Top German Trade Union Head Warns Entire Industries May Collapse Amid Worsening Energy Crisis
Last month, Russia reduced Nordstream natural gas flows by 60% because of an alleged disruption. German industries, heavily reliant on cheap Russian NatGas, face skyrocketing energy costs that have put many in danger of collapse.
“Because of the NatGas bottlenecks, entire industries are in danger of permanently collapsing: aluminum, glass, the chemical industry,” Yasmin Fahimi, the head of the German Federation of Trade Unions, told the newspaper Bild am Sonntag.
Fahimi warned: “Such a collapse would have massive consequences for the entire economy and jobs in Germany.”
Economics Minister Robert Habeck was quoted by Bloomberg on Saturday saying the government is working to address surging energy costs for utilities and power costs for businesses and households. He warned weeks ago Germany should prepare for further cuts NatGas.
Germany recently triggered the “alarm stage” of its NatGas-emergency plan to address shortages as the energy crisis in Europe’s largest economy is far from over.
Habeck had also likened the squeeze on Russian NatGas supplies and its damaging effects on industries to a catalyst that could spark a Lehman Brothers-like crisis.
Deutsche Bank’s chief FX strategist George Saravelos told clients days ago he was becoming increasingly concerned about the unfolding energy crisis in Germany.
Saravelos pointed out that dwindling NatGas supplies to Germany and the resulting surge in electricity prices have created massive problems for industries and utilities.
The biggest blowup last week was German gas and power utility Uniper. Shares in the company crashed because it only received 40% of NatGas from Russia, and the rest had to be purchased in the open market (outside of long-term contracts), where prices have soared. This has created an immense strain on the utility, losing upwards of $30 million per day, or if annualized, could be an $11 billion loss.
Risks are mounting of a full NatGas disruption: “Europe should be ready in case Russian gas is completely cut off,” IEA head Fatih Birol recently told FT.
Saravelos also told clients if NatGas supply woes via Nordstream aren’t resolved in the coming weeks, this would lead to a broadening out of energy disruption with material upfront effects on economic growth, and of course, much higher inflation, or as he put it, “beyond the market’s worries about slower global growth in recent months, what is unfolding in Europe in recent days is a fresh big negative supply shock.”
Sooner or later, Germany will learn if that’s because of economic disruption, that getting virtue signaled into supporting the Ukraine war was a bad idea.