The cat is out of the bag. After months of denial, it is now conventional wisdom that Germany — and Europe more generally — faces deindustrialisation due to the end of cheap Russian piped gas. “Germany’s Days as an Industrial Superpower Are Coming to an End,” reads a headline on Bloomberg.
From London to Berlin, Western governments do not have a serious economic growth plan. Media outlets have started to admit this grim reality because there is no longer any point in denying it.
Privately, Americans shrug their shoulders and hint that this means they will no longer face competition from Europe. But watching the economy of your most dependable ally — not to mention a key trade partner — implode is not cynical Machiavellian statecraft: it is folly. American leaders talk about creating a new economic bloc which only includes “democratic” nations, only to dismiss the destruction of the European economy. It is obvious to everyone except the truest of the true believers: America has no strategy either.
America’s negligence of its core ally will likely lead to electoral tremors across the continent in the coming years. There is every chance that Europe will drift away from American influence and start to build pragmatic relationships with other countries. The big question is where this leaves Britain, which has much closer ties with the United States than the rest of the continent. It is a question that British leaders will have to ask themselves seriously moving forward.
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Japan also entered recession. Korea’s semiconductor industry is also facing headwind.
I think united state fundamentally only makes decisions based on domestic politics. This comes at pretty hefty cost for the allies. In the end, I’m not even sure this is good for the US itself.
Sure… so much common wisdom about Germany. Including their immidiate collaps any day now for the last 20+ years. Or the 5%+ economy loss should they not get Russian gas (after all those people who froze to death of course).
In reality those massive losses -coming out of covid, still having supply chain issues and with not even a fraction of the stimulus money other countries spend to counteract on top of no more gas- are now what? +/-0? And with some more obsolete techs slowly sourcing out parts for cost reasons while new technologies open up shop there at the same time.
The only actual risk for Germany (and a lot of other countries) is that people start to believe the bullshit, the outrage farming and doom scrolling trash and all the usual propaganda they are flodded with on a daily basis.
Recession is a fact. PMI contraction is a fact. When your government has taken on debt with the assumption that number keep go up, that’s a problem.
When your government has taken on debt with the assumption that number keep go up, that’s a problem.
And again, the opposite is true. They have reduced debt constantly for decades, did not spend big sums on stimuli while covid (in fact the recent budgetary discussion was about the unused covid funds) and are still not spending anything on the economy. If they actually would take on debt to invest it into economy boosts like everyone araund them does right now, they would obviously have growth.
So they sat at ~+/-0 now and everyone loudly cries recession, doom and apocalypse because two quarters in a row had a (rounded down) -0.1% which technically qualifies.
They are spending on energy subsidies, and therefore, “the economy”. It’s just not enough to prevent recession.
Machine translation of FAZ article:
The energy crisis has caused public debt in Germany to rise to a record high. According to the Federal Statistical Office, at the end of the first quarter of 2023, the federal government, federal states, municipalities and social security funds were in debt to the tune of 2406.6 billion euros. Compared to the end of 2022, this was an increase of 1.6%. Compared to the first quarter of 2022, debt increased by 3.8%.
Compared to the previous quarter, the federal government’s debt rose by 2.4% to 1659.6 billion euros. “This was primarily due to the increased financing requirements as a result of the current energy crisis in connection with Russia’s war of aggression against Ukraine,” the office announced in Wiesbaden on Wednesday.
The increase in federal debt is therefore largely due to extra budgets. The Energy Economic Stabilization Fund, which was established at the end of 2022, accounted for the largest share. The debt of the Corona Economic Stabilization Fund also continued to rise. For the first time, the special budget for the Bundeswehr also created debt.
Oh, no! Their debt rose by 1,x percent… to a total of ~64%. That’s nearly 20% under EU average. And while countries with rates of 100-160% (let’s not even talk about Japan or US as they are playing in another league entirely) take on more debt to push the economy in times of crisis Germany is not spending anything as no new debts (beyond 0,35%) are allowed constitutionally.
