Economist Mustafa Abdel Salam says a shocking question is being asked about Germany’s bankruptcy.
And he added in an interview with RT: “The question, of course, is shocking for many reasons. Germany is the world industrial machine, and the first industrial power of Europe, and without her financial support and powerful support, many countries of the continent, such as Cyprus, Greece and other countries, are faced with the risk of stumbling and almost going bankrupt.
And he continues: “German exports of goods exceeded 1375.5 billion euros in 2021, and the German economy is one of the largest economies in the world, as it ranks fourth in terms of GDP after the United States, China and Japan, as well as Germany. is one of the largest companies of the G7 and the headquarters of giant global companies, especially specialized in the automotive industry, electronics and home appliances, building materials, manufacturing, chemical and medical technology.
The economist explains that “the annual revenues of a single German company such as Volkswagen exceed the budgets and incomes of several countries combined, and German goods are strongly represented in world markets not because of their cheap price, they are often expensive, but because of their quality and high efficiency.
But Abdeslam says, “Why is he asking the shocking question about Germany’s bankruptcy?”
He says: “The answer lies in the serious problems and heavy losses that the German economy has faced, as the coronavirus pandemic caused losses that exceeded about 330 billion euros, or more than 9% of GDP, during 2020 and 2021. The losses hit vital sectors particularly hard. such as tourism, travel, restaurants and cafes, non-e-commerce, cultural activities and education.
“Germany is facing a massive inflationary wave from energy and food price spikes as they surged to their highest levels in nearly half a century in May. It is also facing additional supply chain and logistics disruptions as a result of the war. in Ukraine,” he explains.
Abdel Salam expects the German economy to suffer losses of around 230 billion euros in 2022 and 2023 if Russian gas supplies suddenly stop, or about 6.5% of annual gross domestic product, and a German boycott of Russian gas will lead to a decline in growth rates of about 2.2%, and this will lead to the loss of 400,000 jobs. Indeed, Germany’s central bank, the Bundesbank, expects production to fall by about 2% this year in the event of a total ban on Russian coal, oil and gas.
But the biggest danger, according to the economist, lies in what is happening today. Germany is facing a severe energy crisis that it may not have experienced since World War II as it faces a severe shortage of energy sources as it depends on Russia. gas and oil, which cover about 55 percent of its needs. Due to the crisis, Germany has returned to using coal for electricity generation after being a pioneer in the use of clean energy, and it has a plan to completely phase out the use of coal in electricity and power power plants.
He added: “Today, German Economy Minister Robert Habeck said that his country may resort to closing some industrial sectors, especially before the winter season, in case of a continuing shortage of gas supplies, due to a decrease in Russian gas supplies to Germany. The minister also stressed yesterday, Thursday, that the gas it is based on, the German industrial machine has become a rare commodity, so the German government has activated the second phase of its emergency plan to secure gas supplies, for the Minister of Economics to call it “necessary” due to the severity of the current situations.
He says: “Before this official warning, the German Federation of Industry (BDI) warned that the consequences of any sudden cut in Russian gas supplies would be disastrous for the German economy, and even expected the economy to experience the largest contraction in its history if Russian gas imports was stopped without finding alternatives.
He explains: “Even before the war, the energy crisis heavily affected the German industrial sector, the backbone of the economy and exports, as the war brought production to a halt in the car factories. Production has stopped at large automobile plants such as BMW and VW due to the termination of the supply of Ukrainian-made cable wires.”
He continues: “The German Automotive Industry Association (VDA) also anticipated a shortage of raw materials and higher prices for raw materials. the volume of trade between Germany and Russia in 2021 amounted to about 60 billion euros. In addition, 250,000 jobs in German companies depend on exports to Russia.
Economist Mustafa Abdel Salam argues that “the coming period is very difficult for the German economy and outweighs what is happening to the major economies, especially if the war continues and the western alliance completely bans Russian oil and gas, and Germany may be at risk of a severe crisis, but the crisis will not bring the country to the brink of bankruptcy if the government quickly found an alternative to Russian gas, whether from Qatar or the US and other countries, and built ports to receive liquefied gas.
He concluded: “The German economy is strong and able to withstand any shock due to its huge dollar resources, especially from export activities, tourism, services and foreign investment, and the strength of its industrial sector.”