German Chancellor Olaf Scholz spoke in Berlin Tuesday with Bloomberg News Editor-in-Chief John Micklethwait. Here are the key takeaways from their conversation:
(Bloomberg) — German Chancellor Olaf Scholz spoke in Berlin Tuesday with Bloomberg News Editor-in-Chief John Micklethwait. Here are the key takeaways from their conversation:
Economy Headed in the Right Direction
It was a clear and emphatic response from Scholz on whether Germany faced a potential recession this year. “I’m absolutely convinced that this will not happen,” he said.
Germany, he insisted, had shown it could respond rapidly to a difficult situation and cut its reliance on Russian energy, boosting the capacity to import liquefied natural gas from its ports. Like others in Europe, Germany has benefited from a warmer winter than expected, although energy experts are warning the real crunch may come next winter without any Russian gas to fill storage tanks.
Either way, the economic challenges remain for Germany, with output stagnating in late 2022.
Read more: Scholz Sees Germany Avoiding Recession With New Gas Supplies
Non-Committal on Modern Battle Tanks for Ukraine
Scholz rattled off a list of the things he said Germany had done for Ukraine, especially sending it weapons and other military support. The chancellor has faced criticism that Germany was too slow to commit to arms for the government in Kyiv in the aftermath of Russia’s invasion last February.
Speaking in the interview, Scholz said he’s in talks with allies about potentially supplying Ukraine with heavy Western-made tanks (in Germany’s case that means Leopard battle tanks), which Ukraine says it needs to not just hold Russian forces at bay but potentially retake ground faster in the coming months.
Still, Scholz made clear any decision would be made in concert with Germany’s partners: “We always act together with our allies and friends — we never go alone.” Germany shares the concern of some others in Europe and NATO members that certain types of advanced weapons might provoke Russian President Vladimir Putin into retaliation and draw other nations into the war on the ground.
Scholz was cautious about the idea of peace talks anytime soon, saying it was dependent on Russia agreeing as a starting point to withdraw its troops — which he seemed to think was unlikely, noting “Russia has to do something which they are as far as we see not ready to.”
Read more: Scholz Is in Talks With Allies About Sending Tanks to Ukraine
Globalization is Good (By and Large)
Asked about China, Scholz pivoted to talking about the need for Germany to diversify its supply chains in what he called the shift to a “multipolar world with many strong nations.” In that landscape, he said, it was “necessary to have a supply chain that is not only linked to one region, one country.”
Russia’s war in Ukraine, alongside the Covid-19 pandemic, is leading countries to push for “reshoring” of industry and to shift supply chains away from one place – that means from Russia on energy, and from China on things like semiconductors.
But Scholz equally talked up the benefits of globalization even as protectionist voices increase in the US and elsewhere. The positives of globalization, he said, were “very obvious.”
Part of that reflects his desire to bring countries outside the richest nations into the fold and keep them onside as alliances splinter and middle powers rise. There has been some unhappiness from countries in what is often called the “Global South” at how much support they have received, even as they bear the brunt of the broader fallout from the war on food and grain supplies and the economic hit from the pandemic.
There’s No Europe-US Trade War Coming
Scholz said he’s sure a trade conflict between the European Union and the US won’t happen, despite bubbling tensions over President Joe Biden’s massive package of support for US-based industry.
“We are working very hard to avoid a situation like this,” he said on the trade war question.
Read more: Scholz Confident EU Will Avoid US Trade War Over Green Subsidies
The head of the EU’s executive arm, Ursula Von der Leyen, said in a speech to the World Economic Forum in Davos Tuesday that the bloc should pass a new law to fast-track investments in clean tech and boost funding for the energy transition in response to a US climate law it fears unfairly subsidizes American companies.
Enough Money in the Pot for Now
Asked if he is prepared to endorse his own party’s idea of additional EU instruments for joint financing to increase green subsidies in the bloc, Scholz noted that a good amount of the money that was pulled together to jointly fight the Covid-19 pandemic was unspent.
At the time of the Covid package, he described the fiscal unity as a “Hamiltonian moment.” But while he said he still felt “Hamiltonian,” he indicated there was no more joint borrowing on the horizon.
During the pandemic, he said, “we told all the markets that we will stick together – but now we have done this, we have a lot of money that is still there to be used. There is a good chance to use this money.”
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.