of experts willing to go to where the work is, to get away from the economic turmoil at home.

Warren Trees
Warren Trees
24 days ago

Mirror, mirror on the wall, who is the most feckless of them all?

Ian Stewart
Ian Stewart
24 days ago

You’d almost think the German government is trying to find ways to undermine its own economy and create popular resistance to supporting Ukraine, so Putin can win there. Machiavellian I know, but it’s the closest likely answer to being logical.

Bruce Edgar
Bruce Edgar
23 days ago

The difficulties Germany faces derive directly from the self-harming sanctions that are driving the entire EU into the toilet. I thought at last I would encounter the real news coming from the German people–but encountered a barrage of obfuscating political labels that have been discredited for some time now.