As of: February 26, 2024, 5:26 a.m
By: Lars-Eric Nievelstein
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Germany was dependent on Russian gas for a long time.
Energy prices exploded due to supply bottlenecks and sanctions.
A current study shows the bill that the German economy has to pay for this.
Cologne – 200 billion euros.
According to economists, Germany lost this amount due to the massive increase in energy costs.
It's not just companies that are affected by this.
The total costs for the German economy are likely to be significantly higher.
Loss to the German economy due to increased energy costs |
At least 200 billion euros |
|---|---|
Reduction in growth due to energy costs in 2022 |
2.5 percentage points |
Total loss since 2020 (IW) |
545 billion euros |
Total investment losses (IW) |
155 billion euros |
Global crises are attacking the German economy
In a current report, experts from the German Economic Institute (IW) revealed the economic impact that the crises of recent years have had on the Federal Republic of Germany.
Even though the coronavirus pandemic and the war in Ukraine are currently taking on greater importance, the downturn began long before that, according to the IW.
Germany was already in recession in 2019.
The experts cited, among other things, US protectionism, fueled by former President Donald Trump, and the Brexit decision as “disruptive factors” for economic development.
Marcel Fratzscher, President of the German Institute for Economic Research, at the SME Forum 2023. A current study shows the bill that the German economy has to pay for the high energy costs.
© IMAGO / Frank Peter
Both examples represent “geoeconomic fragmentation” between economies, triggering a chain reaction in supply and demand.
The coronavirus pandemic and later the war would have caused the already tense development to explode.
At least 200 billion euros in losses
A number of problems arose in the course of the Ukraine war.
“The economic costs for Germany after two years of war in Ukraine are likely to be significantly higher than 200 billion euros,” said Marcel Fratzscher, President of the German Institute for Economic Research (DIW) to the
Rheinische Post
.
Fratzscher took this sum directly from the reduction in economic growth as a result of high energy costs.
In 2022, growth fell by 2.5 percentage points, which corresponded to around 100 billion euros; a year later the amount was similar again.
Important: This only meant the “direct financial costs”.
Further costs would be added, for example due to the “escalating” conflicts, including with China.
Export companies were hit “hard” by this.
The IW came to an even higher sum in its report.
It compared the actual economic development with a model in which neither a pandemic nor a war in Ukraine were foreseen.
Overall, with the coronavirus pandemic and other crises mixed together, the German economy is said to have been missing around 545 billion euros since 2020.
In the war years 2022 (100 billion euros) and 2023 (140 billion euros), losses totaled 240 billion euros.
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The institute further explained that the savings accumulated during the pandemic quickly melted away due to the high energy costs.
“The high inflation once again restricted Germans in their shopping and leisure activities,” said the IW in a corresponding report.
Export nation Germany is hit much harder
The IW urged caution: the effects of the various crises cannot be completely delineated.
The aftereffects of the coronavirus pandemic are still being felt today, even if the public debate revolves more around the war.
It is therefore not possible to say exactly where the effects of the pandemic end and where those of the war begin.
Germany's economy is more likely to have to contend with all of these crises than that of other countries.
According to the IW, this is also because German industry is more dependent on international trade.
A weak global economy therefore has an even greater impact on the Federal Republic.
If companies around the world invest less in new machines, the German economy will suffer particularly badly.
Another factor is that Germany is home to many energy-intensive industries that react strongly to higher energy prices.
The war's big losers included the oil and gas sector and utilities.
A lack of investment is paralyzing Germany's development
What is problematic is not only the direct loss, but also the fact that many investments fell by the wayside in the wake of the crises.
Overall, the investment losses over the past four years are said to amount to 155 billion euros.
Michael Grömling, IW economist, 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 developments are now particularly affecting people with low incomes.
According to DIW boss Fratzscher, they experience much higher inflation than people with high incomes.
“The German state primarily supports energy-intensive companies with massive subsidies, but people with low incomes have to tighten their belts significantly,” quoted the
Rheinische Post
.
Germany had made itself dependent on the Russian Gazprom group for many years.
Former Chancellor Willy Brandt had already signed a corresponding agreement with the then Soviet Union in the 1980s.
In the new millennium, this dependence increased further.
Natural gas is one of the most important energy sources for Germany; a shortage and increase in the price of this resource inevitably means higher energy prices.
Austria has a similar problem - the energy minister recently called for the country to actively move away from Russian gas.