SHARE
COPY LINK

ENERGY

Energy crisis to labour shortage: Five challenges facing Germany right now

From Russia's war on Ukraine putting an end to cheap energy to a lack of staff in several industries and rising inflation, here are five challenges causing Germany's economy to become unstable.

A restaurant searching for staff in northern Germany. Many industries are struggling with staff shortages in Germany.
A restaurant searching for staff in northern Germany. Many industries are struggling with staff shortages in Germany. Photo: picture alliance/dpa/dpa-Zentralbild | Jens Büttner

Stagnant German growth in the second quarter has led analysts across the board to predict a recession as the outlook becomes clouded by the threat of a halt to Russian gas supplies.

But it is not only growth that is sputtering at zero percent between April and June – Germany’s entire economic model is being called into question by experts. Here’s a look at the challenges on the table right now.

READ ALSO: Germany economy stalls as recession looms

End to cheap energy

“The war in Ukraine puts an end to the German economic business model as we knew it – a model which was mainly based on cheap energy imports and industrial exports into a increasingly globalised world,” say analysts from ING bank.

Less expensive to produce and transport, with prices pinned down in long-term contracts, Russian gas has for decades contributed to Germany’s economic prosperity.

Industry consumes 30 percent of the gas burnt in Germany. Before the war, more than half of the total supplies came from Russia, a figure which had fallen to 35 percent by the beginning of June.

To wean itself completely off Russian gas, Germany is looking further afield for new supplies including shipments of liquefied natural gas from the United States and Qatar, as well as moving more quickly to renewable electricity generation.

Meanwhile, German society is having to take extreme measures to save gas. Cities have started turning off the lights, including Berlin, as is shown in the cathedral below. 

The Berlin Cathedral or Berliner Dom will no longer be illuminated to save energy.

The Berlin Cathedral or Berliner Dom will no longer be illuminated to save energy. Photo: picture alliance/dpa | Paul Zinken

READ ALSO: What is Germany’s new gas bill ‘tax’ and who pays it?

Globalisation in crisis

“As an exporting nation, Germany has benefited disproportionately from free trade. But it is exactly that which is now in danger,” opined the Süddeutsche daily earlier this month.

The coronavirus pandemic and the Ukraine war have shown the weaknesses of open economies as supply chains have been upended and key components have become scarce. Germany has been among the most exposed to the logistical snafus of the past two years.

Germany’s dependence on China is also worrying politicians in Berlin. The strong two-way ties between Germany and China were “not healthy”, liberal Finance Minister Christian Lindner said in April.

Beijing is Germany’s number one trade partner, with trade between the two nations climbing again by 15.1 percent in 2021.

“It’s potentially a new risk,” economist Claudia Kemfert told AFP. While the risk was less acute than dependence on Russia, more needed to be done to “focus on the domestic economy and build resilience”, she said.

Inflation shock

After years of anaemic growth, inflation is back with a vengeance in the European Union. In Germany, the memory of 1920s-style hyperinflation weighs heavy on the public debate.

Beyond this psychological block, the obsession with price stability ensures a “competitive industry and a nation of savers”, according to a recent report by French think tank OFCE.

An employee takes money from the till at a shop in Stuttgart.

An employee takes money from the till at a shop in Stuttgart. People in Germany face more price hikes, according to a study. Photo: picture alliance/dpa | Marijan Murat

Rising prices have led to rising labour unrest in Germany. July saw the longest industrial action at German ports in 40 years and a day of strikes by ground staff at Lufthansa. Unions haven’t ruled out more strikes happening if employers do not push up workers pay.

READ ALSO: Will Germany see more strikes affecting air travel this summer?

Ahead of negotiations that are set to kick off in September, the powerful IG Metall union is asking for an eight-percent pay rise for 3.8 million workers across various industrial sectors, the biggest wage demand since 2008.

Staff wanted

Overshadowed by the war in Ukraine, the lack of skilled workers is a major headache for German industry.

On top of the million vacancies already advertised, “Germany will need 500,000 extra employees every year for (the) next ten years,” said Marcel Fratzscher, head of the DIW think tank in Berlin.

The potential shortfall was a “risk for the competitiveness and prosperity of the country”, he noted.

Auto supplier Continental raised the alarm in July saying the shortage “threatened the future of the German economy”, which “urgently needs controlled immigration”.

Germany’s coalition government made up of the Social Democrats, Greens and Free Democrats say they want to make Germany more attractive to skilled immigrants to encourage them to come to Germany and work.

READ ALSO: ‘Appointments in English’: How Germany wants to attract workers from abroad

Germany is also planning to relax citizenship laws as part of its overhaul of immigration policies, which will mean non-EU nationals will be allowed to hold more than one nationality. 

