Photo: German Chancellor, Olaf Scholz.

Made in Germany No More: German Industry In Existential Crisis As Energy Inflation Soars

Germany is staring at the prospect of de-industrialisation as factories struggle with sky-high energy prices. Energy inflation is more dramatic in Germany, in large part due to its sanctions on Russian oil and gas imports. In February 2022, Germany announced it was suspending the Nordstream 2 pipeline, which it built to import gas from Russia – Germany’s biggest energy supplier.

Prices for gas and electricity in Germany have more than doubled in the past two months. The choice is stark for many factories: pay, or close down. Energy intensive companies in the car, chemicals and steel industries are seriously affected by the sharp energy price rises, which has inflated their production costs. The fear is that Germany could soon face a factory exodus, as it becomes more and more difficult for German industry to remain competitive in the face of soaring energy prices.

German Chancellor Olaf Scholz has refused to open the Nordstream 2 pipeline, which critics say would be the simplest solution to the energy crisis. Former Chancellor Gerhard Schroder, AfD (Alternative fur Deutschland) boss Alice Weidel and FDP (Free Democrat Party) politician Wolfgang Kubicki are among those who have called to open the Nordstream 2 pipeline.

On Monday 22 August, Chancellor Scholz and his Minister for Economy, Robert Habeck visited Canada for talks to import Liquefied Natural Gas (LNG). Canadian Prime Minister Justin Trudeau promised help to ease regulatory processes “because of the difficulty that Germany is facing”.

At the press conference with PM Trudeau, Chancellor Scholz said that “Russia is no longer a reliable business partner”.

On 19 July, during his visit to Tehran, Russian President Vladimir Putin told reporters that Russia was ready to increase gas supplies to Germany if it lifted the suspension on the Nord Stream 2 pipeline.

“We have another route ready – it’s Nord Stream 2, which can be launched,” Putin said regarding the energy crisis.

“A month and a half or two ago, in a conversation with the Chancellor, we discussed this topic. I raised this issue, saying that Gazprom has reserved capacity. It must do something about it, it cannot hang around in the air infinitely long”

According to the Russian President, Chancellor Scholz replied that he was already taken up with other matters.

Putin told reporters: “They closed one route, a second route, put these gas turbines under sanctions. Gazprom is ready to pump as much as needed. They closed everything themselves,”

On Monday, German power rose to above 700 euros ($696) a megawatt-hour for the first time.

Bundesbank Chief Joachim Nagel has warned that inflation is likely to be in the double digits next year, and a recession was coming.

Speaking to the public TV station ZDF from Montreal, Federal Minister for Economy Robert Habeck said “We have a very critical winter right in front of us,”

“We must expect Putin to further reduce gas.”

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