The German recession

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By FLAVIO AGUIAR*

The war in Ukraine continues, and the German recession is here to stay, affecting the entire continent

For decades, Germany was the apple of the European economy's eye. Its pillars were great monetary stability with a minimum of inflation, low interest rates, a very efficient transport system, a high and stable internal consumption pattern, a high standard of exports and imports and Last but not least, a political balance of an “enlightened conservative” spirit considered unshakable, with the alternation or combination between Social Democrats (SPD), Greens (Bündnis 90/Die Grúnen) and the Christian unions, the Bavarian Social (CSU) and the Democrat (CDU) from the rest of the country, in addition to the eventual presence of the liberal FDP.

In the SPD, a markedly neoliberal vision predominated, which guaranteed that no strong opposition would come to the implemented fiscal austerity plans, except from a left reduced to a niche of divided tendencies. On the contrary, many of the “austere” reforms were implemented by the Social Democratic/Green government at the beginning of the XNUMXst century.

With such predicates, the Berlin government became the balance of the European Union and the continent as a whole, exercising a partnership above all with Paris. Chancellor Angela Merkel and her ruthless Finance Minister, Wolfgang Schäuble, were the mainsprings to bend, neutralize and derail the proposals of the left-wing Greek government, led by Alexis Tsipras and his party, Syriza.

She and Nicolas Sarkozy had a decisive influence in preventing Italian Silvio Berlusconi's histrionic style from becoming the main brand of European politics. On the contrary, Angela Merkel transformed austerity – in addition to fiscal – into the most important political emblem in Europe at the beginning of the XNUMXst century. At the same time, Germany became the flagship of the continental economy, thanks to its varied list of imports and exports.

Of the ten countries that import most from Germany, eight are European: the other two are China and the United States. The same numbers and two exceptions are repeated in the exports column. The European continental economy is tied to the German one like a train to a locomotive, or… a fish to a hook.

Suddenly, no more than suddenly, this beautiful building showed cracks and cracks in its foundations, and today it threatens to fall apart, dragging down the entire continent. Inflation rose meteorically, from almost 0% to almost 10% per year, on average: in the food sector, 20% and in energy, 40%. Domestic demand fell, and external demand tilted dangerously with fluctuations in the Chinese economy and protectionist pressure from the United States. German industry, the flagship of exports and imports, especially vehicles, auto parts and accessories, pharmaceutical products, electrical devices, planes and helicopters, among others, went into depression. At the beginning of 2023, the IMF predicted a 0,1% contraction in the country's economy. Then it increased to 0,2% and now the forecast is at negative 0,4%.

How so? everyone asks. What happened? The answers are many and varied, but there are some points of convergence.

In general, the consequences of the war in Ukraine are pointed out as the main inflationary factor, especially in the sectors already highlighted: food and energy. With the reduction in imports of grains and oils from Ukraine, the price of agricultural products went through the roof. Many of the fertilizers given to Europe came from Russia: the source dried up. And German industry depended heavily on Russian gas imports; with the economic sanctions imposed on Russia, this tightened the supply tap, in addition to the gas pipelines that connected one country to another having suffered attacks to this day without official explanation.

The United States has accused Russia of sabotaging its own gas pipelines. North American journalist Seymour Hersh published an article pointing out the United States as the main responsible for the attack, with the collaboration of Denmark. Later, in the German media the hypothesis was publicized that Ukraine or at least Ukrainians were the perpetrators of the attack, with Norwegian collaboration. A melancholy silence followed: this hypothesis compromised the “victim” image that the European media cherishes on a daily basis about Ukraine and its government. All those mentioned denied any responsibility. Today that silence has become oceanic, covering the attacks. Nobody talks about them anymore.

Despite optimistic statements to the contrary, the immediate effect of the breakdown in Russian gas supplies on German industry was very heavy. The German government, led by Social Democrat Olaf Scholz, was very hesitant to join in military support for Ukraine. He was right to hesitate. Although there is no official recognition of this, it was evident that Germany was not prepared, either politically or economically, to enter the war, even indirectly in this conflict against Russia, outsourced by the West. This and its consequent economic sanctions imposed on its allies by the United States are failing to break Russia, which has rushed under China's protective wing. On the contrary, its boomerang effect may well help to cripple, if not break, Germany.

There are other less obvious factors at the root of the crisis. The pandemic hit commerce hard, causing the initial closure of small stores and soon after also some large ones, with the exponential increase in online shopping, which remains on the rise. The neoliberal-inspired reforms implemented at the beginning of the century, with the tightening of “austerity” in social investments and the compression of pensions, are beginning to take their toll, in the face of a population whose aging is growing visibly.

To complete this gloomy picture, voting intentions for the party alternative for Germany, AfD, far-right, anti-European Union, threatening to immigrants and refugees, are growing alarmingly, especially in the states of the former East Germany and among young people, the region and sector hardest hit by unemployment and the drop in purchasing power. The AfD is in second place in the polls, behind only the CDU which, pressured by the defection of voters towards that party, has been making its program increasingly conservative. There is no immediate risk to Germany's democratic institutions, but there are already thunderstorms on the horizon.

At first, all political parties refused to collaborate with the AfD. Now, voices within the CDU are already being heard talking about this collaboration, following the model of the Popular Party, in Spain, which joined forces with the ultra-right VOX, which proclaims itself heir to Franco and the Knights Templar of the Middle Ages.

Nowadays the most optimistic predictions and statements have cooled down. The war drags on, and the German recession is here to stay, affecting the entire continent. The most relevant question is how long it will last. And so far there is no crystal ball that will stick your neck out on a prediction.

* Flavio Aguiar, journalist and writer, is a retired professor of Brazilian literature at USP. Author, among other books, of Chronicles of the World Upside Down (boitempo).


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