Debt brake illusion

Returning to Germany’s strict budgetary rules in 2023 after a three-year pandemic-enforced hiatus is a key aim for Finance Minister Lindner.

However, the goal was “as surprising as it is unrealistic”, said analysts at ING.

Germany is preparing to spend billions again to support households through the coming energy crisis and investing colossal amounts into the switch to renewable energy.

“Germany will need time and money” to implement “investment and structural change as determined and committed as it demanded from other eurozone countries in the past”, the ING analysts said.

READ ALSO: Germany plans return to debt limit rules in 2023

By Sophie MAKRIS

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

CRIME

Ukrainian Holocaust survivors find safe haven in Germany

Borys Shyfrin fled as a young child, along with other members of his Jewish family, from the Nazis.

Ukrainian Holocaust survivors find safe haven in Germany

More than eight decades on, the Ukrainian Holocaust survivor has been forced from his home once more – but this time he’s found a safe haven in Germany.

Shyfrin is among a number of Ukrainian Jews who lived through the Nazi terror and have now fled to the country from which Adolf Hitler’s Third Reich launched its drive try to wipe Jews out.

He never wanted to leave Mariupol, where he had lived for decades. But Russia’s brutal assault on the Ukrainian port city made it impossible to stay.

“There was no gas, no electricity, no water whatsoever,” the 81-year-old told AFP from a care home in Frankfurt, recalling the relentless bombardment by Moscow’s forces.

“We were waiting for the authorities to come… We waited for a day, two days a week.”

Bodies of people killed by bombs and gunfire littered the streets, recalled Shyfrin, a widower who had lost contact with his only son.

“There were so many of them… no one picked them up. People got used to it – no one paid attention.”

People scraped by finding what food they could, with water supplied by a fire engine that made regular visits to his neighbourhood.

Shyfrin’s apartment was damaged during the fighting in Mariupol – defended so fiercely that it became a symbol of Ukrainian resistance – and he spent much time sheltering in the cellar of his building.

Became homeless

The elderly man eventually left Mariupol with the aid of a rabbi, who helped the local Jewish population get out of the city.

He was evacuated to Crimea, and from there, travelled on a lengthy overland journey through Russia and Belarus, eventually arriving in Warsaw, Poland.

After some weeks in Poland, a place in a care home was found in Frankfurt.

In July, he was transported to Germany in an ambulance, with the help of the Claims Conference, a Jewish organisation that has been aiding the evacuation of Ukrainian Holocaust survivors.

Shyfrin, who walks with the aid of a stick, is still processing the whirlwind of events that carried him unexpectedly to Germany.

The outbreak of war was a “very big surprise”, he said.

“I used to love (Russian President Vladimir) Putin very much,” said Shyfrin, who is a native Russian speaker, did military service in the Soviet Union, and went on to work as a radio engineer with the military.

“Now I do not know whether Putin is right to be at war with Ukraine or not – but somehow, because of this war, I have become homeless.”

Shyfrin was born in 1941, in Gomel, Belarus.

When he was just three months old, his family fled to Tajikistan to escape German Nazi forces who were occupying the region.

Many of Belarus’s Jews died during the Holocaust, in which the Nazis killed a total of six million European Jews.

In neighbouring Ukraine, the once-large Jewish community was also almost completely wiped out.

After the war, his family returned to Belarus and Shyfrin completed his studies, did military service, and settled in Ukraine, then part of the Soviet Union, in the mid-1970s.

“Traumatised”

The pensioner seemed philosophical about the twist of fate that has forced him to leave his home.

“Well, it’s not up to me,” he said, when asked about having to flee war for the second time in his life.

His most immediate concerns are more practical – such as how to access his money back home.

“I can’t even receive my honestly earned military pension,” he said.

He recently moved to a new care home run by the Jewish community, where there are more Russian speakers.

As well as helping Shyfrin on the final leg of his journey, the Claims Conference provided him with financial assistance.

It has evacuated over 90 Ukrainian Holocaust survivors to Germany since the outbreak of the conflict, a break from the organisation’s usual work of ensuring that survivors get compensation and ongoing support.

The body had long been helping to run care programmes for Holocaust victims in Ukraine.

But, as the conflict intensified, it became clear such care programmes could no longer be sustained, particularly in the east, said Ruediger Mahlo, the Conference’s representative in Germany.

“Because many of the survivors needed a lot of care and could not survive without this help, it was clear we had to try to do everything to evacuate (them),” he told AFP.

Getting them out involved huge logistical challenges, from finding ambulances in Ukraine to locating suitable care homes.

For many of the frail Holocaust survivors, it can be a struggle to grasp the fact that they have found refuge in Germany, said Mahlo.

They are fleeing to a country that “had in the past persecuted them, and done everything to kill them,” he said.

“Certainly, they are traumatised,” he said.

SHOW COMMENTS