Germany fears inevitable bankruptcy amid energy crisis

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In a tweet on Thursday, German left-wing politician and chairman of the Bundestag committee on energy, Klaus Ernst, referenced statements by Chancellor Olaf Scholz that the sanctions should not hit Europe harder than Russia itself: “We have now imposed seven packages of sanctions and Gazprom is making record profits. At the same time, we are threatened with a wave of bankruptcies. Therefore: negotiate with Russia with an open mind".

The largest EU economy is anticipated to contract in 2023, as gas and electricity prices continue to skyrocket. According to the Ifo Institute for Economic Research, the Munich-based think tank, the ongoing energy crisis as a result of the war in Ukraine is “wreaking havoc” on the German economy and they project it could lead to a 0.3% drop in GDP next year.

The CEO of Deutsche Bank, Christian Sewing, previously stated that “as a result, we will no longer be able to avert a recession in Germany. Yet we believe that our economy is resilient enough to cope well with this recession — provided the central banks act quickly and decisively now,” noting that for now, many in Germany still have pandemic savings to fall back on in order to meet skyrocketing energy costs, while most companies remain "sufficiently financed".

However, Sewing warned that “the longer inflation remains high, the greater the strain and the higher the potential for social conflict.”

The German government approved August 4 a €65 billion relief package, which includes continued cheaper public transport and tax breaks for energy-reliant companies, as they have been affected the most by the biggest surge in prices.

According to the Federal Statistical Office, Germany's inflation rose to almost 8% in August after declining slightly in the months of June and July.

German politician and fellow left-wing, Sahra Wagenknecht, condemned the government for dragging the country into a full-blown “economic war” with Russia who happened to be its top energy supplier, while she referred to the Bundestag concerning the fatal impacts that the Russian sanctions have on Germany.

The Bundestag warned that Germany's economic health is at stake considering the spiraling of energy prices out of control, which will serve as “a reminder of the good old days,” followed by Wagenknecht urging for the cancellation of restrictions and engaging in talks with Moscow.