Scholz made his remarks at the World Economic Forum in Davos. He also said that having multiple gas suppliers has played an important role in supporting the economy. Until last year, Germany depended on Russia for more than half of its gas supplies. The country has learned from this, Scholz says.
The statements are striking, yesterday the German finance minister said that Germany will probably end up in a recession. Scholz’s comment is therefore ‘Hopeful thinkingg’, says chief economist Carsten Brzeski of ING Germany. I think what he’s saying is that the German economy is still doing quite well after a long series of crises. But I don’t rule out a recession.”
Investments are lagging behind
Germany ended 2022 with poor economic data, and despite growing investor confidence, things aren’t looking really rosy for Germans, Brzeski thinks. The number of new orders for industry has been declining since February 2022 and German consumers are only now paying the high price for energy. The energy supply crisis may then be resolved, but the energy price crisis is not yet. And then we haven’t even mentioned the energy transition to renewable energy that the country is facing. There is still a lot to recover.”
That is why Brzeski hypothesizes a stagnation of the German economy. ‘Stagnation is good, the German economy has performed better than feared. But doing better than feared doesn’t mean it’s doing very well.’
Diversification
According to Scholz, the country needs to further diversify its energy supply chains. “We can no longer become dependent on just one country.” With new terminals where it is possible to import liquefied natural gas (LNG) from countries such as the United States and Qatar, Germany has already taken steps in this direction.
Two of these terminals have already opened, a third will open this week. Germany is planning a total of five LNG terminals. “We will build capacity to be able to import as much gas as we had before the war,” Scholz said.
This will be necessary to keep the German economy alive, which is largely based on industry. In the fourth quarter, production likely stagnated, a better result than the previously expected contraction. “I’m sure we will overcome such a situation again,” Scholz said, referring to previous economic shocks caused by Russia’s invasion of Ukraine. “That’s because we’re getting more and more gas import capacity.”
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Ukraine
In that war, Scholz says he supports Ukraine “for as long as we need, with all the resources we can use.” The German chancellor is under pressure to allow the delivery of the Leopard tanks. Scholz has so far carefully consulted his actions with the United States and will continue to do so. “We will never go alone, because it is very important in a difficult situation like this.”
While allies on both sides of the Atlantic are working well on sanctions against Russia and arms supplies to Ukraine, there are also differences of opinion. Stimulate the US with subsidies for sustainable products made in the US, US industry. But Europe sees this as a restriction on free trade. Still, a trade war won’t happen, Scholz thinks. “We work very hard to prevent that.”