Germany's Developing Economic Crisis A Study In Self-Harm

Glenn Diesen: Germany’s developing economic crisis is a fascinating study in self harm

RT

Germany just posted its first monthly trade deficit in three decades, and the head of the German Federation of Trade Unions has warned that key industries in the country may collapse permanently as a result of high energy prices and shortages. The golden era of the European Union’s economic locomotive has already come to an end. 

For three decades, the competitiveness of German industries was enhanced by the import of cheap Russian energy, while Europe’s largest country also became a key export market for German technologies and manufactured goods. Over the previous centuries, a key theme of European politics was that the productive power of Germany and the immense resources of Russia could create the main pillar of power on the European continent.  

The relationship between Germany and Russia has subsequently always presented a dilemma: A partnership between the two giants would create a challenge to rival powers such as Britain and the US, while German-Russian conflicts have previously turned Central and Eastern Europe into what the British geographer James Fairgrieve referred to as the “crush zone.” 

The current NATO-Russia proxy war in Ukraine demonstrates that this dilemma from the 19th and 20th centuries remains relevant. Although the 21st century presents a key difference in that the world is no longer Europe-centric.  

Moscow’s objective for a Russian-German partnership was to construct an inclusive Greater Europe, although this initiative has now been replaced with a Russian-Chinese partnership to construct a Greater Eurasia. The export of Russian energy and other natural resources is being redirected to the East, while Russia increasingly imports vital technologies and industrial products from that source as well. 

The economic crisis in Germany is a fascinating case study of self-harm. After Moscow supported German reunification in the early 1990s, there was a lack of reciprocation as Bonn, then Berlin, abandoned the agreements with Moscow for a pan-European security architecture based on “sovereign equality” and “indivisible security.” Instead, Germany supported NATO expansionism to create a pan-European system, without the continent’s largest state. 

When Moscow responded by recognising the independence of Donbass and attacking Ukraine in February 2022, Germany cancelled the Nord Stream 2 pipeline, seized control of Gazprom’s subsidiaries on its territory, and announced sanctions on Russian energy. For years, there has been speculation that Russia would use the feared “energy weapon” by cutting energy supplies to Germany, although in the end there was no need to do so as Germany inflicted this economic pain on itself. 

Escalation control entails the ability to raise tensions to impose costs on adversaries and de-escalate them when the desired concessions have been obtained. In the unipolar era, when there was solely one centre of power, the collective West largely enjoyed escalation dominance as it could raise the pressure until its adversaries were compelled to capitulate. NATO expansionism, strategic missile defence and asymmetrical economic interdependence enhanced this power against Russia. 

In the emerging world order, sanctioning Russia merely entails surrendering an immense market share to states such as China and India as opposed to forcing Moscow into submission. While Germany is scrambling to find expensive energy to replace cheap Russian fuels, Moscow is now selling its output at a discount to China and India as it transitions from Greater Europe to Greater Eurasia.  

Consequently, German industries will lose competitiveness vis-à-vis their Asian counterparts. 

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