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September 12, 2023 - 7:00am
This week, the European Commission announced that it had cut its 2023 growth outlook for the Eurozone from 1.1% to 0.8%. The commission also identified the main reason for the not entirely unexpected downgrade: Germany, the bloc’s largest and most important economy, is running out of steam. The sentiment among industry leaders in Berlin has not yet reached a full-blown panic, but it is moving in that direction: business activity has declined at a pace last seen in 2020, and 43.4% of companies are considering moving production capacities abroad.
Unfortunately for Europe, if the German economy is spiralling downwards it is only a matter of time before it drags the rest down with it. What makes the situation especially frustrating, however, is that in many ways this development is self-inflicted. German (and European) companies have made it abundantly clear that high energy prices are a major factor in their cuts to productivity, and that from an economic perspective the “energy transition” has been a disaster for competitiveness. The pessimism of producers is now bleeding through to consumers, and the numbers show that since 2019 private consumption in Germany has been stagnant, with government spending serving as the most important engine of the little growth there is.
The energy-intensive industry is in a state of free fall, with industrial activity now falling below Covid-era levels. Evidently, a global pandemic is less of a problem than entirely misguided energy policies, such as decarbonisation and a hasty shift to renewable energy. Environmentalists have been celebrating the growing share of renewables in electricity production, but this “success” comes at an increasingly high price. With the energy-intensive industries collapsing, overall electricity and energy consumption is declining, which has been partially satisfied by wind and solar. But reduced energy demand also means less economic activity and ultimately less prosperity — something that is taking place in real time right now. Perhaps inevitably, the middle class has started to contract as a result.
All of this is having political consequences as well, and the AfD is on the brink of winning its first mayoral election, while the far-Right is on the march all over Europe. As Bloomberg reports, former fringe parties now place among the top three most popular political groups in almost half of the 27-member EU. Given that the Eurozone has not yet fully entered a recession, the situation still has room to deteriorate further. If the current leadership in Brussels wants to avoid a Right-wing wave in next year’s European Parliament election, it should start to persuade Berlin to abandon its current, suicidal economic policies. It is these plans which threaten to pull the entire EU into a prolonged economic downturn.
Ralph Schoellhammer is assistant professor of International Relations at Webster University, Vienna.
Raphfel
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SubscribeNot new news. But we are arriving at the point of net zero vs civil unrest as pennies drop, purses shrink, and the majority join the degrowth dots. Schwab/WEF has been warning governments to expect this and has stated that they must stick themselves to the task. Whether Mrs Macbeth can persuade ejectable politicians to comply will be interesting. The intention is to use their evolving techno-authoritarian tools to control the herd. Let’s see – the 4th turning is here.
Quite, hence the simultaneous scrambling across various western countries to impose their ‘misinformation’ censorship bills. All to protect the children and vulnerable. Right, because history has shown that it is always the ‘good guys’ that censor and shut down dissent.
” The welfare of the people in particular has always been the alibi of tyrants, and it provides the further advantage of giving the servants of tyranny a good conscience.” Albert Camus
Indeed and closer to the day of conflict between ideology and realpolitik.It has been quite clear since the inception of net zero and the greens (read-de growth party )reaching some degree of political leverage (eg Germany /Scotland)that deindustrialisation will occur and unfortunately none of our technocratic elite are sufficiently versed or experienced in commercial reality to fully grasp what this means.I suspect we are fast approaching an inflexion point on deindustrialisation and certainly in Germany there is no real counterbalance in creative or digital industries.
So- what does Herr Schmidt do when confronted with the rather rapid destruction of his comfortable lifestyle all in the name of some rather nebulous aspiration to avoid a rather poor computer simulations forecast?Right wing?-hardly-self preservation-probably.
You could turn that round and argue its more like a heroin addict (only this time the drug is endless economic growth) going cold turkey. Once we’re through the cold sweats we might actually be in a healthier state
That FP article is a fascinating glimpse into the mind of the European progressive mindset.
“Alarm bells are ringing in Brussels. A senior EU diplomat said he was worried that radical parties could try to exploit potential public fatigue over support for Ukraine to their advantage in elections across Europe.”
Unelected bureaucrat complains about democratically elected politicians trying to get votes. These people are a cancer.
They only have one narrative, but it must still be sufficiently worthwhile, in order to climb the much truncated career tree now available, if they’re prepared to recite this nonsense as if nothing had ever happened.
Empires take a long time to die.
Sure Byzantine diplomats were reliably trundling out the same stale old commonplaces, even in 1453.
Germany is the student who turns up at the exam hall to find nothing they studied on the paper, but just for the heck of it, soldiers on and writes the essay they’d meticulously planned regardless.
I hate to say it but that describes my school career to a tee.
