Berlin, 08/10/2022, Author: Matthias Ilgen
Photo: Adobe Stock
Germany stands on the brink of the most severe economic crisis since World War II. The almost fourfold increase in gas prices within a calendar year is the most severe external shock that the German economy has had to cope with since 1945. Even the two oil price crises of 1973/74 and 1979/80—when the global price of oil roughly doubled each time—did not present citizens and companies with challenges as great as they are today. Furthermore, while the oil price shocks followed the economic boom period from 1968 to 1973, today's price surges are hitting companies that have already been severely shaken by the Corona pandemic. The state's capacity for countermeasures has also been severely strained after the deployment of several hundred billion euros to alleviate the consequences of the pandemic for companies and employees.
The interest rate turnaround, now underway due to global inflation – which has been fueled not only by rising commodity prices but also by previously low interest rates and government spending programs worldwide – further restricts the scope of action for governments in democratic states, both beyond the Atlantic and here in Europe. An expansive government spending policy is hardly sustainable at rising interest rate levels if one does not want to unduly narrow the scope for future generations. Therefore, if the state still wants to provide impetus for growth and employment, it must curb spending elsewhere in return. Fierce distributional struggles loom – particularly with regard to the situation of citizens and companies who will no longer be able to bear the exploding energy costs and food prices on their own.
The current „summer theater“ offers a first taste of the upcoming debates. The leading politicians of the traffic light coalition are almost daily outdoing each other with media contributions, which are intended to present what they believe absolutely must be done – or what absolutely must not be done. In addition to the debate on extending or stretching the operating times of nuclear power plants, there is the feasibility of a successor arrangement for the 9-euro ticket, as well as windfall taxes for „greedy“ corporations and wealth taxes for the „rich,“ and the mitigation of fiscal drag, which is currently hitting hard due to rampant inflation. Anyone who turns on the radio and television or studies newspapers and online news sites is seemingly offered a new political potpourri from the governing parties every day.
Behind this are very serious party political concerns of the "traffic light" coalition partners. Each party tries to ensure that their political goals and clientele are served or protected from losses. Given the differences between the three parties, policy proposals will diverge widely, and consensus will be difficult to achieve in many areas and only after tough negotiations. The scale and importance of the upcoming distributional conflicts will fully unfold in the fall, when political Berlin moves towards the finalization of the 2023 federal budget.
This makes it all the more important for companies - regardless of their industry, as virtually all will be affected in some way - to analyze the potential advantages and disadvantages of the federal government's decisions to be made in the fall and to develop a suitable political strategy early on that will allow them to successfully advocate for their own interests in the political process. ALP is happy to support you with tailored stakeholder analyses, political strategy concepts, and close contacts in parliament and government. If you are interested in a corresponding offer or have further questions about our services, please do not hesitate to contact us!
