( Observer.com news) "The numbers are bad, but no one talks about this issue." As the largest economy in the EU, the German economy is facing a "severe moment".
According to German News Agency on October 13, German Vice Premier and Minister of Economic and Climate Protection Habek held a press conference on the 12th to announce the autumn economic forecast report. At the same time, he emphasized the current dilemma of Germany's economy. The report predicts that Germany's economic growth this year will be 1.4%, lower than previous expectations, while Germany's economy will shrink by 0.4% in 2023. In addition, Germany is expected to have inflation rates of 8% and 7% in 2022 and 2023, respectively.
At the same time, data released by the German Federal Statistics Office on the 13th showed that Germany's inflation rate in September was 10.0%, setting a new high since 1990.
Euractive, a media outlet that has long been concerned about European affairs, believes that the forecast released by the German economic sector means that Germany will fall into "stagflation". Habek said that the German government has used policy tools to alleviate the status quo, but the core reason is still the high energy prices.
The German Ministry of Economic Affairs released its autumn economic forecast report on its official website
Habek said at a press conference on the 12th: "The economic growth rate this year will be lower than the forecast results of April (Spring Economic Forecast Report). Our forecast of the full-year economic growth rate in autumn is 1.4%. In April this year, this figure is 2.2%, and next year the German economy will fall into recession, with a growth rate of -0.4%. The spring report predicted a growth of 2.5% in 2023.
In response to this, Habek said that Germany is entering a "recession". Meanwhile, the German Ministry of Economic Affairs predicts that inflation will reach 8.0% for the whole year and 7.0% for the next year. In addition, Germany's inflation rate in September was 10.0%, setting a new high since 1990.
Euractive commented that this is what economists call "stagflation". "This is a difficult economic phenomenon to deal with, because measures such as central bank raising interest rates may exacerbate the economic downturn, while measures such as increasing government spending to support growth may further exacerbate inflation."
In April this year, the German Finance Minister issued a warning about stagflation and said that the government is doing its best to avoid this phenomenon.
Nowadays, warnings may have become reality. Habek commented on this: "The data is bad, but no one talks about this." But he also said that the German government has used huge energy subsidies including 200 billion euros and various aid programs to alleviate the current economic situation.
But he also expressed concerns: "It is obvious that the economic means we use to treat the symptoms but not the root cause. The reason is energy prices, they need to fall... This is a serious period, we are facing a serious energy crisis , and the energy crisis is turning into an economic and social crisis."
Habeck at the press conference video screenshot
Habeck put the blame on Putin government: "Sometimes people forget that (we are in this crisis) because Putin no longer fulfills its promise." He claimed, "We are taking various measures to offset Putin's price-driven policy."
In order to get rid of this crisis, Habeck "bet" on investment. "With a wise economic and fiscal policy, we have a full opportunity to send investment signals. To this end, the planning and approval process also needs to be accelerated." This suggestion made by Habek, a Green Party member, received support from the Social Democratic Party where Prime Minister Scholz is located. However, the German Federal Association of Industry expressed concerns: "Due to cost shocks and pessimistic business development prospects, investment activities, especially investment activities in the industrial sector, may decline in the next year. The German government must now quickly implement proposed measures for the energy market to avoid a serious recession."
The German Ministry of Economic Affairs announced this time is close to the previous report released by the Ifo Economic Research Institute in Germany. Ifo Economic Research Institute said on September 26 that the Ifo business environment index fell by 4.3 month-on-month to 84.3 points, the lowest since May 2020. A series of crises have dragged down the German economy. First, the Russian-Ukrainian conflict has increased uncertainty. Then there is the energy crisis, the troubles in world trade and the rise in the underlying interest rates that make loans expensive.
The German Federal Statistics Agency also released the latest inflation data on the 13th. In September this year, Germany's inflation rate has increased to 10.0%. Inflation rose again in September after government relief measures such as 9 euros monthly passes and oil price subsidies expired at the end of August. In August this year, the inflation rate was only 7.9%. "The main reason for high inflation is still the rise in prices of energy products. But we have also noticed that some other commodities, such as food, are also rising rapidly."
data shows that this is the seventh consecutive month since March this year, which has exceeded 7%. In addition, Germany's energy and food prices rose by 43.9% and 18.7% year-on-year respectively in that month. Excluding energy and food price factors, the inflation rate for the month was 4.6%. Preliminary statistics previously released by the European Statistics Office show that due to the situation in Ukraine, energy and food prices in the euro zone continued to soar, and the inflation rate in September reached 10% annually, setting a new record high and exceeding market expectations.
It is worth mentioning that Russian President Putin introduced at the International Forum of Russia Energy Week on the 12th that a pipeline of "North Stream 2" still exists and Russia is ready to "transmit gas" to Europe. But German government spokesman Christian Hoffman said at a press conference held at Berlin on the 12th that Putin's proposal was "a good attempt", but she also emphasized that Germany refused to use "North Stream 2".
On the other hand, when attending the Berlin Mechanical Engineering Summit on October 11 local time, Scholz and German EU Trade Commissioner Valdis Dombrovskis all mentioned their views on "decoupling".
On this issue, Scholz supports globalization and opposes decoupling. He believes that decoupling is not only not an option for Germany, but also must trade with the EU and many countries including China. Dongbrovskis also said that decoupling from China is not an option for EU companies, and the EU should continue to deal with China with a pragmatic rather than naive attitude.
At the same time, the two also talked about the United States, another major trading partner of Europe, and were "deeply worried" about the Inflation Reduction Act, which was previously launched by the United States, believed that some of the subsidy provisions treated the EU's automobile, renewable energy , battery and energy-intensive industries discriminated against the EU's automobile, renewable energy , battery and energy-intensive industries, and will continue to discuss this with the United States.
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