Energy costs threaten to shake Germany by triggering trade | Economics

“So it’s not pasta?” The Germans heard all about it earlier this month when a toilet paper manufacturer went bankrupt.

After all, while toilet paper was the second most in-demand supermarket item during the pandemic, pasta was the first. Consumers are limited to one or two bundles so that no one goes out. But at the time of the pandemic, Hakle, a luxury brand from Dusseldorf known for its three-pack rolls “bringing comfort since 1928,” was hit by an energy crisis. It is the first major German consumer goods maker to collapse due to rising energy and raw material prices, and there are many signs that many more will follow.

Last week, the Munich-based Ifo Institute for Economic Research cut its forecast for German growth, saying: “We are entering a winter recession.” Europe’s largest economy is forecast to shrink by 0.3 percent in 2023, after growing by just 1.6 percent this year. Inflation is forecast to reach 8.1 percent this year and 9.3 percent in 2023.

Timo Wolmershauser, head of forecasting at EFO, said: “This summer’s disruption of gas supplies from Russia and the sharp price hikes they triggered are taking a heavy toll on the economic recovery following the coronavirus.” 2024, 1.8% growth and 2.4% inflation can be expected.

German Chancellor Olaf Scholz is traveling to the Gulf from the United Arab Emirates this weekend. Economy Minister Robert Habeck said: “The gas supply is gradually expanding and the government is constantly talking to several countries in the Arabian Peninsula.”

Paper production is very labor intensive. Hackley used 60,000 megawatt hours of gas and 40,000 megawatt hours of electricity each year. The company said that the increase in energy costs is so hard and fast that it cannot be passed on to consumers in time, who in turn are switching to cheaper double-layer low-rollers.

Company bosses, union leaders, shopkeepers and workers are voicing their fears that Europe’s biggest economy is at risk of spiraling out of control. Scholz and Habeck, who welcomed Gerry, admitted that “the financial pressure is high” and cast doubt on his optimism, saying that “if we can get through this summer, we have a good chance.” Next summer and winter things will be very relaxed.

Ekehard Vatter, the baker in Hanover, northern Germany, which has 35 branches and employs 430 people, recently went to press after his gas bill rose by 1,200% to €75,000 (£65,800) a month. “Are they crazy? We have to turn off the ovens,” he said as he took to the streets with nearly 1,000 bakers on Wednesday, accusing politicians of “plunging us into the biggest crisis” and calling for urgent government support.

Yasmin Fahimi, head of the German Trade Union Federation (DGB), said she fears the consequences of multiple challenges coming at once. “Some companies are on the edge. This domino effect could lead to the deindustrialization of Germany, which is a risk,” she told Spiegel.

He called on the government to protect companies that are particularly at risk due to high energy use, “so that they can keep their production capacity at a minimum level and grow as things improve.” Reboot them. Those who shop now, will never go back. We must be clear about this.

Many companies have done just that: they have cut production to nothing or – in the case of ArcelorMittal’s steelworks in the ports of Hamburg and Bremen – plan to close “until further notice”.

The scene is being repeated across Germany, hitting many of the energy-intensive industries that form the backbone of the German economy – steel, building materials, glass, paper, chemicals. Fahimi fears what might happen if they shut down “industrialization” for good.

Meanwhile, cheaper energy and manufacturing costs elsewhere – gas is 10 times cheaper in the US – are causing some businesses to relocate their manufacturing facilities. But the hundreds of thousands of Mittelstand companies—small to medium-sized, often family-run concerns loyal to a niche that has been Germany’s main engine of growth since World War II—is less of an option.

According to the Federation of German Industries (BDI), 90% of companies refer to the level of energy and raw material costs as a “strong” or “existing challenge”. In the case of ammonia – critical to the agricultural industry for fertilizer production – producers such as BASF have been forced to cut production to a minimum and buy the chemical cheaper from other global markets.

Volker Jung, the head of the bankrupt Hackle toilet paper firm, is demanding government-backed energy tariffs.

Wolfgang Grosse Entrup, head of the German Chemical Society (VCI), warned of the risk of creating new dependencies when Germany should seek to do the opposite.

Another recent study shows that consumer confidence is at its lowest level since the founding of the Federal Republic of Germany in 1949. Faced with higher energy costs, households are rethinking spending on everything from holidays to furniture purchases and food.

Businesses are also shunning new investments and instead holding crisis meetings about how much they can reduce the heat in factories and offices.

A growing number of companies are moving their employees to “Kurzerbeit” – a short-term work mode – which was first used in response to the economic crisis of the Weimar Republic in the 1920s and was later used extensively during the global financial crisis.

This desire to stick with workers is crucial if Germany is to have any chance of emerging from its current crisis. But from time to time the question is being raised: how long can he endure to do this?