This EU powerhouse is committing ‘economic suicide’ – who’s to blame?

Alexey Miller, the longstanding head of Russian energy giant Gazprom, is not known for rhetorical excess. That’s why his recent public statement at the St. Petersburg International Gas Forum should make Europeans, and especially Germans, prick up their ears.

Miller explained that the “artificial destruction of demand” on the EU gas market – that is, Western sanctions and a little US-UK-Ukrainian pipeline bombing “among friends” – has led to a continuing “deindustrialization” of Western Europe that will disrupt its economies “for at least a decade,” in the best-case scenario.

According to more pessimistic expert assessments, we are witnessing the “economic suicide of Europe,” Miller added, with its “locomotive” – a traditional byname for Germany – now the continent’s “sick man.” And that, Miller stressed, is a diagnosis “with which one can agree.”

Context always matters. Due to Berlin’s absurd decision to enthusiastically join the US proxy war against Russia in Ukraine, the German-Russian relationship is at its lowest point since, literally, 1945. So, it may be tempting for Germans to dismiss Miller’s tough words as less than objective. But they would be wrong because he has facts on his side.

Robert Habeck, Germany’s Green minister of the economy, has just had to lower his growth prognosis for 2024 as a whole. So much, in fact, that, instead of the minuscule increase of 0.3% – yes, you read that right: that’s what’s considered good news now in Germany, if it happens, which it does not – the country is looking at a minus of 0.2%. Germany’s economy is not merely stagnant, it is shrinking. When Berlin was still dreaming about that lavish 0.3% growth that is not actually happening, government representatives were speaking of a turning point. Well, there has been a turn alright, another one for the worse.

What makes this much worse is that it is not an outlier event or a temporary phenomenon but the new, miserable German normal. Or, as German economists put it, their country is stuck in a “deep structural crisis.”

Even the staunchly NATO-philic and Russophobic Economist came to the same conclusions last summer already. Asking (rhetorically) if Germany was “the sick man of Europe,” the journal found that, since 2018, Berlin has been presiding over an economic “laggard.”

Before that, Germany was doing quite well. After the mid-2000s, its economy had grown – cumulatively – by 24%, while Britain added 22% and France only 18%. But, as of last year, the International Monetary Fund (IMF) predicted German cumulative growth of only 8% for the period of 2019 to 2029, while it forecast 15% for the Netherlands and 17% for the US. And the way things are going, the IMF may well have been too optimistic.

Germany’s deep economic crisis has many causes. They include an aging population; weak digitalization; a surfeit of bureaucracy (but then that has always been the case); corporate taxes that some consider too high (but then someone will always complain about taxes); the country’s failure to overcome the Covid shock more quickly; the massively deteriorating relationship with China, a key market for Germany in general and an indispensable factor in the making of the “good times” before 2018; Germany’s dependency on global supply chains and markets beyond China, which means it is hard hit by the current fracturing of the globalized economy; the insane decision to abandon nuclear energy and, linked to that, the failure of a perfectly messed-up “green transition.”

Yet only the lazy assemble a grab-bag of causal factors and end their analysis with a simple “all of the above.” To do better requires, as a minimum, identifying the most crucial factors. There can be no doubt that two of them are geopolitical: the disruption of the relationship with China and the fact that energy is too expensive, that is more expensive than in many competitor economies. As German experts are acknowledging, this makes producing in Germany “persistently less attractive” than other locations. Put simply, it does not pay any longer to make stuff in Germany. And the reason for that economically lethal state of affairs is well known, even if German politicians and mainstream media won’t admit it: Berlin has cut its economy off from inexpensive Russian gas and oil. And we need to stress the word “inexpensive” because Germans do, of course, still use both. Only they buy them from intermediaries, so they are now expensive.

None of this had to happen. As late as at the beginning of 2022, Berlin could have chosen to promote a reasonable compromise between Russia and the West, which was what was really at stake in the crisis over Ukraine. Back then, especially together with France, Germany could still have charted a course sufficiently independent of the hardliners in the US, with their warmongering camp followers in Eastern Europe and Britain. Berlin could have stopped the insane drive to all-out proxy war in the delusional pursuit of a “strategic defeat” for Russia. If Germany had done so, Ukraine would be much better off, and so would the whole of the EU and Germany as well.

All that, however, is water under the bridge. The question now is whether things can be repaired again. There is no reason, unfortunately, for optimism, at least not before fundamental changes in German politics. Under the current government, in any case, it is certain that things will only get worse, because its members display zero interest in even understanding, far less in correcting their mistakes. Take, for instance, Robert Habecks’s very own press conference when he had to announce the fresh recession.

