Алхимия в немецком бухучете. Как экономика Германии оказалась в режиме кризиса?

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The concept of “crisis mode” has become the word of 2023 in Germany. The German Language Society says that the word of the year reflects reality, and the reality in Germany is quite grim. Can't argue with that. Take economics, for example. This year the country has faced recession, inflation and declining purchasing power. Recently it became known that the German government failed to agree on the budget for 2024. As expected, by the end of 2023, Germany will become the only G7 country with a decline in GDP. Just yesterday the German economy was called the “locomotive of Europe,” today it is spoken of as a “sick man.”

Dangerous state of paralysis. Is Germany facing a shutdown?

Due to disagreements in the Cabinet of Ministers, the German authorities were unable to agree on the budget for 2024. The German publication Spiegel reported this on December 7.

The secretary of the Social Democratic Party of Germany (SPD) faction in the Bundestag, Katja Mast, said that Chancellor Olaf Scholz, Economics Minister Robert Habeck and Finance Minister Christian Lindner were unable to “complete their intensive discussions” regarding the budget in a timely manner.

The publication notes that from the beginning of 2024 until the actual adoption of the budget, according to the rules, temporary budget management is introduced. During this period, ministries have the right to spend funds only in case of emergency. They are also not allowed to allocate money for new projects.

The Bild newspaper, in turn, reported that the government plans to hold a meeting of the budget committee to adjust the budget for 2024 before December 25. However, it is not yet clear whether this will be possible.

German Finance Minister Christian Lindner commented on the situation. He assured that the delay in adopting the 2024 budget would not be a serious problem. “The state is fully capable: not a single government body will be closed,” the official said.

The German television channel ARD also tried to reassure German residents. He said that the country is not yet at risk of an economic shutdown, as happens periodically in the United States when Congress fails to agree on a budget for the next fiscal year.

"Most people in Germany wouldn't even notice if the federal government startednew year without a current budget: teachers continue to receive salaries, retirees - pensions, students - scholarships. The no-budget period in Germany will have nothing in common with a shutdown, as in the United States, that is, with a general stop of payments,” the TV channel said in a statement.

Still, some funding programs will be suspended. For example, housing subsidies and many real estate projects are being frozen, drawing criticism from the construction industry.

The situation could become more complicated if the three parties forming the ruling coalition are unable to overcome differences on the issue of budget cuts. The SPD is categorically against cutting social benefits, the Greens do not intend to save on climate protection, and the Free Democratic Party (FDP) opposes initiatives to raise taxes. In the end, they will have to find a compromise solution, another question is how long it will take.

At the same time, Spiegel notes that the dispute over financial policy has led the German government into a dangerous state of paralysis. At the same time, the publication draws attention to the fact that today a split exists not only between parties, but also within parties.

GDP decline and the threat of deindustrialization. What were the consequences of the sanctions?

This year, Germany became the only G7 country to experience a contraction in GDP. In October, the German government reported that GDP would contract by 0.4% in 2023, although growth was expected back in the spring. At the same time, the International Monetary Fund predicts that the German economy will shrink by 0.5%, and German analysts believe that the decline will reach 0.6%.

“The main reason is high interest rates, which have slowed down housing construction, as well as high inflation and weak EXPORT potential,” explained the decline in GDP in the Federation of German Industries (BDI) of Germany.

It is worth noting that inflation in Germany fell to 3.2% in November, but it is significantly higher than the eurozone average. German consumers continue to see above-average price increases, particularly for food .

Meanwhile, the country's industry is suffering not only from low export demand, but also from high energy prices. The country's government planned to counteract this by reducing the electricity tax, but at the moment the decision has been postponed due to the budget crisis.

But for many years Germany was called the “locomotive of Europe.” The country dominated world markets and half of its economy was export -driven . "Germany achieved one economic success after another... While other European countries were drowning in debt, the German state treasury grew, and there were also plenty of jobs. Economists wrote books about what other countries could learn from Germany. Now that is a thing of the past. Now Germany shows the worst results among large developed economies,” notes Euronews:

The decline in the German economy began when Berlin joined anti-Russian sanctions. Germany was deprived of cheap natural gas, which dealt a blow to energy-intensive industries. We are talking about enterprises in the chemical industry, metallurgy and construction industries. Now the price of gas is approximately double the price of 2021, which is causing great damage to businesses. A study by the Swiss consulting company Prognos showed that in Germany the cost of electricity will remain high in the coming years if Russian gas supplies are not restored in full.

