German economy crashing into recession


GERMANY, the EU’s biggest economy, is fast heading into recession according to economists who are growing increasingly fearful that inflation fuelled by the EU sanctions on Russia will crash the economy of the eurozone.

Germany, for years the economic powerhouse of the EU, is facing the nightmare of the highest inflation rate for 50 years accelerated by sanctions on Russian energy supplies. It relies on Russia for nearly 55% of its natural gas and 35% of its oil. In total, Russia supplies over 40% of the EU’s energy.

The EU has implemented limited measures to cut back with an ‘incremental approach’ to sanctions – mainly aimed at cutting Russian oil transferred by ship – while trying to keep gas supplies still operating, scared that a complete boycott would mean disaster for Germany and European capitalism.

In March, German chancellor Olaf Scholz warned: ‘Hundreds of thousands of jobs would be at risk’ and a total boycott ‘would mean plunging our country and all of Europe into recession’.

Despite this fear, the German government, along with the EU countries, has embarked on limited sanctions, much to the anger of the US and UK governments. This has provoked a response from Russia.

The seizure by the German government of the giant Russian gas company’s (Gazprom) German affiliate has met with retaliation with gas supplies being cut from its pipelines.

According to an article in the Daily Telegraph, German ‘heavy industry in the engine room of Europe is being hammered with higher costs and the threat of energy rationing should Russian supplies be cut off faster than anticipated, while families are suffering under soaring bills.’

The German working class, along with the working class across Europe and the UK, is being expected to pay for this inflationary crisis stoked by the imperialist war drive against Russia.

Despite the German government hastily increasing the minimum wage by 4% in January, the pay of workers has fallen by 1.8% relative to prices – a result of decades of low pay inflicted on them to pay for the German economic ‘miracle’.

In 2004, the German government imposed benefit cuts to force workers into jobs, while at the same time the industrialists and employers carried on with wage cutting ‘restraint’.

In return for high employment levels, the German trade union leaders accepted low pay deals, spread over many years, which were agreed during the period of low inflation.

This situation is now set to explode as inflation soars above 8% and heads higher, while German factories recorded a third straight drop in orders in April even before the massive increase in energy costs for industry. One large trading company, Avatrade, summed it up saying the latest figures confirm that ‘economic conditions are becoming dire’ for the eurozone’s largest economy.

As the Telegraph article makes clear, the big worry of the German ruling class is having to drive down workers’ wages and impose draconian power rationing for both households and industry as gas and oil supplies are cut – and even stopped completely. This means a war on workers to drive them into the gutter of mass poverty.

Last week, Scholz called for ‘a targeted effort in an extraordinary situation’ saying he now wants to discuss solutions to inflation and the economic collapse of German capitalism with employers and the trade unions.

The solution Scholz is trying to achieve is to bring the trade union leaders on board to exercise wage ‘restraint’ on their members at a time when millions of German workers and youth are rising up.

On May Day this year, tens of thousands of German workers and youth took to the streets with 14,000 marching in Berlin under the banner of a ‘Revolutionary May 1 demonstration’.

The powerful German working class is rising up along with the working class across Europe as the entire EU faces the collapse of capitalism across the continent.

The issue of the day is to unite the working class of Germany with the workers across Europe by building sections of the International Committee of the Fourth International in every country to mobilise general strikes to bring down their own capitalist governments and go forward to establishing the Socialist United States of Europe.