Skip to main content

RECESSION IN GERMANY IS A SIGN OF EUROPE'S DEINDUSTRIALIZATION.

By Philip Pilkington.

 "Last week Germany announced that, after the government statistics agency revised its recent GDP figures, it was clear that the country was in recession. In recent history it has tended to hold up well as the global economy softened relative to some of Europe’s weaker economies. But this time it seems that Germany is leading the pack into recession.

This is because the recession that is currently looming over Europe is fundamentally different from previous iterations. The coming recession is no simple turning of the business cycle. Instead, it could be the beginning of the deindustrialisation of the European economy, which no longer has access to cheap Russian energy.

Since chatter about deindustrialisation started last year, there has been much confusion on the matter. Some appeared to think that deindustrialisation would mean the instantaneous closure of energy-starved European factories and mass layoffs. Others assumed that the crisis was over because energy futures prices have fallen in recent months.

Deindustrialisation is not something that happens overnight. Rather, it is a gradual process whereby European industry becomes less competitive on the global market, as higher energy costs are passed through in the form of higher prices. We saw something similar happen in Britain in the 1990s, as many factories shut down and few reopened. But the potential deindustrialisation of Europe will probably be more rapid than the British example.

As for energy prices returning to normal, this seems unlikely. Last week the head of Britain’s energy regulator admitted that energy bills were unlikely to fall to pre-crisis levels for at least two years. By all accounts, the regulator is likely being optimistic. Qatar’s energy minister warned around the same time that the “worst is yet to come” for European oil and gas shortages. He would probably know, since Europe is relying heavily on Qatari LNG imports for their energy supplies.

Quantifying the impact of deindustrialisation at this early stage is quite difficult and a clear picture will only emerge in retrospect. But there are already some very notable trends in the data. The German services sector is booming while the manufacturing sector is cratering. This divergence explains why the German economy is currently experiencing only a very shallow or even “technical” recession.

Bluntly, the current contraction we are seeing in Germany’s manufacturing sector relative to its services sector is associated with a much larger downturn something along the lines of what followed the 2008 financial crisis. Today we are seeing a very large relative contraction in the manufacturing sector that cannot be explained by the relatively modest weakening of the economy.

Put differently: the current manufacturing crunch in Germany is not primarily being driven by Germany’s slack economy. This means that something else is to blame and that something is likely the high energy prices putting enormous pressure on German manufacturing.

German and European deindustrialisation is not yet certain. There is a chance that, after the war in Ukraine is over, the Europeans turn once again to Russia for their energy needs. But right now, in the current diplomatic environment, this seems unlikely. If the current trajectory is followed for the next five to 10 years, however, it seems fairly certain that Germany and Europe will deindustrialise to a significant extent. 

Source :

https://unherd.com/thepost/recession-in-germany-is-a-sign-of-europes-deindustrialisation/

Comments

Popular posts from this blog

Columbia President ( Katrina Armstrong) Is Replaced as Trump Threatens University’s Funding. Key Points. NYTimes

Key Points & Further Details on Columbia University Leadership Change 1. Presidential Change at Columbia University Katrina Armstrong stepped down as interim president of Columbia University. Claire Shipman , a journalist and Columbia alumna, was named acting president . Armstrong’s departure marks Columbia’s third leadership change since August 2024. 2. Trigger for Leadership Change The Trump administration threatened to withhold $400 million in federal funding from Columbia. This funding is roughly 20% of the university’s operating revenue . The university ultimately complied with government demands , causing internal and external backlash . 3. Government Demands & Columbia’s Compliance Columbia agreed to: Employ 36 campus safety officers with arrest powers . Adopt a formal definition of antisemitism . Review admissions policies . Increase oversight of its Middle Eastern, South Asian, and African Studies Department . These changes sparked faculty and...

Why Netanyahu Chose to Blow Up the Ceasefire and Return to War" Key Points. Mondoweiss

  Key Points from the Article: "Why Netanyahu Chose to Blow Up the Ceasefire and Return to War" 1. Israel’s Resumption of War Israel resumed its military assault on Gaza early Tuesday, killing over 400 Palestinians , including 130 children . Key figures in Gaza’s civil administration were also targeted to weaken Hamas’s governance . 2. The Ceasefire Agreement and Israel’s Stalling Tactics A ceasefire deal was brokered by Egypt, Qatar, and the U.S . two months prior. The second phase of the deal included discussions about ending the war and reconstructing Gaza in exchange for Israeli captives . Netanyahu stalled , aiming to release captives without committing to ending the war . 3. Israel’s Blockade and Its Impact In early March , Israel blocked the Rafah crossing and cut off humanitarian aid , causing a severe humanitarian crisis in Gaza . Prices of goods soared , bakeries shut down , and hospitals ran out of fuel . 4. Hamas’s Unexpected Move ...

Havens for Open Debate Or Enforcers of Political Orthodoxy. From Mahmood Khalil to Rumeysa Ozturk: The Rising Cost of Pro-Palestinian Activism on Campus.

 The case of Rumeysa Ozturk , a Tufts University student detained by federal authorities , along with earlier incidents like that of Mahmood Khalil of Columbia University, raises serious concerns about the targeting of international students  for their political views, particularly regarding Palestine-Israel discourse. This situation has broader implications for academic freedom, free speech, and the reputation of U.S. universities abroad , especially given the significant financial and intellectual contributions of international students to American higher education. --- 1. Impact on International Students: A Revenue & Reputation Concern - Financial Contribution : International students contribute $40 billion annually  to the U.S. economy, with universities relying heavily on their tuition fees (often at higher out-of-state rates).   - Chilling Effect : Cases like Ozturk’s and Khalil’s may deter prospective students from applying, fearing political perse...

Ignoring Massacres in Gaza City While Protesting for Democracy in Tel Aviv, Hanin Majadli. Key Points. Haaretz

  Brief introduction of Hanin Majadli  Hanin Majadli Hanin Majadli is a Palestinian Israeli journalist and editor at Haaretz , Israel's liberal-leaning newspaper. She holds a bachelor's degree in Middle Eastern Studies and Arabic and Islamic Studies from Tel Aviv University. As an opinion columnist, Majadli focuses on the experiences and challenges of Arab-Palestinian communities in Israel , examining their complex relationships with the state and its Jewish citizens . She gives particular attention to the history of the Nakba and its deliberate omission from Israel's social and political narrative. In her role as editor of Haaretz 's Arabic edition , Majadli aims to broaden the reach of alternative Israeli perspectives, presenting journalistic work that diverges from mainstream Israeli media. Before joining Haaretz, Majadli founded a popular spoken Arabic school in Tel Aviv, promoting Arabic language and culture . She has also been active in addressing pol...

Price Tag Attackers: Extremist Settler Violence in the West Bank.

  Year-by-year breakdown of documented " Price Tag" attacks in the West Bank and Israel , based on reports from UN OCHA , B’Tselem , Yesh Din , and Israeli media (Haaretz, Times of Israel). Introduction to "Price Tag" Attackers  "Price Tag" attackers are extremist Israeli settlers , primarily affiliated with radical right-wing groups, who carry out violent acts agains Palestinians, Israeli security forces, and left-wing activists  in retaliation for perceived threats to Jewish settlements in the West Bank . The term refers to the " price " they seek to impose for actions like outpost demolitions or Palestinian attacks on Israelis.   - Vandalism, arson, or violence by extremist settlers against Palestinians, Israeli security forces, or left-wing activists.      - Often involves graffiti (e.g., "Price Tag," "Revenge," or "Arabs Out").     - Retaliation for Palestinian attacks, outpost demolitions, or Israeli gover...