The Federal Land of North-Rhine Westphalia declared an emergency financial situation. Winter has arrived in Germany.
Winter has come, and it eventually brought the energy crisis so much foreseen. Germany, the richest country in Europe, is in one of the worst positions on the continent because of their energy policies in the last decade. As a result of severe lack of gas and oil, German states are in an increasingly difficult position.
Germany’s most industrialized Land (German Federal territory) has declared on Tuesday an emergency situation. North-Rhine Westphalia (NRW) is the Land with Koln and the heavily industrialized Ruhr region.
NRW needs more gas and oil than any other German Land, and it is easy to see why it received a hard blow this winter. On their official site they declared that NRW has been “hit much harder by this crisis than the other countries, since our state’s economic structure is characterized by many basic industries that are particularly energy-intensive.”
The Land’s economic forecast for 2022 looks grim, with a 2.8% shrink in GDP. The State, therefore, called for a special emergency fund to be immediately set by the German Federal Government. According to NRW official site, such emergency fund should be implemented by the end of the year to be effective.
Germany, despite being the largest European economy, has faced difficult challenges in the last year. Everything is connected, obviously, with the current war between Russia and Ukraine.
What is happening in Germany
When the war broke out between Russia and Ukraine, Germany immediately realized they were in a terrible position. In the last decade, German politicians closed increasingly more ties with Russia, especially on the energetic front.
After the illegal invasion of Ukraine, however, Germany sided with the West and supported Kyiv financially and militarily. This did not sit with Russia, which cut all their energy supplies to Germany,
Before the war, Germany imported half of their gas from Russia. Further, because of the war Berlin decided to increase their military spending by 3.2%. This entailed falling roughly €180 billion in debt, almost half of the GDP annual increase of the country.
At the onset of winter, Germany decided to implement a price cap on Russian gas, increasing national debt by another €200 billion. The move was supposed to help German households cope with gas prices, but it did not solve the overall lack of energetic supplies.
NRW now declared a financial crisis, being the third German land to do so after Bremen and Mecklenburg-Western Pomerania. NRW, however, is the industrial backbone of Germany, needing their industries to support national GDP.
It remains to be seen how Berlin will tackle the situation, but the future of the German economy does not look so bright anymore.