“The loss of cheap Russian natural gas needed to power factories has dealt a painful blow to the business model of the German economy,” Christian Kullmann , CEO of large German chemical company Evonik Industries AG , told The Associated Press . According to him, the German economy is now in a situation where it is being strongly negatively affected by external factors.

"The federal government must intervene to regulate the industrial price of electricity," says Jörg Hofmann, HEAD of the German trade union IG Metall. "Otherwise, steel production, the aluminum industry and other energy-intensive industries risk disappearing sooner or later in Germany." Hofmann added that this situation would affect hundreds of thousands of German citizens.

Against the background of rising gas prices in European countries, including Germany, the United States last year passed a law to reduce inflation. The law provides generous subsidies to manufacturers of electric vehicles, batteries and energy equipment, provided they are manufactured in the United States. In other words, US companies have gained significant advantages over their European competitors.

Against this background, European companies began to transfer business to the United States, where working conditions are more favorable. “Some see in this the danger of a new wave of mass deindustrialization of Europe in the interests of the United States. Moreover, the law on reducing inflation was supplemented by a law on chips that subsidizes the microprocessor industry in the United States,” the French newspaper Le Figaro wrote about this.

The threat of deindustrialization is also talked about in Germany. Earlier, the head of the German trade union IGBCE, Michael Vassiliadis, said that his country would face deindustrialization if German enterprises, amid rising electricity costs, began to close or move their production to other regions.

The general DIRECTOR of the German steelmaking concern Salzgitter, Gunnar Grebler, is also sounding the alarm. According to him, if German companies producing steel and chemicals move their business to other countries, then Germany will lose the entire production chain.

According to a survey by the German Chamber of Commerce and Industry, over the past year the number of German industrial companies choosing to invest abroad rather than expand domestic production has doubled - from 16 to 32%. According to the department, the reason was concern about the future without cheap Russian gas.

Member of the European Parliament from the Alternative for Germany party Markus Buckheit is confident that sanctions against RUSSIA have created problems for the German economy. “We see that the Russian economy is currently growing, and the German one is shrinking. An important role in this situation is played by Germany’s decision that we will no longer accept Russian gas - a decision that was made even before the destruction of the gas pipeline in the Baltic Sea... I believe that it was bad for Germany to unilaterally apply measures against Russia from which we ourselves are now suffering more than Russia,” Buckheit said in an interview with broadcaster ERR.

The head of the Bundestag Committee on Climate Protection and Energy, Klaus Ernst, said at the end of November that Germany needs to increase energy supplies from abroad, including from Russia, in order to reduce electricity prices in the country.

According to Ernst, sanctions against Russia led to an explosive rise in energy prices, a sharp drop in production in energy-intensive industries and a contraction of the German economy. He also pointed out that sanctions against the Russian Federation threaten the prosperity of Germany. “We need negotiations, not more and more weapons and new sanctions!” - Ernst emphasized.

Alchemy in German accounting. Where did Scholz go wrong?

Another headache for the German government was the verdict of the German Constitutional COURT, which prohibited spending 60 billion euros on environmental projects. Initially, these funds were included in the state budget for 2021 and were intended to combat the consequences of the pandemic. However, the government redistributed them to a new fund. The Constitutional Court ruled that the decision was illegal. As a result, the Scholz government was faced with the problem of a lack of money to finance previously agreed projects.

In this regard, German Finance Minister Christian Lindner said that a court ban on the redistribution of unclaimed loans would have dire consequences for the German economy. He also said that the “hole” in the German state budget for 2024 is estimated at 17 billion euros.

Now the German authorities are hastily trying to find a way out. Meanwhile, Politico predicts that at this rate, Berlin may go bankrupt.

Olaf Scholz. Xinhua Photos

“The paradox is that Germany laid itself on this altar, and now has no idea how to receive atonement for its sins,” the publication notes (translation by InoSMI).

Scholz's coalition has created a network of "special funds" that are not included in the main budget, Politico explains. The Chancellor was confident that the government could spend this money without violating the so-called debt brake (a rule that prohibits spending more money from the budget than it receives). However, the court did not agree with this, prohibiting the government from spending money from special funds. The court's decision forced the government to freeze new spending and slow down approval of next year's budget.

There is no easy way out of this situation, Politico believes. Scholz has promised to quickly prepare a new plan, but few think the problem can be solved without austerity measures.

