“There’s never been anything like it,” Georg Geier, the company’s chief executive, told CNN Business.
These companies are an essential part of the “Mittelstand”, the 2.6 million small and medium-sized enterprises that account for more than half of Germany’s economic output and nearly two-thirds of the country’s jobs. Many are family owned and deeply integrated into rural communities.
“We are informed [of our energy costs] almost every day,” Geier said. “When we get up until we get out.”
Europe’s largest economy is particularly vulnerable. According to the International Energy Agency, in 2020 Germany depended on Russia for about 46% of its natural gas consumption. That number has likely fallen since the start of the war, but a sudden interruption in imports from Russia would be “catastrophic” for manufacturers like Siempelkamp, Geier said.
So far, Siempelkamp has not reduced production, but it will pass at dazzling cost increases for its customers, such as the copper and cement makers who use their grinding mills, and electric car makers who use their machines. In turn, it expects its customers to pass the costs on to consumers.
In Berlin, an ice cream machine also feels the tension.
Florida Eis is partially insulated from high prices — it has switched much of the energy it uses for production and delivery to renewable sources — but its suppliers have not. The company now pays between 30% and 40% more for its milk.
“The sugar industry needs an enormous amount of energy. If they run out of gas, there is no more raw sugar,” said Höhn. “We cannot buy raw sugar on the world market because of EU regulations.”
“We would have massive budget cuts to a complete stop,” he added.
Lightning-fast prices have shaken a country that has long been proud of its stable economy, and which still carries a deep-seated fear of the kind of hyperinflation of the 1920s and 1930s that is widely believed to have brought the Nazi Party to power. has helped.
Siempelkamp director Dirk Howe wonders how long all this can take.
“We’re kind of in a spiral now,” he told CNN Business.
That benefit has now become an obligation.
“Natural gas is likely to remain expensive after an embargo or a supply freeze for quite some time,” Sebastian Dullien, research director at the Macroeconomic Policy Institute, told CNN Business.
He warned of “structural damage” to the German economy if Russia cuts off its gas — damage that will be harder to repair than the 2008 financial crisis. That could spark a recession at least as deep and potentially lasting much longer than a decade. past.
Fear of ‘stagflation’
Inflation is only part of the story.
German economy may already be on its way go inside a recession. The German Council of Economic Experts, a government advisory group, last month lowered its forecast for GDP growth in 2022 from 4.6% to 1.8%, citing inflation and the war in Ukraine.
Manufacturing output shrank this month and fell to the lowest level since June 2020, according to the survey data from S&P Global, and falling confidence could spell a prolonged downturn.
“The risk [of a recession]I’d say is over 50% right now,” said Dullien.
‘We have to cope’
German Association for Small and Medium-sized Businesses, said some of its members were: production has already been scaled back due to shortages.
†[Production cuts are] not the due to a lack of electricity, or high electricity prices, but [because] they have no materials to produce the goods,” Hans-Jürgen Völz, chief economist of the association, told CNN Business.
“For example, aluminum, steel and everything [else] that is currently in short supply around the world due to sanctions against Russia.”
Höhn, in Florida Eis, considers himself an optimist, but even he cannot ignore the “dark clouds” gathering over the German economy.
“We have to cope,” he said.