Unsurprisingly, Habeck was less than forthright when presenting the disappointing data. He wrapped the cold, hard facts of general decline and his own failure in a little patriotic rhetoric, pontificating unctuously about Germany’s “strength” and “extraordinary structure.” Yet he only displayed his habit of cherry-picking his numbers and, in effect, tried to mislead his listeners on substance.

His claim, for instance, that Germany is “the third-largest national economy in the world” is so primitive that no minister of the economy should be caught making it. Yes, measured in absolute Gross Domestic Product (GDP), Germany holds that rank; for 2023, the UN even lists it in second place (with adjustment for purchasing power parity).

But that is an essentially meaningless data point. Once you split all that big GDP up per capita, Germany is in eleventh place. Not a terribly useful figure but already more realistic than Habeck’s brute lump sum. Let’s put it like this: If you believe in using total GDP as your benchmark, then you probably also believe German World War I tanks were superior because they were bigger. In reality, they were unwieldy, badly engineered, mis-designed, top-heavy monsters prone to getting stuck in the mud.

Habeck did not do better with other aspects of the economy. Take his boast about how innovative Germany is, with a “research landscape hard to equal” and a “vibrant start-up scene.” Really? Interestingly, we do not find much reflection of that fantasy in the Global Innovation Index (GII), a key metric that has just been released for this year. With The Economist, for instance, reporting on it, Habeck’s staffers surely cannot have missed it. The GII shows no leading position for Germany. In Germany’s own high-income group, the top three are Switzerland, Sweden, and the US. In the also relevant upper-middle income section, we find China, Malaysia, and Türkiye. In a simple global ranking, including everyone regardless of income level, Berlin finds itself in ninth place, and inside Europe – sixth. Germany does not figure among the GII’s “leaders in global innovation.” Given its resources, that is not a result to be proud of.

Like a lazy student trying to bluff his way through an exam, Habeck could not resist fibbing about wages and consumption either. Citing figures on recent, modest increases in salaries, he displayed economic illiteracy by surmising that consumer spending will “certainly” go up as well and boost the economy as a whole. But before wage earners start consuming – instead of saving – more, they must have confidence in the future.

Yet – lo and behold – that is precisely what many Germans do not have. According to a recent poll conducted by the prestigious accounting firm Ernst and Young (EY) and reported in Der Spiegel, more than a third of Germans (37%) now restrict themselves to buying only what is strictly necessary; large numbers are cutting down on luxuries (58%), home deliveries shopping (49%), gym memberships (43%), going to restaurants and cinemas (40%). Even streaming services – a comparatively inexpensive form of entertainment people do not give up easily – are on the chopping board for 34%. On the whole, only every fourth German (26%) believes they will be better off next year, three-quarters think their own financial situation will get worse or, at best, stay the same.

This is the picture of an economically deeply depressed society. And for good reason. Habeck’s frequent cheap appeals to not fall victim to pessimism must strike many Germans as mockery. A man with the extremely comfortable salary and lifestyle of a German minister displays his egotism and his crass lack of empathy for the citizens he is supposed to work for and take care of. 

Indeed, it is even worse. Like many of the country’s politicians, Habeck, one of the greatest and most obvious failures of German postwar politics, has developed a paranoid and/or bad-faith, neo-McCarthyite habit of blaming Russia and of accusing any domestic challenge of being in the service, intentionally or not, of Moscow. He demonstrated exactly this paranoia and bad faith again when very mildly and reasonably challenged by a mainstream German journalist about his over-optimistic depiction of Germany’s strengths.

In response, he offered no substantial answer at all, but, instead, publicly disparaged the journalist for not taking enough care of the “intention” behind his question. Which, according to Habeck, somehow betrayed the signature style of dark forces trying to tear Germany down, that is, in other words, Russia, of course.

The German minister of the economy presides over a crash site of failed plans. His reaction is to deny that reality, while, at the same time, blame it on what, under Stalinism, would have been called “wreckers” and “traitors” conspiring with outside enemies. Robert Habeck is not only a failure but also an extremely dangerous, perhaps deranged man, who still wants to be chancellor. For Germany’s sake – and I am writing this as a German – German voters must keep him out of that office. He has done enough damage already.

If he should ever read this text, he will surely blame it as well on the big bad Russians. But here’s a newsflash for you, Robert, between countrymen: It’s all on you, and only you. No country that has you in government even needs outside opponents to be in a mess.