Vladimir Putin’s war of aggression works thanks to the money Russia gets by selling fossil fuels to Europe. And although, surprisingly, Ukraine has repulsed Russian attempt to take Kyiv, Putin certainly won’t be stopped until Europe ends its energy dependence.
Which means Germany – whose political and business leaders insist they cannot do without Russian natural gas, despite the fact that many of its own economists disagree – has actually become a main supporter of Putin. This is a shame, and also incredibly hypocritical, given the recent history of the German country.
Background: Germany has been warned for decades about the risks of relying on Russian gas. But its leaders, who were only seeing the short-term benefits of cheap energy, ignored it. On the eve of the Ukraine war, 55% of German gas came from Russia.
There is no doubt that turning off this flow of fuel would be painful. But several economic analyzes – from the Bruegel Institute in Brussels to the International Energy Agency and Ecocontribute, a foundation sponsored by the universities of Bonn and Cologne – have concluded that the impact of a drastic reduction in gas imports from Russia would be far from disastrous for Germany. As a member of the Council of German Economic Experts, a ban on Russian gas would be difficult, but “feasible”.
The ECONtribute analysis provides a range of values, but its worst-case scenario shows that such a ban would temporarily reduce Germany’s real GDP by 2.1%. However, German industrialists refused to accept the economists’ calculations and insisted that the gas embargo would be disastrous for all intents and purposes.
But what were they going to say? Industry leaders everywhere always claim that any proposed ban on their activities would be an economic disaster.
He knows all the sides of the coin deeply.
For example, in the 1990s, US industry groups issued dire warnings against policies to reduce acid rain, insisting it would cost hundreds of billions and even “potentially destroy the Midwest economy.” “Maybe also. Nothing of the sort happened; The fact is that the new regulations delivered large public health benefits at a modest economic cost.
Unfortunately, German leaders, including Chancellor Olaf Scholz, have taken the side of the doomsdayers. The revelations of Russian atrocities in Ukraine have given a serious acknowledgment that something needs to be done, but so far without any urgency.
What impresses me – a comparison that, for some reason, I haven’t seen many people draw – amidst the current German reluctance to make liberal sacrifices, even in the face of horrific war crimes, and Germany That’s the difference between demands for huge sacrifices from other countries during the European debt crisis a decade ago.
As some readers will recall, much of Southern Europe faced a crisis at the beginning of the last decade, when the credit spigot closed, leaving interest rates on public debt skyrocketing. German officials blamed these countries for their plight, asserting self-righteously, that if they were in trouble it was because they were financially irresponsible and had to pay the price.
Well, it turns out that the diagnosis was essentially wrong. The rise in interest rates in Southern Europe reflected more market panic than economic fundamentals. The cost of borrowing fell after the president of the European Central Bank said four words, including that of Greece – “whatever it takes” – indicating that, if necessary, banks could help economies with problems. Will intervene by buying the loan.
Germany, however, took the lead in demanding that debtor countries take extreme austerity measures, particularly spending cuts, no matter how high the economic cost. And the costs were enormous: Between 2009 and 2013, the Greek economy shrank by 21%, while the unemployment rate reached 27%.
But while Germany was prepared to impose economic and social devastation on those countries it claimed was irresponsible in borrowing, it was unwilling to inflict little on itself despite the undeniable irresponsibility of its previous energy policy. Was.
I’m not sure how to measure it, but my feeling is that Germany has received more, and clearer, warnings about its pre-crisis indebtedness on Russian gas than Greece. However, it seems that the famous German eagerness to regard economic policy as a moral dilemma only applies to other countries.
To be fair, Germany has come a long way from its initial reluctance to help Ukraine in the slightest. The Ukrainian ambassador to the German country confirms, although the Germans deny this, that they were told that there was no point in sending weapons as their government would fall within a few hours. And maybe, just maybe, the understanding that refusing to cut Russian gas flows makes Germany a real accomplice to the genocide is ultimately enough to inspire real action.
But until that happens, if it does, Germany, to its shame, will remain the weakest link in the democratic world’s response to the Russian invasion.
Paul Krugman He is a Nobel laureate in economics. © The New York Times, 2022. translation of news clips
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