Sure… Germany totally has a debt problem. One of retarded politicians stuck in economic ideas of the 1970s that still don’t understand the difference between a country’s economy and business economy. So they refuse to take on any debt when everyone else does to make their location more attractive for companies via investments.
And still the German economy is only shrinking if you round rediculous low numbers up to 0,1%. Guess the country will deindustrialise and collaps any day now. I hope someone tells the companies building massive new production sites in Germany that they are wasting their money on lost case they will lose all its industry… somehow…
FFS, recession is not a fact. Stop with that Bullshit. Yes, growth is down to 0,2% - that’s not good, but it isn’t a recession!
Edit: To all the downvotes: You realize a recession is defined as “Not growing”? Meaning a 0,2% growth is still growth?
- That number is not adjusted for inflation
- The Bundesbank says that Germany is already likely in a recession
- GDP is not the only measure of the economy. In fact it’s a really bad one
GDP is not the only measure of the economy. In fact it’s a really bad one
I agree - which makes the rest of the numbers very odd, because most companies posted a substantial plus for 2023.
https://www.vdma.org/viewer/-/v2article/render/81411795 shows a net 10% decrease in orders across the entire machinery and plant engineering sector as of June 2023, but that net comes from an increase in domestic orders of 9% and decrease in global orders of 18%. It also indicates that there were over 30% fewer orders from all of Europe. Meanwhile, https://www.kloepfel-consulting.com/supply-chain-news/maerkte/vda-umfrage-automobilindustrie-deutschland-6566823/ shows that, in May 2023, in a survey of 128 automotive industry companies, 0% planned to increase their investment in Germany with 27% planning to shift their investments out of Germany. And here we have evidence that total energy consumed in Germany dropped 8% in 2023, mostly because of high energy industry doing less.
here’s evidence as of July 2023 that it was already happening, and here we see their economy faltering in an analysis from Sept 2023.
Buy my gas or you’ll be sorry by V. V. Putin
Newsweek, Sept. 2022: Video of Biden Saying He’d ‘End’ Nord Stream Resurfaces After Pipeline Leak
“Now that Nord Stream has been damaged, Germany will probably have to buy more natural gas from the US at 5x the price,” wrote commentator James Melville.
Speaking to reporters on February 7, Biden said: “If Russia invades, that means tanks or troops crossing the border of Ukraine again, there will no longer be a Nord Stream 2.” “We will bring an end to it,” the president said. A journalist asked Biden how he could do that since Germany was in control of the project, the president replied: “I promise you: We will be able to do it.”
“Any deliberate disruption of European energy infrastructure is utterly unacceptable and will be met with a robust and united response,” Borrell said.
Europe’s “robust” response has been to buy LNG from the US (and also still from Russia) at higher prices.
Bloomberg, Jan. 2024: Gas-Addicted Europe Trades One Energy Risk for AnotherInstead of evil Russian fossil fuel producers, you now have very nice very cool very reliable American fossil fuels producers.
Exxon Mobil publicly denied global warming for years but quietly predicted it
They cleaned up BP’s massive oil spill. Now they’re sick – and want justice
The US loves fucking over the economies of allies, just ask Japan. It’s all about looking out for #1. Speaking of looking out, while the US is shrieking about foreign countries spying, it loves to spy on its supposed allies: https://www.reuters.com/world/europe/us-security-agency-spied-merkel-other-top-european-officials-through-danish-2021-05-30/
Outsourcing industrial bases to overseas wasn’t so smart after all. The US can change that, but the EU isn’t as united, it’s a federation (talking 'bout you London) and seemingly quite slow. And invested (overseas).
Europe is not as united, and the eurozone is structurally designed to lock in neoliberalism and preclude a return to Keynesianism.
Naked Capitalism, Sept. 2022: Michael Hudson on The Euro Without GermanyAnd the eurozone’s own economic rules limit its budget deficits to just 3% of GDP. This prevents its national governments supporting the economic by deficit spending.
