AThis Monday is crisis summit day again in Berlin. Chancellor Olaf Scholz (SPD), Economics Minister Robert Habeck (Greens) and Chancellor Wolfgang Schmidt (SPD) are consulting with the CEOs of the DAX companies about the consequences of the war in Ukraine. Specifically, it should be about the energy supply and the disrupted supply chains.
The round had already met once in mid-April, since then the economic prospects have clouded over again significantly. Politics and business are looking forward to July 21 with concern. Then it will become clear whether gas will flow from Russia again after the maintenance work on the Nord Stream 1 pipeline has started. And also whether Germany is threatened with another recession, the second within a short period of time.
Economics Minister Habeck is currently using every camera to prepare the country for difficult times. At the trade fair in Munich last week, he warned: “There are still enormous price increases to come.” A little later, on the ZDF program “Markus Lanz”, he described the rescue of the ailing energy supplier Uniper as one of these “whatever it takes” moments: Cost what it may.
The Economics Minister warns of chaos on the energy market
Politicians must prevent “the German, the European energy market from falling into chaos as a result of a company collapsing”. Lars Feld, adviser to finance minister Christian Lindner (FDP) and former chairman of the council of experts, saw Habeck at Lanz – and turned it off after a while. “At some point that was too much doom for me,” says the Freiburg economist, referring to Habeck’s gloomy picture of the situation.
Feld also sees the fact that the economic outlook is clouding over. “The probability of a recession has increased significantly.” This is not only due to the high gas prices in Europe. “Due to the Fed’s rate hikes, the US is clearly on course for recession. Hardly anyone expects a soft landing anymore. In view of the zero-Covid policy, it is also questionable whether the 4 percent growth in China will be achieved.” Something is brewing there.
In 2020, gross domestic product (GDP) shrank by 4.6 percent, then grew again by 2.9 percent in 2021. At the beginning of the year, Habeck announced an increase of 3.6 percent for this year. But after four months of war in Ukraine, there is not much left of it. The most recent forecasts by the industry association BDI and the Leipzig Institute for Economic Research in Halle consider only 1.5 percent to be realistic – and only on the assumption that gas will come from Russia again.
Economy sees potential for a recession
“A recession has become more likely,” agrees Monika Schnitzer, one of the current three “wise men”. But Schnitzer adds: “It is not inevitable.” The past four months have been important to fill up the gas storage facilities and to push ahead with the construction of LNG terminals. Now it is important that the energy suppliers also pass on the higher prices to customers, “with targeted help for those who can no longer afford heating”.
Schnitzer is convinced: “A high gas price is not as bad as not getting any gas at all.” She estimates that energy prices will remain high for another two to three years.
An intriguing question is: is the economic slowdown causing the recently extraordinarily high level of inflation to drop? Many prices have recently fallen on the international commodity markets. Copper, for example, has become significantly cheaper, as have nickel and tin. The price of oil, which was just under $130 per barrel of North Sea Brent in March, fell below $100 again for the first time last week.