These provide 90% of the total credit to the Mittelstand family-owned companies, which were once the foundation of the German Wirtschaftwunder, but are now under increasing pressure. The nightmarish scenario for the German conservatives unfolds before their eyes. “The euro became the successor to the Italian pound, not the successor to the German mark, as we feared,” said Professor Thomas Mayer, a former chief economist at Deutsche Bank and author of The Inflationsgespenst. “We saw the echoes of the 1970s even before the war in Ukraine began. “The ECB uses models that do not work and has forgotten the money supply: the Keynesian example is supreme,” he added. “It has succumbed to pure fiscal domination, just like the Banca d’Italia in the 1970s, when it was forced to buy Italian government bonds. Southern Europe is now so heavily indebted – including France – that the ECB cannot raise interest rates. It is fully boxed. “Of course, everyone will blame Putin and claim that none of this could have been predicted,” said Professor Mayer. Otmar Issing, the ECB’s founding economist and a prominent figure in German business circles, said the central bank had betrayed the stability mandate and now had to bite the ball before it was too late. “The war is not an excuse to delay the exit from the mass bond markets. “The ECB is going to pay the price for not heeding the countless warnings and for stopping its hyper-monetary policy a long time ago,” he said. The Evercore ISI said the ECB may need to navigate the reefs in the wake of an economic downturn, while at the same time setting up a “dispersal watchdog” to protect Club Med, which some may call a euphemism for the illegal monetary rescue of insolvent states. . The German Institute for Macroeconomic Policy warned this week that the war in Ukraine had stalled the recovery, with the risk of an unpredictable “waterfall phenomenon” through supply chains and financial channels. A complete shutdown of Russian coal, gas and oil could cut growth by 6% of GDP, leading to a deep recession. Germany has not yet recovered from supply disruptions after Covid, especially the lack of semiconductor chips used in the automotive industry. Now there is a second blow from Ukraine, a manufacturing component of car parts and neon gas required to produce chips. Unlike France and the United Kingdom, Germany has not yet regained GDP levels before the pandemic. The longer this prolonged crisis continues, the more it begins to look like depression, with constant structural and backwardness. The last window closes slowly before the country’s demographic decline begins in earnest. The huge difference in gas and energy prices between the US and Germany is destroying German industrial units. Chemicals, fertilizers, steel and metallurgy companies are either shifting their production to US-based plants or losing global market share as a whole. The strain is worsening at a time when the German car industry itself is facing the existential threat of electric vehicles, which it has neglected for too long. Professor Wieland said the debate in Berlin about whether a Russian energy embargo would be costly is not the most important point. Germany has no choice: it is already in conflict with Russia. “You have to assume that Vladimir Putin will speed up the supply freeze when he does the most damage and it will be more beneficial for him. “So we have to put all the levers in motion now to prepare for that.”