“Between the lines, the judges of the German Constitutional Court made it clear that the use of shadow funds by the Scholz coalition is tantamount to accounting fraud. This is the same alchemy in accounting for which Berlin reproached Greece a little more than ten years ago... Simply put, the Scholz coalition wanted to cook both porridge and MILK Don't get burned. To do this, she created the appearance of fiscal discipline while freely spending money on her ambitious agenda," Politico writes.

During coalition negotiations in 2021, Scholz proposed the idea of ​​a budget trick to his future partners: the conservative-liberal Free Democrats and the Greens. It is doubtful that the coalition could have emerged at all without such a plan.

“Scholz’s role is understandable, but his successor as Finance Minister Christian Lindner bears a significant share of responsibility for this confusion - for the simple reason that it was his department that controlled the implementation of this strategy. During negotiations on the creation of a coalition in 2021, Lindner was literally torn between desire to lead and the financial constraints that his party advocated. Scholz offered him a graceful way out of this situation," Politico points out.

The publication also believes that when the Greens supported Scholz’s manipulations with reporting, they had no remorse. If we are talking about the implementation of environmental goals, then for the green ones these goals have long justified the means. So, in the early 2000s, they convinced the Germans of the need to decommission nuclear power plants and switch to renewable sources. They won the vote by deceiving voters by promising that the subsidies that consumers would have to pay monthly to build solar and wind energy projects would cost no more than a scoop of ice cream. This brought the total annual bill for German households to €25 billion. This is enough to corner the entire global ice cream market many times over .

“This strategy of the Greens was also applied in their “socio-ecological transformation”. This is a plan to transform the German economy into carbon neutral. That is why the shock from the decision of the Constitutional Court was the most painful for the Greens. They have been in opposition and in alliance for over 15 years Scholz and Lindner saw the triumph of their attempts to persuade the Germans to support their ecological vision of the future. The revolution they had hoped for was within reach, but it slipped through their fingers," the newspaper notes.

Economy Minister Robert Habeck, who has become the face of the green transition, has looked completely confused in recent days and made ominous predictions about the coming economic Armageddon. "This was a turning point for the German economy and for the labor market," Habeck said on German public television. He predicted that the country would now find it much more difficult to maintain the level of prosperity it had enjoyed for decades.

Crisis mode. What do Germans think about the state of affairs in the country?

The German authorities are still trying to convince the people and themselves that the state is capable and there is no crisis. However, the business environment is well aware of the real state of affairs.

Germany is facing an economic shock in 2024, the German economy is in deep crisis and little will change next year. Such far from optimistic forecasts were published this week by Spiegel.

The publication refers to a survey conducted by the German Economic Institute among 2.2 thousand companies in Germany. According to the survey, only 23% of companies give a positive forecast for their development in 2024. This signals "a continuation of economic paralysis in Germany," the institute's report said.

Business expectations in Germany fell to levels seen in autumn 2022, when the country was reeling from shock from energy prices, high inflation and the risk of power shortages. “The sharp rise in energy prices since the outbreak of the conflict in Ukraine , geopolitical uncertainty and a significant decline in the dynamics of the global economy explain the economic stagnation in Germany,” the researchers say.

In such a situation, German companies reduce investments and refuse to expand their staff. Only one in five companies expect to increase their workforce next year, and 35% of companies surveyed expect job cuts. "This signals that Germany's long-term labor market boom may have come to an end," the German Economic Institute said in a report.

Experts also predict that the construction and industrial crisis will continue in Germany . Only a quarter of industrial companies expect an increase in production in 2024, while 38% expect a decrease. Among construction companies, 54% are preparing for a decrease in production, and only 13% expect an increase.

Meanwhile, in Germany, the word of 2023 was Krisenmodus, which means “crisis mode.” “There have always been crises. But this year the crises and their overcoming have reached their culmination,” the German Language Society said.

The head of the organization, Andrea Evels, noted that the word of the year reflects reality, and the reality is now quite gloomy. She believes that German society has been in a state of crisis since 2020. “The state of emergency has become a long-term condition. This causes fear, uncertainty and a feeling of powerlessness in people. These feelings dominate everyday life and people do not know what else will fall on them,” Evels said.

It is noteworthy that last year the word of the year was the concept of “turning point,” which Scholz uttered more than once in connection with the conflict in Ukraine. In reality, the turning point occurred, rather, for Scholz himself. December polls showed him to be Germany's most unpopular chancellor since polling began in 1997 . Only 20% of the country's residents are satisfied with Scholz's performance as chancellor.

Vita KHANATAEVA,

BELTA.