Fresh sources of energy mean Germany’s economy can avoid shrinking this year
(Bloomberg) — Chancellor Olaf Scholz said the German economy is in good shape to get through the fallout from the energy crisis sparked by Russia’s war in Ukraine without shrinking.
“I’m absolutely convinced that this will not happen, Germany going into a recession,” Scholz said Tuesday in an interview with Bloomberg Editor-in-Chief John Micklethwait.
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The increased capacity from new liquefied natural gas terminals on the Baltic and North Sea coasts is giving Germany the flexibility to maintain its economy, Scholz said before heading to the World Economic Forum, where he will deliver a special address on Wednesday. He’s the only Group of Seven leader traveling to the gathering in Davos, Switzerland.
Europe’s largest economy is starting 2023 with brighter prospects than could have been expected just a few weeks ago, after unusually warm weather helped cut natural-gas consumption and all but eliminated the risk of blackouts over the winter. That’s offered a boost to the chancellor as he looks to maintain public support for Ukraine’s war effort and keep his three-party coalition in line.
Scholz was the surprise winner of last year’s federal election and was almost immediately plunged into turmoil by the Russian invasion. The 64-year-old chancellor announced a massive spending plan to revamp Germany’s moribund military and has started to adapt the economy to the shut off of cheap Russian gas, but his broader promise of “Zeitenwende” — German for a historical turning point — remains a work in progress.
Output probably stagnated in the fourth quarter, defying widely held expectations that the period would mark the beginning of a recession on the back of soaring inflation. Some economists had upgraded their growth expectations in December already as surveys revealed greater optimism among businesses.
“I’m sure that we will be able to go through the situation again, and this is because we are constantly increasing our capacities for importing gas,” Scholz said.
–With assistance from Iain Rogers, Petra Sorge, Jana Randow and Alexander Weber.
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