As of: February 22, 2024, 3:53 p.m
By: Lars-Eric Nievelstein
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The German economy is suffering from the effects of crises and high energy costs.
Experts put the loss at 200 billion euros.
The number of unreported cases could be even higher.
Cologne – According to economists, the German economy has suffered a loss of more than 200 billion euros due to the drastically increased energy costs.
This loss affects not only companies, but also private households and even future profits.
The total cost could be even higher.
Loss to the German economy due to increased energy costs |
At least 200 billion euros |
|---|---|
Total loss since 2020 (IW) |
545 billion euros |
Total investment losses (IW) |
155 billion euros |
German economy in crisis
A current report from the German Economic Institute (IW) sheds light on the economic consequences of the recent crises for Germany.
Although the coronavirus pandemic and the Ukraine war are currently in focus, the IW points out that the economic downturn began before these events.
Germany was already in recession in 2019.
The IW experts identified, among other things, US protectionism, fueled by former President Donald Trump, and Brexit as “disruptive factors” for economic development.
Marcel Fratzscher, President of the German Institute for Economic Research, at the SGVSH Mittelstandsforum.
According to Fratzscher, the German economy lost more than 200 billion euros due to high energy costs due to the war in Ukraine.
© IMAGO / Frank Peter
These two factors are examples of “geoeconomic fragmentation” between economies that has triggered a chain reaction in supply and demand.
The coronavirus pandemic and the subsequent war have further exacerbated the already tense situation.
Losses are likely to be “significantly higher than 200 billion euros”
With the outbreak of the Ukrainian War, a number of problems arose.
Marcel Fratzscher, President of the German Institute for Economic Research (DIW), told the
Rheinische Post
: “The economic costs for Germany after two years of the Ukraine war are likely to be significantly higher than 200 billion euros.”
Fratzscher related this sum directly to the decline in economic growth as a result of high energy costs.
In 2022, growth fell by 2.5 percentage points, equivalent to about 100 billion euros, and a year later the amount was similar.
It is important to note that this only represents the “direct financial costs.”
Additional costs arise from the “escalating” conflicts, especially with China, which are particularly hitting export companies “hard”.
The IW calculated even higher costs in its report.
It compared the actual economic development with a model in which neither the pandemic nor the war in Ukraine had taken place.
In total, the German economy has been missing around 545 billion euros since 2020, including the coronavirus pandemic and other mixed crises.
In the war years 2022 (100 billion euros) and 2023 (140 billion euros), the loss totaled 240 billion euros.
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The IW found that savings accumulated during the pandemic were quickly depleted by high energy costs.
“The high inflation once again restricted Germans in their purchases and leisure time,” said the IW in a corresponding statement.
Export nation Germany – hit particularly hard
The IW warned that the effects of the various crises cannot be clearly distinguished from one another.
The aftereffects of the coronavirus pandemic are still being felt, although public debate tends to focus on the war.
It is therefore not possible to determine exactly where the effects of the pandemic end and those of the war begin.
The German economy is more affected by these crises than that of other countries.
According to IW, this is also because German industry is more dependent on international trade.
A weak global economy therefore has a stronger influence on Germany.
If companies around the world invest less in new machines, for example, the German economy suffers particularly because it would like to ship these machines out.
Another factor is the high number of energy-intensive industries in Germany, which react strongly to rising energy prices.
The biggest losers from the war include the oil and gas sector and utilities.
Lack of investment – future of the nation in danger
It is not just the direct loss that is problematic, but also the fact that numerous investments have fallen by the wayside in the wake of the crises.
The sum of investment losses over the last four years is estimated at 155 billion euros.
IW economist Michael Grömling warns of the consequences: “In the long term, the lack of investment reduces our ability to deal with challenges such as digitalization, a shortage of skilled workers or climate change.”
The current situation particularly affects people with low incomes.
According to DIW boss Fratzscher, they experience significantly higher inflation than people with high incomes.
The
Rheinische Post
quotes: “The German state primarily supports energy-intensive companies with massive subsidies, but people with low incomes have to tighten their belts significantly.”
Germany has made itself dependent on the Russian Gazprom group for decades.
Back in the 1980s, then-Chancellor Willy Brandt signed a corresponding agreement with what was then the Soviet Union.
In the new millennium, this dependence has increased even further.
Natural gas is one of the most important energy sources for Germany; a shortage and increase in the price of this resource inevitably leads to higher energy prices.
Austria is facing a similar problem - the energy minister recently called for the country to actively move away from Russian gas.