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Container ships in the port of Hamburg: alarm mood in the economy
Photo: Marcus Brandt / dpa
The danger may still seem rather abstract.
Statisticians are still reporting that employment is increasing month by month.
Corporations are still announcing record profits.
Appearances could be deceptive, however, and both Americans and Europeans could be on the way to an unusual recession under the impact of the energy crisis, inflation and fears of war.
A recession for which equally unusual political answers are urgently needed - and for which the Germans, as hosts of the G7 summit next week, seem poorly prepared so far.
Sure: So far, the economic analysts have been relying on a mild scenario.
Accordingly, inflation and supply bottlenecks would result in less being produced and (in real terms) less money being spent.
On the other hand, there were also one or two hopes: for example, that – unlike in previous classic recessions – neither too much was invested nor consumed.
And also that neither banks nor industry are in major financial difficulties.
Which also limits the need for correction, which has often triggered fatal downward spirals in other recessions.
Ten days ago, researchers from the Kiel Institute for the World Economy (IfW) still expected economic growth of a good two percent in Germany in 2023 – and even more than three percent in 2023.
Half as wild.
Managers have become pessimistic
Since then, however, dangers and warning signals have increased - and the likelihood of a mild outcome seems to be rapidly disappearing.
According to the June surveys of corporate purchasing managers, the economy in Germany is already expected to shrink.
The Ifo Institute's manager surveys on the business climate showed that expectations for the next six months are, all in all, as pessimistic as is otherwise only the case in, well, recessions.
What is now tipping the balance in the direction of the alarm is, on the one hand, how aggressively the US Federal Reserve has recently reacted to the renewed increase in inflation, which is now almost nine percent - with interest rates rising so sharply that this is no longer without equally severe consequences for the real economy The economists at Berenberg Bank write in their new forecast this week.
Since a number of investments are too expensive - and now capped.
In addition, for the Europeans in particular, gas prices have skyrocketed again in the most recent escalation with Russia's President Vladimir Putin - and with that the chance of an approaching end to the loss of purchasing power is gone.
And that at a moment when the next corona wave is underway - and it does not seem foreseeable how long the many supply bottlenecks will remain,
According to the new Berenberg forecast, the euro zone will slide into recession after the summer holidays at the latest.
The US economy will follow shortly thereafter.
A dramatic shift: For 2023, the economists revised their forecast for the USA from 1.7 percent growth to 0.4 percent contraction.
Even stronger for Germany: The local economy is likely to shrink by one percent next year due to the heavy dependence on Russia's energy;
a swing of three percentage points compared to the previous forecast of around two percent growth.
That is far from what the federal government is currently expecting.
The corona recession was comparatively mild
In such critical phases, fear threatens to lead to even more fear and reluctance - which makes the outcome difficult to predict, according to Berenberg chief economist Holger Schmieding: "A downturn can quickly take on a life of its own."
In any case, economists expect unemployment to rise.
In contrast to the pandemic, where the crash was mainly due to the initial shock of fear and everyone involved could count on a speedy recovery, this time the situation is far more difficult: there are even more serious imponderables, such as the progress of Putin's war;
In addition, there was the great experiment of fundamentally changing the established energy supply of an entire economy in a short time - accompanied by a historical surge in inflation.
The short Corona recession was briefly more severe, but actually much easier.
It is all the more difficult to predict how severe the impending recession will ultimately be.
The only thing that is reasonably certain is that it would be fatal to wait a long time for evidence.
Once the spiral turns, it is all the more difficult to stop - and it is too late to prevent worse.
Relying on the central bankers would be tragic.
The main effect of the higher interest rates is that they dampen the economy – and thus also intensify the recession.
Suboptimal.
It would be more important to try everything that works against high prices in other ways.
These include the idea of directly lowering prices by lowering (VAT) taxes.
Just like everything else that may also ensure more stable prices by law – no matter how unusual and forbidden that may seem in a market economy at first.
These are just not ordinary times.
It could help to cap gas prices for consumers.
Or to put a stop to speculatively driven world market prices – as US Treasury Secretary Janet Yellen is now proposing for Russian oil exports.
What else but a gathering of the most powerful governments in the hours and days of a more likely recession could be the time and place for this - when it comes to something that only works with the participation of a large number of stakeholders.
The G7 summit, which begins on Sunday at Schloss Elmau, is in any case the best opportunity to counteract the suspicion that these meetings are just for show without any effect.
In view of the growing dangers, there is something creepy about how carelessly the German finance minister now wants to counter this crisis with a few old economic tenets.
For example, by the fact that it now supposedly helps the state to save and avoid new debts.
Because otherwise you supposedly fuel inflation.
That may be vaguely true in the US, where the economy was in fact much closer to overheating (and is now very soon to be overheating due to the recession) - for the eurozone it's grotesque and dangerous because there hasn't been any overheating at all.
This is just bad.
As the Berenberg experts write in their alarm forecast, the question of whether a worse recession can still be avoided will depend on governments spending more in the crisis in the coming weeks,
Ten years ago, German leaders were dramatically wrong when they tried to deal with the euro crisis the old-fashioned way – and recommended that the Greeks and others cut back as far as possible in the midst of recession and panic.
And demanded higher interest rates.
Well intentioned - patient dead. The result was that the economy plummeted even more and the crisis only got worse - and has meant that no serious economist today would call for such a thing.
Simply reacting to the looming recession with higher interest rates and keen spending cuts would be the best recipe for a great catastrophe.
It would be good if our rulers showed over the next few days that they too are up to date.