Threatened supply stop for Russian gas: No time for ideological reservations and slowdowns
Created: 04/30/2022, 10:05 am
Prof. Volker Wieland: In view of a possible supply freeze for Russian gas, the economics expert advocates extending the service life of the remaining nuclear power plants.
© Stefan Boness/Imago
In view of the imminent stop in the supply of Russian gas, the federal government must suspend the planned shutdown of the nuclear power plants and postpone the phase-out of coal, says the outgoing economics expert Prof. Volker Wieland in the guest article.
Frankfurter - A new inflation record of 7.4 percent and Russia stops gas supplies to Poland and Bulgaria.
Germany could be next.
Now at the latest, Germany must pull out all the stops to become independent of Russian energy imports as quickly as possible and thus get through the coming winters reasonably well.
The government has to prepare the citizens for the fact that this will hit everyone and become tough.
Independence costs.
It owes its citizens a duty to act pragmatically and leave no option untouched - no time for ideological reservations and hesitation.
Half of the natural gas imports come from Russia - mostly by pipeline.
Natural gas is mainly used for heating and industry, but it also plays an important role in electricity supply, especially when renewable energies fail because the sun isn't shining or the wind isn't blowing.
Speculating that Putin doesn't want to harm Germany?
A little liquid gas from Qatar and faster expansion of solar and wind power are far from enough to meet demand.
The high price of natural gas in Europe - many times the price in the US - signals how scarce it is.
But many do not feel it yet because they have long-term supply contracts.
With a delivery stop that would be over.
Prices would continue to rise and fuel inflation.
To be honest, do we really want to speculate that Putin doesn't want to harm Germany?
Or not picking the best time to do it.
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Suspend the planned shutdown of the remaining nuclear power plants
A package of measures is necessary to improve the energy supply.
There are alternatives, especially when it comes to power generation.
First and foremost, it is important to avoid mistakes such as shutting down the three nuclear power plants Isar 2, Emsland and Neckarwestheim 2 (4,300 MW) that are still in operation at the end of the year in the middle of winter.
A clear perspective for a multi-year extension is needed.
This also applies to the three plants that were shut down at the end of last year.
That doesn't come for free.
But such a prolongation doesn't mean abandoning nuclear phase-out, it's just being postponed.
The government should now take all necessary regulatory steps before it is too late.
Postpone coal phase-out
The same applies to the coal phase-out.
It has to be postponed and, in particular, power plants for generating electricity from lignite have to be taken out of the reserve.
Incidentally, natural gas has been produced in Germany for more than 60 years, but currently only covers five percent of demand.
That can be doubled when shale gas production and hence the so-called fracking technology.
It's not honest if you rule that out and at the same time want to import more "fracked" liquid gas from the USA.
All of these measures can increase supply, thereby reducing the inflationary effect of energy prices.
The high prices are dampening demand.
This is necessary and makes economic sense.
Because the price ensures that the remaining offer is used where it has the greatest benefit.
Of course, you have to keep an eye on the social dimension and, if necessary, support those who otherwise could not afford the heating.
more on the subject
Energy subsidies: protect the EU internal market from national solo efforts
Germany's Energy Dependency: Lessons from the Russia Trap
State aid in the energy crisis - not the bazooka again
Gas price cap leads in the wrong direction
But nationwide gas price caps, as recently called for by union boss Bsirske to combat inflation, are going in the wrong direction.
Less is saved and someone else foots the bill.
The government finances the subsidy either through higher taxes and levies, in which case the taxpayer pays immediately, or through higher debts.
Higher debt means either higher taxes in the future or more inflation to devalue the debt.
That's not how it works.
Instead, the government should do everything possible to provide replacements for Russian gas supplies.
ECB: High time to act
Controlling inflation is the ECB's job.
It can influence inflation expectations and ensure that energy price increases do not permanently lead to widespread and entrenched inflation by switching to interest rate hikes as quickly as possible.
Even if it were to increase the central bank interest rate from -0.5 percent to +1 percent, the real interest rate would still be negative next year, with an expected inflation rate of more than three percent.
This means that monetary policy would still be very expansionary.
Here, too, it is high time to act.
About the person: Prof. Volker Wieland is an endowed professor for monetary economics and managing director of the Institute for Monetary and Financial Stability (IMFS) at the Goethe University Frankfurt. Wieland did his doctorate at the US elite university Stanford and then worked for the US Federal Reserve. Since March 2013, the expert in monetary theory and monetary policy has been a member of the German Council of Economic Experts. At the end of April 2022, Wieland will leave the Advisory Council prematurely.