The war in Ukraine forces Germany to rethink its economic model

It is projected on the Russian consulate: “No money for the murderers.  Stop the Oil and Gas Trade,” in Frankfurt, Germany, on April 4, 2022.

Is the war in Ukraine causing the collapse of the German economic model? One of the strongest signals was given on Monday 4 April by the Minister of Economic Affairs, the ecologist Robert Habeck, who announced the quasi-nationalization. “temporary” of Gazprom Germania, the German subsidiary of the energy group, which organizes the distribution and storage of Russian gas across the Rhine. For reasons of national security and supply, this placement under the supervision of a private foreign company by the State is unprecedented. It breaks a major economic taboo and illustrates the disastrous adjustment of Europe’s leading economy to the new world order.

To measure the current evolution, one must remember the shock that the Russian aggression against Ukraine means to Germany. Moscow ruined the special relationship that still connected it to Berlin, inherited from history and maintained through exchanges, by taking on the dramatic consequences for Russia’s economy and its people. This scenario, of violence unimaginable by Germany, hits it at its Achilles heel: energy, which has made it largely dependent on imports of Russian fossils.

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The war also casts a shadow over the model that has made Germany’s fortunes for the past twenty years. Since the late 1990s, the winning formula for “made in Germany” has been importing raw materials, energy and semi-finished products at good prices, building and assembling products with a high added value in Germany, exported all over the world with a strong margin, especially to China. No other country of this size has benefited so much from globalization. The Russian aggression, which entails a loss of confidence in international trade, casts doubt on the intellectual, moral and economic foundations of this model.

“Bitter Balance” of Russian Policy

In recent days, several major economic and political leaders of the 2010s have acknowledged their blindness to Vladimir Putin. On Wednesday, April 6, former Siemens boss Joe Kaeser, who spoke one-on-one with the Russian president several times, did an act of remorse. “I hoped” [les échanges économiques] Russia’s industrial development would help. I have always believed in the principle of “change through trade”. It failed, at least in this case.” he acknowledged. This theory, long supported by business, defends the idea that exchanges with non-democratic countries make a positive contribution to change.

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