More like the student who has been raised by obscurantists who glory in self-flagellation and was taught the science of flat earth, spontaneous generation, theory of humours, and phlogiston, and is now thrown into the real world.
Fewer BMWs and Lidls is a shame, but a small price to pay for fewer immigrants.
An interesting article. I expect however that the current leadership in Brussels will find it difficult to respond as in their own minds their policies are always correct, whatever the implications.
It seems that there are two situations where the progressive views prosper. Adjusting the attitudes of the elite towards the ordinary people in times of economic hardship, and adjusting the attitudes of the ordinary people towards the elite in times of plenty. When the economic outlook is unsettled people want the comfort of traditional certainty.
Your comment is very interesting, especially the second paragraph of it. However, I would say that when the attitudes of the elites are adjusted to suit the concerns of the ordinary person in times of hardship, that is something that would be more commonly referred to as “populism” rather than a situation where progressive views are prospering.
Your final sentence is spot on. And yet – with regard to Germany, many of those traditional certainties which might have settled people down are no longer present or accessible. Living in a country that is sitting in Germany’s slipstream, the way things are going there is of significant concern.
Reading this article along with Mr. Rapley’s elsewhere on this site shows the major shifts that will impact the West. As we spend ourselves into oblivion with Net Zero and welfare state mandates, the Developing World is getting stronger (ex-China) and will gladly take the industries and fossil fuels that leave our shores. The natives are waking up to the cost of this and I think the move rightward is only beginning..
Maybe I am getting old but all of these apparently shocking and surprising events occurring seem as obvious as action and blatant reaction to me.
Here’s a fun exercise. Do an internet search for countries with the highest electricity prices. Common denominator? They all lead the world in wind and solar penetration.
Germany has gone from being a practical and sensible economy to one dominated by green morons. The elimination of nuclear is a catastrophe.
All for nothing but the cataclysmic fantasies of some academics in search of a purpose and research funding.
This is just disgusting.
God, I hope we in the US can get rid of Biden and the progressives and avoid Germany’s fate.
Oh, and it would be a shame to drive the Atlantic whale population to extinction trying to build wind farms to save the planet. Ugh
I’m no fan of Trump, but at least the man secured the border and helped produce domestic energy.
Another article repeating the blindingly obvious, even on the same day that Unherd publishes an article about the race to exploit resources beneath the melting Arctic ice by powers who couldn’t care less about the environment.
Germany is clogged with all sort of bureaucracies. This means extremely slow decision making and hard times ahead for these people who are so used to their comfort and ease they have not met their defense obligations for years, leaving their protection up to Uncle Sam.
I don’t think this is so much about right or left. After all, the UK seems about to get a left-wing government next year. It’s more about complete dissatisfaction with the incumbents.
Aren’t they left wing now and about to get an even more left wing govt next year? As conservatives they seem as worthless as the republicans in my country.
Start building up the UK army, navy & airforce. Remember what happened the last 2 times this happened in Germany!
And guess who they will blame!
The German economy is not “running out of steam”; the German economic boiler has been deliberately holed, the feedstock deliberately chucked overboard.
Europe is not “gravitating to the right” – European voters are turning to the only parties that have not blatantly lied to the them for the past four years, who do not demand that they unquestioningly admire the Emperor’s new clothes.
The photo caption is brilliant!
Perhaps low growth isn’t such a bad thing. Not sure quite where those you push for ever higher economic growth think this is all leading. Am I mad to think infinite grow in a finite world is perhaps a trifle misguided.
I think there are two separate issues, and German policy is by any criterion bonkers.
Where I definitely agree is that a conception of economic growth that is based on wasting finite resources on manufacturing ever cheaper and ever more short-lived crap and shipping it halfway around the world, or where a lawyer increasing his hourly fee is recorded as economic growth, is not fit for purpose.
We do need a yardstick for measuring how we’re doing and whether our policies are sensible, but the current one is not it.
Yep, nothing to do with the supply of cheap Russian gas that’s disappeared as Europe crucifies itself in the name of US foreign policy. Yep, it’s all that nasty renewable energy.
How can anyone take this blog post seriously?
Exactly, I was thinking the same. It’s much more about the war than renewable energy. Remember they lost a big market, not just energy source. They are paying 5x for gas coming with ships from US, Qatar etc., instead through pipeline which was blown up. They don’t mind using fossil energy, actually are increasing use of coal, energy is just too expensive to make competitive products.
Nuclear power would make little change here, although I agree it was silly to decommission perfectly good power plants.
Won’t happen. Net Zero is the current religion of the West, and to reverse direction would be the equivalent of mass heresy.
Germans are very intelligent, but think rigidly. They sensibly took advantage of Russian gas and oil supplies, but also blindly obeyed their US masters when ordered to weaponise those same supplies.