German industry prospered partly due to its close energy trading relationship with its political and economic rival, Russia. That is, until the German Green Party did everything it could to sever economic ties, with an emphasis on energy with Russia.
The recent years have glaringly exposed the folly of this green energy policy. Russia’s war with Ukraine prompted the ruthless severing of Germany’s vital, yet cheap gas supply and cheer as industry could no longer support manufacturing costs in Germany. They moved elsewhere.
Now, a leading renewable power boss in Germany has suggested that the country could eternally regret this mistake, as the energy crisis fallout is likely to cause permanent damage to its industry. Speaking to the Financial Times, RWE boss Germany’s heavy reliance on Russian natural gas was starkly evident when the country initiated its Special Military Operation in Ukraine back in February 2022.
Being a net importer, a staggering 55% of Germany’s natural gas supply was imported from Russia at that time. Russia not only served as Germany’s primary provider of natural gas but also held a dominant position as the main source of oil and coal imports for the nation.
Markus Krebber stated that gas prices in Germany were structurally higher than in the rest of Europe due to the country’s dependence on liquefied natural gas imports.
The country shed most of its reliance on Russian gas due primarily to the work of Analena Baerbock and Robert Habeck, cutting its gas imports by 32.6% in 2023, the country’s energy regulator said, mostly as a result of cutting out Russian supply.
At the 2022 YES conference, Baerbock pointedly stated over and over Germany’s only option was to switch to hydrogen from Ukraine and North African wind farms within the next 10 years even though the technology to do this wouldn’t be available for 15-20 years.
In her view, Germans could endure the current situation. Baerbock and Habeck campaigned on a platform that radicals claimed aimed to dismantle Germany’s industry. They didn’t advocate for Germans to purchase electric cars but sought to create a scenario where Germans could no longer afford them.
The Nord Stream pipeline explosions were a godsend for their policy.
Germany continues to rely heavily on other countries for its energy supply, leading to pricing issues for the struggling economy. The impact on German industry has been significant and, according to the RWE chief, is likely to be enduring.
“You’re going to see a bit of recovery, but I think we’re going to see a significant structural demand destruction in the energy-intensive industries,” Krebber told the FT.
Since shutting down the Nordstream Pipelines, Germany has found itself in the unusual position of becoming the major laggard of Europe’s stuttering economic engine.
The nation teeters precariously on the edge of a technical recession, following a 0.3% contraction in its economy in 2023. The forecast for this year is nothing short of dismal, with the German government drastically reducing its GDP growth prediction from an already modest 1.3% to a meager 0.2% for 2024.
The once robust engine of its economic might, the energy-intensive industry, has been faltering ever since Baerbock and Habeck’s Green Party made not buying Russian energy German security policy which has now become an irksome burden that the country can ill afford to bear.
Following suit, Germany’s Purchasing Managers Index (PMI) for its construction sector has been declining since early 2022. Manufacturing, meanwhile, has been in decline since mid-2023.
“Germany’s manufacturing sector has been in recession since around mid-last year, and the latest PMI readings indicate another contraction in the first quarter of 2024,” wrote Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “Compounding the issue, the downturn is broadly based, affecting capital goods as well as intermediate and consumer goods.”
This is a big Green Party win. They won.
It has ignited debates around whether Germany can once again be considered the “sick man of Europe,” having previously shaken off its post-Cold War title in the 1990s.
German businesses are experiencing a surge as they take flight towards new horizons. RWE is one of several German companies that seem to have grown weary of Germany’s stagnant industry. Analysis by fDi Markets reveals that German companies nearly tripled their investments in the U. S. in 2023, reaching $15. 7 billion.
In June 2021, ahead of the German elections, Baerbock signaled to the White House her party was in sync with Joe Biden on Ukraine and Green policy moves.
Baerbock and Habeck should be held accountable for the deterioration of the German industry, which significantly contributed to the capital drain towards the United States. This situation was further exacerbated by Joe Biden’s ill-conceived Inflation Reduction Act (IRA), a policy that dangled attractive subsidies as bait to lure in new businesses.
George Eliason
