Energy, industry, trade… why the German model doesn’t work anymore

With worried eyes, the European Union is watching its first economy weaken. Previously cited as an example, Germany achieved, in the first quarter of 2022, one of the worst performances within the euro zone. The country’s growth remained flat, against 0.8% in the first three months of the year, burdened by the acceleration of inflation that reached almost 10%. Not very satisfactory results compared to some of the European neighbors, and that raises the specter of a recession. It was hard to imagine, six months ago, that the German industrial giant would go bust. However, the challenges facing the country are not new and it is now forced to review its strategy based on cheap energy imports and dynamic exports of high-value products, especially thanks to close trade relations with Russia and China. Back to the reasons for the fall of the German model.

Russia’s dependence on gas

This is the main weakness of the country, which has long benefited from cheap energy imports without seeking to diversify its supplies. Since the outbreak of the war in Ukraine and the economic sanctions taken against Russia by the West, the Russian gas giant, Gazprom, has continued to reduce its gas deliveries to 27 to the great anger of Germany, more in 50% of whose imports came. from Russia, for its industry, which uses 30% of the gas burned in Germany, and for its population, which mostly uses gas for heating. In 2005, this dependence on Russian gas was only 40% but Germany has promoted it for many years, said Jacques-Pierre Gougeon, university professor specializing in Germany and director of research at the Institute of International Relations and Strategies (Iris). This is also the subject of a great political debate at the moment in Germany, because it is seen as a big mistake of previous governments. ». Beyond the economic argument, Germany introduced a political strategy » since 1969, “Ostpolitik” based on close relations with Moscow. there Always since the unification, and even before, a privileged relationship with Russia. Germany considers itself a European power that can negotiate with it », recalls Jacques-Pierre Gougeon.

on forced march, Germany finally managed to reduce its import of Russian gas to 35%. But this effort now raises the risk of shortages next winter. At the end of June, Berlin activated level 2, called “alert”, in the emergency plan for gas supplies, the last level before the State rationing organization. As the population rushes for heating electricity, the government is studying new sources of supply, even if it means going back to more polluting energy. To reduce gas consumption, less gas must be used to generate electricity. However, coal-fired power plants should still be used »thus informed Robert Habeck, Minister ofEeconomy and climate protection, co-president of the Greens, despite the commitments made by his party to anticipate a phase-out of coal by 2030. A decision bitter » and Fundamental », according to the minister.

Other methods are being studied, those of nuclear, solar or wind energy, but also of gas from Norway, the Netherlands or even liquefied natural gas (LNG) from the United States or Qatar. But he costs more. Because beyond the instructions given by the Germans to get a shorter and cooler rain, it is to pay their bills that the effort made is the heaviest. The energy crisis more to come for the economy »warned Robert Habeck recently, expect hard winter ». In dire straits, energy suppliers are struggling to cope with rising costs. That is why the government was forced to take a 30% stake in the largest of them, Uniper, to avoid its bankruptcy. The company will be able, from October 1, to pass on the prices to its customers.

A close economic relationship with China

There is another country with which Germany has established a strong commercial relationship. Making foreign trade one of the pillars of its economy – according to the World Bank, trade in goods represents 72.2% of German GDP in 2020 – Germany returned to Asia and more in 1980. especially the China. The latter offered German companies significant trade opportunities and the possibility to transfer part of their production there at lower costs. Germany became the main economic partner. In 2021, more than 245 billion euros will be exchanged between the two countries.

But the health crisis and the disruptions in supply chains as well as the repeated lockdowns in China have come to remove the cogs of German trade. Especially since the sanctions taken by the West against Russia after its invasion of Ukraine prompted Germany to question its trust in Beijing due to its democratic shortcomings, especially regarding the Uighur people. We need to diversify our international relations, including our exports »said German Finance Minister Christian Lindner in a newspaper interview die Zeit, on April 6, 2022, added that Now may be the time to make business more desirable to those who are not just business partners, but also want to be value partners. ».

A change of course in relation to the German policy hitherto pursued, consisting of separate politics from economics »explains Paul Maurice, researcher of the study committee for Franco-German relations (Cerfa) and theFrench Institute of International Relations (Ifri). teaching about China, a kind of blindness »he explained: There was, for two or three years, a very strong political hardening in China that Germany did not take into account, which considered it necessary to continue to create links with this country. And this, until facing a fait accompli and having to find new partners ».

An industry struggling to reinvent itself

This lack of anticipation is also reflected in its industry, especially in the automobile industry, where Germany is the world’s leading exporter. However, the country has fallen behind in the transition from thermal engines to electricity, which is nevertheless working to catch up with other players such as Tesla. This development is especially necessary since on June 8, 2022, the European Parliament voted in favor of banning the sale of new gasoline or diesel vehicles from 2035. The question of the transition to electricity is more anticipated by German industrialists than by politicians and they urge the government to review its position in this regard. », explained Paul Maurice. According to Ifri researcher, a change must also take place for the chemical industry as well as for the technologies used for solar and wind energy, due to the energy transition and where Germany is destined to be the first. However, the country remains in a traditional industry, which risks slowing down its development, because we will not reach ten or twenty years later. »he added.

So the picture seems to have darkened a lot for Europe’s leading economy to be able to do the sick person » among the Twenty-Seven. And if the crisis Germany is going through does not make us forget the economic strength it has shown in recent years, it is built on a model that must now be completely reconsidered.