On Monday a team of engineers on Germany’s northeast Baltic coast will close down the Nord Stream pipeline for its annual servicing.
Unlike Nord Stream 2, its infamously complete yet defunct sibling, the original pipeline still carries nearly 60 billion cubic meters of Russian gas under the Baltic Sea to Germany.
Given Russia’s growing energy war with the West, however, no one is sure if Russia’s state-controlled energy giant Gazprom will ever reactivate Nord Stream 1, which is scheduled to reopen on July 21st. Certainly German federal economic and energy minister Robert Habeck isn’t counting on it.
“After all we’ve seen it wouldn’t be super surprising if they say ‘we found something during the servicing, we cannot switch it back on and that’s that’,” said Mr Habeck.
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With Russian gas deliveries to western Europe already throttled back by 40 per cent in the last weeks, ostensibly because of missing turbines, Mr Habeck has flagged energy rationing as likely and urged Germans already to cut short their daily shower. That is already reality for tenants in Germany’s eastern state of Saxony, with warm water supplies rationed to just three blocks daily totalling 10 hours.
“This isn’t about annoying our tenants,” said the Saxon landlord, “but to prepare them for perhaps not being able to pay for gas next year.”
With gas prices already up 640 per cent in a year, a Nord Stream shutdown could see Europe’s largest economy enter the William Faulkner pattern of collapse: gradually, then quickly.
Exactly six months after taking office Chancellor Olaf Scholz and his new Berlin administration face a perfect storm of war, an energy prices spike and supply collapse driving an inflation surge.
Annual prices rises in Germany are at a 50-year high of around 8 per cent, according to official figures. And from April to May Germany recorded its first monthly trade deficit since 1991 of €1 billion as price surges and supply chain disruption weigh heavily on the country’s industrial base.
Losing its “export world champion” crown has focused minds that the war in Ukraine, hot on the heels of the pandemic, has left Germany exposed and vulnerable like never before.
As autumn looms, fears are growing over whether Germany can fire its industrial machine and heat millions of homes.
The Scholz administration has already agreed two relief packages worth €30 billion, including higher tax-free allowances and higher heating subsidies for welfare recipients as well as a €9 monthly train ticket and cuts to petrol tax and an electricity bill surcharge.
This week, after a meeting of employers’ organisations, unions and Bundesbank officials, Mr Scholz discussed measures for a third aid package, admitting the “current crisis won’t be over in the next few weeks”.
“To put it another way,” he said, “we are facing a historic challenge.”
In Germany, where the traumatic memory of 1922/23 hyperinflation is never far away, Mr Scholz has admitted that the rising cost of living could have “explosive” effects on social cohesion. It is already testing the ideological fault lines between Germany’s three ruling parties — the centre-left Social Democratic Party (SPD), pro-climate Greens and liberal Free Democratic Party (FDP),.
Senior SPD figures are calling for more one-off welfare payments, while the Greens want more targeted climate-friendly measures and fewer of the broad tax breaks favoured by FDP finance minister Christian Lindner.
He is already in territory no liberal finance minister ever wants to be. After massive additional spending — on pandemic measures and defence investment — Mr Lindner has agreed to spend an extra €15 billion to refill Germany’s depleted gas reserves. In addition he has approved a €10 billion public loan to keep the lights on at Gazprom Germania, the Russian energy trading, storage and transmission business that has been run by Germany’s energy regulator since April and renamed “Securing Energy for Europe GmbH”.
But Mr Lindner has warned that even a German finance minister isn’t made of money. He noted this week how, after years of effectively free money, the cost of servicing Germany’s federal debt will rise 650 per cent to €30 billion annually.
On two issues Mr Lindner remains firm: he will block all tax increases and, next year, reimpose Germany’s debt brake, set aside in the pandemic, to force constitutional limits of fresh borrowing.
“My work serves the purpose of ensuring our country gets without further damage through this crisis,” said Mr Lindner this week, as reports began circulating that he is planning drastic cuts to social spending.
On Thursday in the Bundestag, under unprecedented pressure, economics minister Robert Habeck defended new renewable energy measures with an unprecedented attack on the opposition Christian Democratic Union (CDU) and its former leader, Angela Merkel.
“We have seen in the past an ever-growing dependencies on Russian fossil energy, a lack of diversification, missed climate goals, sluggish expansion of renewable energy,” he told parliament.
With the energy supply on a knife-edge ahead of Monday’s Nord Stream 1 servicing, Mr Habeck had a firm message for the listening public: the four-term chancellor had “left Germany standing out in the rain”.
