The German economic model is coming to an end. It lasted almost half a century

  • In May, Germany recorded its largest foreign trade deficit since 1991, amounting to 0.9 billion euros.
  • According to economists from PKO BP, the competitiveness of the German economy based on cheap natural gas from Russia is under a big question mark.
  • A reduction in the supply of energy sources from Russia means that the German economy could fall into recession
  • German analytical centers estimate the economic losses due to the lack of gas supplies from Russia at 6-12%. A threat to GDP and 5 to 6 million jobs in our western neighbors
  • The problems of the German economy will affect the entire economy of the euro zone, but also ours, because it is Poland’s most important trading partner.
  • Almost 28% go to Germany. Poland’s exports amounted to 29.5 billion euros in January-April of this year alone.
  • More such information can be found on the main page of

Recent trade reports from Germany have focused the world’s attention on the economies of our western neighbours. In May, Germany recorded its first trade deficit since 1991y, which is 0.9 billion euros. Exports fell 0.5%. On a monthly basis, imports increased by 3%.

The importance of this data is best demonstrated by the behavior of the single European currency. On Tuesday, the euro was at its weakest level against the US dollar in two decades. Analysts see the source of the weakness of the euro currency precisely in the fear of a global recession, and its source, among other things, is the attack on Germany, that is, the reduction Russia’s gas supply and the increase in its prices on world markets, where the Kremlin must fill the shortage of raw materials after the return of the pipeline.

Russia cuts off Germany’s oxygen

The problems in German trade are the result of Western economic sanctions imposed on Russia and high prices for energy resources, which not only hit our Western neighbors, but can have profound consequences for them.

The data suggests that the German model of the economy is based on export competitiveness. The use of cheap energy sources from Russia, which was put into practice half a century ago, has come under severe strain in the past two months“- Economists of PKO BP Bank Note. In their opinion, the scenario of the future development of the situation of the German economy depends, among other things, on the political reaction of Berlin.

“Maintenance actual status, This is the current economic model, it should perhaps mean significant concessions to Russia (as seen in some signals from Germany). If such concessions are not granted, the risk of tougher measures from Russia, including a further reduction in natural gas supplies, will increase,” experts from Poland’s largest bank stress.

German companies fear the consequences

For now, gas supplies to Germany via Nord Stream are limited, but the government in Berlin is considering stopping them completely.

According to PKO BP analysts, in the short term it is difficult to estimate the extent of economic losses. These appear mainly in autumn or winter, when there is a fear of supplying gas to German industry.

In recent weeks, German think tanks have tried to assess the extent of the problem. Their opinion The amount of economic losses can range from 6 to 12%. GDP, and it threatens the existence of 5 to 6 million jobs.

They are particularly pessimistic about the development of the situation of German companies. Last week, the Bavarian Business Association (vbw) presented a report showing that a hypothetical suspension of Russian gas supplies to the EU from July 1 would lead to a 12.7% drop in German GDP. This is a more pessimistic view than that presented by other experts, including this one from the Bundesbank.

Families are protected

Politicians in Berlin are comparing Europe’s gas problems to the crisis that triggered the collapse of Lehman Brothers, one of America’s largest investment banks. At the time, chaos reigned in global markets, with successive economies falling into recession.

German Economy Minister Robert Habeck accurately compares the current energy commodity market situation to the financial crisis that swept the world in 2008.

The same minister announced on Tuesday In the event of a gas shortage, authorities will give priority to private homes. The same probably happens in schools and hospitals. However, companies, especially industry and energy, can no longer rely on such options. Here, only part of the demand is met to protect vulnerable consumers, i.e. ordinary Germans.

The Bavarian Chamber of Commerce argues in its analysis that the glass industry would be particularly affected, where production would fall by almost half, while the steel, chemical, ceramics, food and textiles would fall by around 30%.

The German chemical company BASF, one of the biggest consumers of natural gas behind the Oder, has already announced that it will reduce its production.

The inflationary hydra will raise its head

The supply shock expected by Germany, but also the whole of the EU, will have a strong impact on prices, as the limitation and possible cessation of gas supplies from Russia will also contribute to the recession. many savings. Theoretically, a fall in GDP should lead to a fall in consumer demand, which should translate into a fall in price momentum. However, experts see the European energy crisis as a source of simultaneous stagnation and high inflation.

Economists at Morgan Stanley earlier this week expected the euro zone to contract in the final quarter of the year.Mainly due to the risk of restricting the flow of natural gas.

Deutsche Bank analysts believe they will continue Gas shortages ‘raise the risk of an impending recession in Germany on energy supplies’And this indicates a “sharp decline” of the euro against the US dollar. This last event becomes mere matter.

The government in Berlin realizes that a fall in German GDP is an increasingly debated scenario. Minister Habeck admitted on Tuesday that he saw “too many” fears of a recession and his “So the country is going to face massive challenges in the months to come”.

It remains unclear what Berlin’s energy policy will be in the coming months and whether Olaf Scholz’s government will eventually return to nuclear power plants. Mere production in coal or oil power plants will not be enough, especially for survival in winter, not only for sport, but also for maintaining the competitiveness of the economy, especially for exports in the years to come. .

The first company asks for help

The scale of the problems facing Chancellor Olaf Scholes’ office is illustrated by the situation of German giant Unibur. It is one of the largest importers of Russian gas across the Oder, which is currently struggling with liquidity problems – according to media reports – Negotiations with the government for a rescue plan of around 9 billion euros.

Companies like Uniper buy gas under forward contracts to ensure security of supply at reasonable prices. However, the Kremlin’s decisions to cut off or restrict gas supplies to countries that support Ukraine mean that many companies have to buy gas on the spot market, where prices have reached record highs in recent weeks.

Bloomberg’s remarks Currently buying gas at rapidly rising market prices, Uniper is losing around 30 million euros a day..

This is why Chancellor Scholes signals that the gas importer needs help after the Lufthansa outbreak. The government then gave the airline a loan and took 20%. Shares.

Poland ricochets

For us, Russia has already closed the gas pipeline, but the problems of our western neighbors can aggravate this problem. We are currently importing gas from Germany, but any further supply restrictions from Gazprom will also affect us, as German partners will have to focus on their own market.

The solution for the Polish economy is to operate the Baltic Pipeline gas pipeline in the fall. Our system manager, Gas System, ensures that the project starts without delay. Representatives of the government and PGNiG announced that the contract for raw materials from the Norwegian shelf would be sufficient for our needs.

Even if we manage to cover the shortfall resulting from the reduction in gas imports from Russia in the autumn and winter, the problems of the German economy will not be without impact on the rate of growth of our GDP.

Today, analysts predict a technological recession in Poland, that is, the GDP has decreased quarter on quarter (for two consecutive quarters). We may experience a temporary year-over-year slowdown early next year.

However, a fall in GDP beyond the Oder would deal an additional blow to our economy, as it would reduce the demand for goods produced in Poland.

Today, Germany is our largest and most important trading partner. Nearly 28% go there. Export from Poland. It was 29.5 billion euros over the January-April period this year alone. For the whole of 2021, we sold around 82 billion euros worth of goods on our western border.

Germany will likely drag the entire Eurozone economy into recession, which will result in a further decline in demand for goods produced in Poland. We send nearly 60% to Euroland. exports, and more than three quarters to the EU.


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