After all, while toilet paper was the second most sought-after supermarket item during the peak of the pandemic, pasta was the first. Consumers were strictly allocated to one or two roller packs to ensure that no one would make it. But having flourished during the pandemic, Dusseldorf-based luxury brand Hakle – known for “bringing comfort since 1928” with its three-leaf blinds – has bombed as a result of the energy crisis. It is the first major German consumer goods maker to collapse due to rising energy and raw material costs, and there is plenty to suggest more will follow. Last week, the Munich-based Ifo Institute for Economic Research cut its forecast for German growth, saying “we are headed for a winter recession.” It forecast that Europe’s largest economy would contract by 0.3% in 2023, after growing by just 1.6% this year. Inflation is forecast to reach 8.1% this year and 9.3% in 2023. “Cuts in gas supplies from Russia this summer and the sharp price increases they caused are wreaking havoc on the post-coronavirus economic recovery,” said Timo Wollmershäuser, Ifo’s head of forecasting, adding that he did not expect a “return to normal”. until 2024, when growth of 1.8% and inflation of 2.4% is expected. German Chancellor Olaf Scholz is traveling to the Gulf this weekend to secure supplies of liquefied natural gas (LNG) from the United Arab Emirates as Russia chokes off its gas supplies. Economy Minister Robert Hambeck said: “The supply of natural gas is gradually expanding and the government is permanently in talks with many countries, as well as with nations on the Arabian Peninsula.” Paper production is very energy intensive. Hakle used 60,000 megawatt-hours of natural gas and 40,000 MWh of electricity each year. Increases in energy costs came so hard and fast, the company said, that it was unable to pass them on in time to consumers, who in turn switched to cheaper two-ply toilet roll. Toilet paper maker Hakle has filed for insolvency due to rising energy and raw material costs. Photo: dpa Picture Alliance/Alamy Company bosses, union leaders, shopkeepers and workers across the country are openly voicing their fears of a crisis in Europe’s biggest economy that risks spinning out of control. They question the apparent optimism of Scholz, who adopted Gerry and Habeck admitted that “the financial pressure is enormous”, offering the faint hope that “if we can get through this winter, we have a good chance next summer and winter things will they will be much more relaxed.” In Hanover, northern Germany, baker Eckehard Vatter, who has 35 branches and employs 430 people, went to the press recently after his gas bill rose by 1,200% to €75,000 (£65,800) a month. “They are crazy; We’ll have to turn off the ovens,” he said, taking to the streets along with about 1,000 other bakers on Wednesday, who held placards accusing politicians of “driving us into the biggest crisis ever” and calling for urgent government support. Yasmin Fahimi, head of the German Trade Union Confederation (DGB), said she feared the consequences of so many challenges coming at once. “Some companies are on edge. This risks a domino effect that could lead to the deindustrialization of Germany, which would be a disaster,” he told Spiegel. He called on the government to protect companies that are under particular threat, due to high energy consumption, “to ensure that they are able to maintain a minimum level of production capacity so that when things get better, they can grow. pick them up again. Those who close shop now will never return. We have to be clear about that.” ArcelorMittal steelworks in the ports of Hamburg and Bremen plan to close “until further notice” due to rising energy costs. Photo: Action Press/REX/Shutterstock Many companies have done just that: cut production to an absolute minimum or – in the case of ArcelorMittal steel mills in the ports of Hamburg and Bremen – plan to shut down “until further notice”. The scenario is being repeated across Germany, hitting mainly the energy-intensive industries – steel, building materials, glass, paper, chemicals – that form the backbone of the German economy. The “deindustrialization” that Fahimi fears is what could happen if they close for good. Meanwhile, cheaper energy and production costs elsewhere – natural gas is 10 times cheaper in the US – are leading some businesses to relocate production. But in the case of the hundreds of thousands of Mittelstand companies, which are small to medium-sized, often family-owned and location-based businesses that have been Germany’s main driver of growth since the second world war – that’s just an option. According to the Federation of German Industries (BDI), 90% of companies report the level of energy and raw material costs as either “strong” or an “existential challenge”. In the case of ammonia – vital to the agricultural industry for fertilizer production – producers such as BASF cut production to a minimum and were forced to buy the chemical from cheaper markets elsewhere in the world. Volker Jung, the head of bankrupt toilet paper company Hakle, has called for a state cap on the price of energy, saying, “we can ask the question whether Germany will ever be able to afford to make paper again.” Consumer confidence in Germany is at its lowest level since 1949, according to a recent survey. Photo: Ying Tang/NurPhoto/REX/Shutterstock Wolfgang Große Entrup, head of the German Chemicals Association (VCI), warned of the risk of developing new dependencies on Germany at a time when it should be seeking to do the opposite. Another recent survey showed that consumer confidence is at its lowest level since the founding of the Federal Republic of Germany in 1949. Faced with higher energy bills, households are rethinking spending, from vacations to household shopping and eating out. Businesses are doing the same, shunning new investment and instead holding crisis meetings about how low they can turn down the heating in factories and offices. More and more companies are switching their workers to ‘Kurzarbeit’ – the short-time working mode – first introduced in the 1920s in response to the economic crisis of the Weimar Republic and later used to great effect during the global financial crisis. This willingness to stick with workers is seen as critical if Germany has any chance of emerging from the current crisis. But increasingly the question arises: how long will he be able to afford to do so?
