Opinion: A winter of discontent | Comments | DW

Henrik Böhme, DW business editor

Rarely have German economists, economists and government advisors been so unanimous: Germany is facing an extremely hard winter. And that is not meant meteorologically, but with a view to the economy. The German economy will suffer, growth will slacken. But you don’t even need a degree in economics for that, common sense is enough.

For example, looking at the horror number that made the rounds last Tuesday: Producer prices (a number that doesn’t interest anyone in normal times, but the times are anything but normal) are almost 46 percent in August compared to the same month last year gone up. This has never happened since this value was determined – and it has been for at least 73 years. Producer prices indicate what a company has to pay for the products that it wants to process and then sell. This makes them a reliable indicator of the further course of inflation. In this case, this means that inflation is eating its way deeper and deeper into the economic system.

With recession against inflation

All over the world, central banks are bracing themselves against the drastic rise in consumer prices and the accompanying devaluation of money. And of course, the best way to fight inflation is to cut the steam in the economy. Even that can lead to a recession – as an example, refer to the USA 40 years ago, where the then highly respected head of the central bank, Paul Volcker, only managed to end persistent stagflation at the price of a severe economic collapse (i.e inflation plus a stagnating economy, the ugly sister of the recession, so to speak). It is foreseeable that this will also have to be the case this time. Because we are heading towards such stagflation.

Henrik Böhme, DW business editor

Henrik Böhme, DW business editor

But of course, the dramatic price increase is due to the ongoing problems in the supply chains as well as to the extremely high energy prices. This is effectively a second front opened by warlord Putin. For a long time no one wanted to believe that he used oil and above all gas as a weapon. With this he wants to split Europe, with this he wants to split societies. He hopes for social unrest, meaning that Europeans will rise up against their governments and blame them for prolonging the war by supplying arms to invaded Ukraine, thereby driving up energy prices.

A test for Europe

In Berlin, Paris, London and elsewhere, however, governments are braving this very scenario with might and main. The French and British cap energy prices, the Germans nationalize gas traders. At the same time, people in Germany are trying to understand what a gas levy is and whether it is even possible to pay such an additional levy on top of the horrendous energy prices. Of course, there are also aid packages worth billions in this country that bring a bit of relief – but rather with the watering can instead of specifically helping those who are really in need.

The real endurance test is still ahead of both the Germans and the Europeans. Because the really big demands for additional payments for gas and electricity, the higher prices for all conceivable products resulting from the high producer prices (see above), the bills that can no longer be paid, which in turn will drive companies into bankruptcy, in short: these Spiral of horror, it will only really start rotating in the coming year. UN Secretary-General António Guterres summed it up this week: “A winter of dissatisfaction is looming on the horizon.”

That’s where European solidarity comes in, standing together in support of Ukraine and against the warmonger in the Kremlin. If Europe gets through the coming winter relatively unscathed, the chances are not very bad that things will pick up again afterwards. Slowly, probably, but – and that’s the good news: without Putin’s gas.


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