the largest economic power in Europe, Germanyfighting a looming recession and war in Ukraine threaten to end his successful economic model. Government Olaf Soltz announced yesterday that Berlin will increase its borrowing by 200 billion euros to finance a series of measures to protect households and businesses from rising energy prices. According to critics of the program, as a result, energy consumption will remain at a high level, and in winter the country will face a serious shortage of energy resources. At the same time, the first evidence points to him inflation Germany in double-digit percentage for the first time in 70 years, namely 10.9%. According to a significant part of economists, the largest European economy is already on the verge of recession. According to Guido Baldi, an expert at the German Economic Research Institute DIW, “Unfortunately, there is no light at the end of the tunnel.” Commenting on the data of the new economic barometer published by the named institute, Guido Baldi emphasizes that “the Russian war in Ukraine and its far-reaching consequences are likely to lead to a loss in the country’s growth in 2022 and 2023 by a total of about 5%. % of GDP.

The economist’s worries are shared by many of his colleagues, who are predicting not only a slowdown in growth this quarter, but also a contraction in Germany’s GDP until next spring. They estimate that the recession is likely to be deeper and more severe than that experienced by many other European countries, although not as deep as in the first year of the pandemic, when German GDP contracted by more than 4%. Some of them, however, express hope for climate change next summer.

More pessimistic is Carsten Bretzky, head of the ING group of economists, who believes that the war in Ukraine has destroyed the last hopes of Germany’s economic recovery after the difficult years of the pandemic. “The war marks the end of a very successful German model, which is schematically described as an economy that imports cheap energy and intermediate goods from Russia and exports high-quality products around the world, reaping the benefits of globalization.” At the same time, Nils Jansen, an economist at the Institute for the World Economy (IfW) in Kiel, notes that compared to the orders received, the country’s industry is in good shape and can significantly mitigate or even absorb shocks. However, Stean Koch, head of the institute’s forecasting center, notes that “with bailout packages, the government will only be able to redistribute the burden, not eliminate it.” The reason, of course, is the sharp rise in energy prices, which now affects a significant part of economic life and fuels inflation. The result is a reduction in consumption, which is an important pillar of the economy.

As Marcel Fratcher, president of the DIW Institute, explains, “high inflation reduces consumer desire to buy, leaving companies with less capital to invest in.” According to him, “this situation can lead to a decrease in economic indicators for a year or two.” In addition, rising energy prices are taking a toll on businesses, and many have already stopped producing some goods that are no longer profitable. Added to all this is the problem of the global supply chain, which has been disrupted since the pandemic crisis. Both raw materials and intermediate products are often scarce and expensive, and the most remarkable thing about all this is that the combination of these factors has had little effect on the labor market. Economists do not expect a significant increase in unemployment even in the next few months, despite the expected recession.