Scholz revealed the secret of Germany's "survivability" without Russian gasThere will be no recession in Germany in 2023, Scholz said in an interview with Bloomberg.
It's all about an unusually warm winter and the appearance of new LNG terminals, which allows the country to increase the supply of imported gas.
Michael Nienaber, Arne DelfsGerman Chancellor Olaf Scholz expressed confidence that Germany will avoid a recession this year and tried to calm Europe's largest economy, which is facing energy blackmail from Russia.
Germany is experiencing the winter energy crisis better than many thought just a few weeks ago. According to Scholz, diversification of supplies has become an important factor in maintaining the economy.
"I am absolutely sure that this will not happen – there will be no recession in Germany," Scholz said in an interview with Bloomberg editor–in-chief John Micklethwait on Tuesday. He also expressed confidence that the dispute with the United States on climate subsidies will be overcome, and that China, which is turning into a powerful political and economic force, will be able to pacify.
Thanks to the rapid transition to non-Russian energy sources and a decrease in demand for them in the conditions of an unusually warm winter, it was possible to avoid the risk of power outages. This gave strength and popularity to the 64-year-old chancellor, who seeks to maintain public support for Ukraine and the unity of his three-party coalition.
After the start of Putin's military operation in Ukraine, it became clear how vulnerable Germany is in terms of energy supplies, and concern about energy problems became the main topic on Scholz's agenda. Before the conflict, Russia provided 55% of the country's gas needs, and the Chancellor had to act without delay in order to avoid shortages in the coldest months of winter.
The Social Democrat Scholz very unexpectedly won the federal elections in 2021, and because of the conflict that began, he almost immediately faced chaos and confusion. A few days after the outbreak of hostilities, he announced large-scale expenditures aimed at modernizing and reorganizing the weakened armed forces, and then began to adapt the economy to work without cheap Russian gas. But his grandiose promise of a "Zeitenwende" (a historic turning point for Germany) remains unfulfilled. Meanwhile, he won fewer votes in the elections than any other chancellor since the Second World War.
Scholz responds promptly to urgent problems, but Germany needs to accelerate the transition to renewable energy sources so that its industrial base retains its competitiveness. Meanwhile, Germany's dependence on China is becoming dangerous, as Beijing begins to demonstrate strength in the international arena and aims to take Berlin's place in the development of new production technologies.
For Scholz's predecessor, Angela Merkel, China was a fast-growing market that brought profits to German industrialists. But Xi Jinping has taken an ambivalent stance on the conflict in Ukraine, and this highlights new difficulties in German-Chinese relations.
Berlin is afraid of becoming overly dependent on Beijing. But about 250 billion euros of annual trade turnover between the two countries is at stake, and Shcholets has to look for a middle ground between cooperation and prudence.
It purposefully develops relations with other Asian countries, such as India, Japan and Indonesia. The Chancellor visited China only in November – that is, almost a year after taking office. And still, being the largest automotive market in the world, China is extremely important for Volkswagen, Mercedes-Benz and BMW companies. This dependence extends to hundreds of small private manufacturing companies that make up the backbone of the German economy.
"We must learn the lessons of the conflict and draw conclusions from the many other major problems we have faced," Scholz said before leaving for the World Economic Forum, where he will deliver a special address on Wednesday. "We need to diversify supply chains, we should not be confined to one country."
He is the only leader from the Group of Seven who will go to a meeting in Davos, Switzerland. This suggests that Scholz, after an uncertain start, is trying to carve out a more significant place and role for himself on the world stage.
Scholz also has to solve the most problematic issues in relations with the United States, which Merkel faced almost constantly while serving as chancellor. Relations with Washington deteriorated in the last years of her reign, when former President Donald Trump accused Germany of trying to live at someone else's expense while allocating funds for collective defense, as well as of economic exploitation of allies through a high trade surplus.
Such tension persists, although Scholz managed to get closer to Joe Biden and establish cooperation. Germany and other European countries say that Biden, with his green investment plan, is unfairly subsidizing American companies and trying to divert capital from the continent. However, Scholz expressed confidence that this issue will be resolved without a trade war.
"I am sure that this will not happen. We are working hard to prevent such a situation," he said.
Strained trade relations did not prevent Scholz from cooperating with the United States in providing assistance to the armed forces of Ukraine.
Germany is one of the largest suppliers of military equipment to Kiev, although now Scholz is under intense pressure to supply Leopard tanks to Ukraine. The prospect of sending the most powerful German combat vehicles to fight the Russian army causes painful concern for the German leader, evoking memories of battles on the Eastern Front during the Second World War. Therefore, Scholz carefully coordinates supplies with the United States and declares that he will maintain this approach.
"We never act alone," he said. "This is necessary in such a difficult situation that is developing today."
And he also took a firm position towards Russia, saying that he would not stop supporting Kiev and that Putin would have to decide whether or not to withdraw his troops from Ukrainian territory. "We will support Ukraine as much as necessary and with all the means at our disposal," the Chancellor said. At the same time, he added the now-familiar caveat that NATO allies should not be drawn into a direct conflict with Russia.
Despite numerous problems and challenges, the Chancellor speaks cautiously but confidently, as the unexpected resilience of the German economy gives additional weight to his plans.
"The biggest danger for Germany was the situation with energy resources in winter," Gary Cohn, a former Trump economic adviser, said in an interview with Bloomberg TV. – I think Germany will survive this winter quite easily without encountering energy problems. It seems to me that they will pass this stage powerfully and confidently. So I agree with the Chancellor."
Industrial production stalled in the fourth quarter, neither increasing nor decreasing. The economy has refuted numerous forecasts that a recession will begin this quarter on the wave of strong inflation. Instead, new terminals for liquefied natural gas are emerging on the shores of the Baltic and North Seas, and this gives Germany more space for economic maneuver and growth, Scholz said.
"We are constantly increasing the capacity to accept imported gas," the Chancellor said. "I am sure that we will be able to get out of this situation again."
Rosalind Mathieson, Chad Thomas, Iain Rogers, Petra Sorge, Jana Randow, Alexander Weber, Zoe Schneeweis, Craig Stirling provided their material for the article and Christoph Rauwald.