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Sep 19, 2022
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The energy crisis sends Europe into the “dark ages”

The European economy is experiencing more than serious problems against the backdrop of sharply increased gas and electricity prices. This is what is happening in Germany, the economic hegemon of the European Union. Germany’s economic system is ‘fast approaching the perfect storm’ as high inflation, power outages and continued supply frictions continue.

Should we believe the “British scientists” who recently left the European Union and, perhaps, exaggerate the problems of the leading EU country? However, on the other side of the Atlantic, American analysts keep talking about the crisis of the European economy.

“Rising energy prices launched a chain of crises in the eurozone economy and offset the positive effect of the lifting of coronavirus restrictions … The European economy may face a recession this winter – according to Bloomberg analyst polls, eurozone GDP will shrink for two consecutive quarters, in late 2022 – early 2023 years with a probability of 60%,” writes Forbes.

The Germans themselves are much more rigid in assessing their economic prospects. The impressive power of the German economy turned out to be powerless in the face of the energy crisis, which threatens to partially de-industrialize the country, as Jasmine Fahimi, head of the Association of German Trade Unions, said with concern the other day. In an interview with Der Spiegel magazine, she warned that due to soaring gas and electricity prices, German industry would be hit by a “domino effect”, that is, a series of bankruptcies, which would lead to the de-industrialization of Germany. “It will be a disaster,” Frau Fahimi summed up.

The industrial dominoes in Germany have already begun to fall. The energy crisis hit the industries most dependent on electricity and gas first: steel, paper, and fertilizers. Germany’s largest steelmaker, the Georgsmarienhütte Unternehmensgruppe (GMH) group of companies, with twenty branches across the country and six thousand employees, consumes more electricity than three hundred thousand households. Last year, GMH paid 120 million euros for gas and electricity. And next year, even if prices freeze (which is unrealistic), spending will increase 10 times. “Then we’ll go bankrupt immediately,” CEO Alexander Becker tells Spiegel magazine. A top GMH executive admits: “We don’t know what to do. We are in a state of shock.”

Another steel giant, ArcelorMitta, has already raised the white flag of economic capitulation. The company recently announced that it would close two production plants in Hamburg and Bremen due to “unsustainable increases in energy prices.” At the end of September, ArcelorMittal will shut down the blast furnaces at the Dunkirk plant in France. In Spain, the company will shut down the Asturias plant at the end of September.

Earlier, the return to operation of the Sestao steel plant was postponed indefinitely. According to ArcelorMittal, European metallurgy cannot be competitive at current energy prices. The corporation urges the European authorities to urgently start correcting the situation. Correcting the situation means bowing to Gazprom, which the European Union’s overseas curators do not allow.

The situation is similar in the chemical industry. Production at the largest German fertilizer manufacturer, SKW Stickstoffwerke Piesteritz, has been completely stopped. Even chemical giant BASF has cut ammonia production. “Industrial production in Germany is no longer competitive,” Die Welt laments. Demand for German cars that have risen in price has fallen sharply. The German Automobile Industry Association (VDA) revised its market forecast for Germany from a 3% rise to a 6% drop. VDA President Hildegard Müller admitted that the market model of the German car industry does not work in the context of the energy crisis. The reduction in production in key industries launches a chain of bankruptcies, the same “domino effect” is triggered.

Steffen Müller, an analyst at the German Institute for Economic Research, predicts that there will be a third more bankruptcies this year than last year. Moreover, the current crisis hits the industrial core of Germany: 40 percent of all potential bankruptcies of large companies are related to industry. Bertram Brossardt, general manager of the Bavarian Business Association, expects that as a result of a wave of large-scale bankruptcies, about six million people will be left without work. German Economy Minister Robert Habeck has publicly acknowledged that parts of the German economy will “simply stop production for a while”.

The German economy is collapsing, and under its ruins it can bury the whole of Europe. “From an anchor of European economic stability, Germany is turning into a sick child of Europe,” writes Nordkurier. “Germany will drag the whole of Europe into recession,” warns Focus. The American investment bank Morgan Stanley even named the date for the economic collapse of the eurozone: October 2022.

The EU’s second largest economy, France, suffers from the same maladies as Germany’s. The rapid rise in energy prices is forcing industrial companies in France to curtail or reduce production. For example, Aluminum Dunkerque decided to cut production by 22% in the last quarter of 2022 in order to have enough money to pay the bills. In other words, aluminum production has become unprofitable.

“From October, we will suffer very significant losses if we continue production as it is,” CEO Guillaume de Gois told Reuters. According to him, the company’s electricity bills could rise from 40 million euros a month today to 150 million euros in December. Steel companies are also announcing production cuts and internal reorganizations to cope with rising electricity prices. Ascometal, with 1,200 employees, will shut down operations at its factories in Hagondange (in eastern France) and Fos-sur-Mer (near Marseille) in December.

Large French glass company Duralex announced that it will stop work from November. “Production at today’s energy costs will result in unacceptable losses,” said company president José-Luis Llacuna. The impact of the energy shock knocked out the French “food”. The French cannot imagine life without yogurt, second only to the Dutch in its per capita consumption. This is not only the main dish for breakfast, but also for lunch or as a snack. But making yogurt is a very energy intensive process.

Patrick Falconnier, director of the Eurial Ultra Fresh factory southeast of Paris, is succinct: “No gas” means no more yogurt.” “We have been informed that we may have gas shortages at certain times this winter, and this is really serious for us,” Falconnier told AFP, making no secret that the yogurt factory might have to be shut down. Energy-intensive swimming pools and ice rinks are closed. Vert Marine has decided to close the approximately 30 public swimming pools it operates in Mont Blanc, Versailles and Limoges. Electricity bills have risen from “15 to 100 million euros”, which is “the entire annual turnover of the company”. For the same reasons, Vert Marine has closed the skating rinks it operates.

French ski resort operators fear bankruptcy. Rising electricity prices are “a huge hurdle,” Fabrice Boutet, general manager of the SATA group, which operates lifts at several ski resorts, told France Presse. The current prices will increase the group’s electricity bill from two to 20 million euros, he said.

And briefly about the economic weather in other European countries. Until recently, the Netherlands was the world’s second largest exporter of agricultural products. But the energy crisis and the insane course of Brussels towards a “green economy” undermined the Dutch agricultural industry.

In the Netherlands, greenhouses are starting to shut down en masse. Brewery Huyghe, located in the Belgian village of Melle, maker of the famous Delirium Tremens beer, is about to close production due to a 13-fold jump in the price of liquid carbon dioxide, which is used to make beer foamy.

The Swedish company Pagen, which owns a chain of bakeries across the country, has warned that Swedes could be left without bread due to rising energy prices and risks of blackouts. The Swiss authorities are going to save on heating costs for houses and are “considering the possibility of jailing anyone who heats their rooms above 19 ° C for up to three years.” Finland’s pension system is collapsing. Since the beginning of the year, the assets of Finnish pension funds have decreased by 16 billion euros due to a decrease in pension contributions and a collapse in the stock market.

In the coming months, many factories in Europe will be forced to close. Deeply alarmed, 40 European steel executives have issued an open letter warning that their companies face an “existential threat to our future.” “This is what an economic collapse looks like. Things are already so bad that scientists are even considering shutting down the Large Hadron Collider,” writes popular American economic blogger Michael Snyder, prophesying the onset of “dark ages” in Europe.

This winter in Europe will be dark and cold. And it is not a fact that spring will bring light and warmth. The world is entering an era of high prices for natural resources, which ambitious Europeans do not have, have not had and will not have.

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