fRobert Habeck is currently grateful for positive moments. When he entered the hall of a Berlin congress hotel on Wednesday, most of the guests at the mechanical engineering summit in Berlin stood up and applauded loudly. The Green Minister for Economic Affairs and Climate thanks him politely, the long applause gave him the chance to get to know three more start-up entrepreneurs quickly while he was wiring the microphone. “Those were the best two and a half minutes of the day,” joked Habeck. For days, the openly held dissent between the Greens and the FDP has dampened the mood in the traffic light coalition. And then there is the latest economic forecast from Habeck’s economists, which is anything but encouraging.
Accordingly, the government expects only small economic growth of 1.4 percent this year. In the coming year, gross domestic product is likely to shrink by 0.4 percent. Growth of 2.3 percent is expected for 2024. In its spring projection, the federal government still expected gross domestic product to increase by 2.2 percent this year and by 2.5 percent next year.
This prognosis was also influenced by the war in the Ukraine; it was released at the end of April. A ray of hope from the point of view of the Economics Minister: After an inflation rate of 8.0 percent this year, inflation is expected to fall to 7.0 percent next year. The leading economic research institutes recently estimated inflation for 2023 at 8.8 percent. The government expects the planned gas and electricity price brake to have a dampening effect. For 2024, the government is even predicting an inflation rate of “only” 2.4 percent.
Lindner: big homework
“We are currently experiencing a severe energy crisis, which is increasingly developing into an economic and social crisis,” Habeck stated. The trigger was the attack by Russian President Vladimir Putin on Ukraine. “It’s already a significant economic slump,” which will focus on the third and fourth quarters of this year and the first quarter of next year. Habeck attributes the fact that Germany is in the bottom of the league in the most recent economic forecast by the International Monetary Fund (IMF), and growth prospects are better in all other industrialized countries, to the high dependence of German industry on Russian gas.
He was critical of the “Inflation Reduction Act” with which the American government is using subsidies to lure companies that are building new production facilities in the United States. This is a “heavy distortion of competition compared to the European market”. However, Germany has “every opportunity” to set investment signals itself. Habeck was open to financing this through new debt. The Greens have long criticized the debt brake, which is anchored in the Basic Law but has been suspended since 2020 due to the various crises.
Federal Finance Minister Christian Lindner (FDP), who is attending the IMF autumn conference there, joined the debate from Washington. “Germany cannot be satisfied with how we will develop economically in the next year,” he said after initial talks with his European colleagues. Compared to other economic nations, Germany has a lot of homework to do. “We’re growing less than others. Put differently: Others get through the crisis better,” emphasized the minister. This reflects the special situation in Germany, its energy dependency, its international exposure as an export nation, but also long-standing deficits in competitiveness, “which we will have to work on systematically in the coming years”.
Habeck: “I’m satisfied, but many things are complex”
Meanwhile, in Berlin, Habeck had to answer a number of questions about the economy at the federal press conference on the liberals’ favorite topic: why not all three remaining nuclear power plants should run until 2024, as recommended by economics expert Veronika Grimm. According to their estimate, the price of electricity could fall by up to 12 percent as a result. “The question of price can be dealt with by other instruments,” said Habeck. He countered the statement by climate activist Greta Thunberg that nuclear power is better than coal with reference to the agreement with RWE, according to which the phase-out of coal in the Rhenish mining area will be brought forward from 2038 to 2030.
Habeck did not want to estimate when the proposals of the expert commission on the gas price brake would become law. “I’m satisfied, but many things are complex,” he said in front of the machine builders. Other European countries had expressed concerns about the €200 billion German “defense umbrella”. “Cohorts of my employees are currently on the phone to clarify the state aid issues,” reported Habeck.
“Sometimes you get the impression that Germany is always being looked at a bit more closely.” Of course, Germany is a country with great financial clout. But I still haven’t really understood why France has been able to issue a capped electricity price for industry for years, and why we can’t even do that for gas for a few months.”
