German deindustrialization and further problems

by Romegas

Friedrich Merz, the chairman of the opposition Christian Democratic Union (CDU) stated that Germany is facing further economic decline and deindustrialization.

He pointed to the country’s grim economic indicators, including a summer rise in unemployment, a contraction in industrial production and a 16% increase in bankruptcies in the first half of 2023.

“Germany is losing competitiveness. This is not an abrupt process that triggers an overnight economic crisis instead, we are experiencing a gradual process of deindustrialization in our country. You have to take this very seriously [because] something is happening here at the moment that may no longer be reversible. The federal government must react to this now,”

This was echoed by Clemens Fuest, president of the Munich-based Ifo economic research institute said that “It looks like the German economy is really having a hard time getting out of this recession.”

The Ifo earlier reported that the German Business Climate Index declined to 87.3 points in July versus last month’s 88.6 and the consensus forecast of 88.0. The index is calculated on the basis of a survey of about 9,000 German enterprises and remains the main indicator of the economic situation in the country. Industrial production has now fallen for several months in a row.

Paolo Raffone, a strategic analyst and director of the CIPI Foundation in Brussels, stated that “long term, reliable, low cost and abundant energy supplies from Russia have been pivotal to German industrial sector development and strength.”

He added that the destruction of the North Stream pipelines in September 2022 was “highly symbolic (cutting German energy ties with Russia and Eurasia) and it has had tremendous consequences for the German economy.”

“without the convenient Russian energy supplies, Germany has entered (again) a period of industrial difficulty that impacts the general economy and the life of people.”

Gunnar Beck, a member of the European Parliament for the Alternative for Germany (AfD) , said that Nord Stream’s collapse and Berlin’s move to join the West’s energy sanctions against Russia were significant events but “not the only source of Germany’s declining economic fortunes.“

“The German government is pursuing very foolish policies in other regards as well. First of all, there is the so-called green transformation or green agenda. Germany is trying to replace not only Russian energy but all fossil fuels, and it’s phased out nuclear energy,” Beck said, adding that the Scholz government is aggravating the effects of a decline of energy imports from Russia and may soon face an even sharper economic slowdown.

The latest in a litany of bad news comes from the Chemical Industry. Frankfurter Allgemeine reports that the specialty chemicals group Lanxess is planning to close two production facilities at its Krefeld-Uerdingen site in view of the high price of electricity and the general economic conditions. 

“We’ve been burning money here for some time, and we don’t expect that to change,” said Lanxess CEO Matthias Zachert in a conference call. The chromium oxide production at the same location has also been underutilized for months because more and more ceramic manufacturers from Germany, who are among the customers there, are withdrawing due to the economic situation. 

Zachert held politics responsible for this. Due to the high energy costs, German industry has enormous locational disadvantages in Germany. This is why companies have begun to migrate from the country. “De-industrialization is beginning,” he added ominously.

In addition to the high costs, the group is also suffering from the economic weakness. The demand from important customer industries is “awful,” said Zachert. Customers reduced inventories, which in turn suggests that they too are producing less than they originally expected and are therefore buying fewer chemical precursors.

“I’ve been in the industry for 30 years now, I’ve never experienced anything this tough,” he concluded ominously.

Never has a nation so voluntarily castrated itself.

Zachert may have said it diplomatically, but I have been shouting it out loud – that the West is now for the most part led by incompetent fools and what’s worse is that the incompetency in leadership positions is now systematic and a feature not a bug of a system which for decades now has promoted ideological purity and political loyalty above capability and merit. I will perhaps dissect the mechanics of how and why this came about and how it functions and the inevitable repercussions that it will lead to in a separate article.

In yet another separate article, I will also explain to you in a manner which the likes of the Times of Malta never bother to – How the trouble in Niger threatens to further seriously compound the energy problems in Europe with Niger being not only the source of Uranium mines that fuel France’s economy but by the virtue of it being also the transit nation through which a pipeline from Nigeria to Algeria was supposed to feed Europe with an alternative to Russian gas supply.