Media's ‘Sick Man of Europe’ Diagnosis for Germany Needs a Second Opinion
Jeffrey Brodsky
Since the 19th century, the epithet “sick man of Europe” has been used to describe European nations undergoing economic hardship or social restlessness—first the Ottoman Empire in the 1860s, then Russia in 1917, France in the 1950s, Britain in the 1960s, Italy in the 1970s and Germany in the late 1990s/early 2000s.
Corporate media outlets have recently been applying the phrase to Germany again in response to the Central European nation's negative GDP growth. "Is Germany the Sick Man of Europe?" a Bloomberg video (8/3/23) asked. A CNN article (8/24/23) explained "Why Some Are Calling Germany ‘the Sick Man of Europe’ Once Again." CNBC (9/4/23) reported, "Germany Is the ‘Sick Man of Europe’—and It’s Causing a Shift to the Right, Top Economist Says."
But their reporting has consistently ignored what is likely a primary source of Germany’s economic illness: the sabotage on the Nord Stream pipelines that carried natural gas from Russia to Europe.
Blowing up the economy
There is substantial evidence that the “sick” German economy has been significantly impacted by the loss of the pipelines, and it can be verified that the dearth of inexpensive Russian gas is a major contributor to Germany’s succumbing to a recession. Natural gas accounts for around a quarter of Germany’s overall energy mix. In 2021, the year before fighting over Ukraine's secessionist Donbas region deepened, Germany imported 142 billion cubic meters (bcm) of gas, with 52% of it originating from Russia. In the three years leading up to the current conflict, Germany’s natural gas consumption averaged 89 bcm. (Germany was able to reexport much of its imports, reaping the economic benefits from selling the surplus gas to neighboring countries.)
Nord Stream 1 alone was vastly larger than any other Russian gas pipeline to Germany, annually delivering up to 59 bcm. Germany’s Federal Office for Economic Affairs and Export Control does not identify the infrastructural origin of imported gas, so the public remains unaware of the exact volume of gas imports coming from Nord Stream. But Germany lost, at least for the foreseeable future, as much as a staggering 66% of its gas consumption, and 42% of its supply.
“The German economy is the European Union’s greatest economic casualty of the war in Ukraine," economist Jeffrey Sachs told FAIR:
The destruction of Nord Stream, the loss of trade with Russia and the boomerang effect of US/EU sanctions will weigh very heavily on the German economy, and hence on the EU-wide economy, for years to come.
Scrambling to find replacements for Russian gas, Germany has turned to liquified natural gas (LNG) from the United States—and it may even turn to Russia LNG, too. The European Union and the United Kingdom saw their imports of US LNG increase more than threefold in the first four months of 2022 from the previous year. At the same time, Europe is now importing greater quantities of LNG from Russia than ever before. According to a report in Spiegel (9/12/23), “There are many indications that this fuel will ultimately also be burned in Germany.”
Methane, a potent greenhouse gas, is the largest component of natural gas; an estimated 56,000–155,000 metric tons were released into the atmosphere by the Nord Stream sabotage. If the destruction of the pipeline expedites the transition to green energy, its long-term net impact may be positive. However, there are short-term repercussions.
Russian pipeline gas is more cost-effective than LNG, and using the the latter as an energy source is more harmful to the environment: It requires energy-intensive, low-temperature storage, fuel for transatlantic shipping (in the case of LNG from the US), liquefaction and regasification, and often the construction of LNG terminals (as seen in Germany).
The $19 billion elephant
In September 2022, three of the four strands that make up the $19 billion Nord Stream 1 and Nord 2 pipelines were ruptured by underwater explosions. Russia held a 51% stake in the pipelines, with remaining ownership distributed among four Western European nations. Financing for the project came from a Russian energy firm and Western European companies. The pipelines made landfall in Germany, the nation that depended on them the most.
Nord Stream 1 began delivering gas in 2011. Nord Stream 2 never entered service, as its certification was suspended by Germany in February 2022 following Russia’s formal recognition of two breakaway regions in Ukraine. In August 2022, Russia halted gas flows through Nord Stream 1, citing maintenance work. After the sabotage, in October 2022, Russian President Vladimir Putin offered to supply gas via the one remaining line of Nord Stream 2 that had not been damaged in the attack; his offer was rebuffed.
Corporate media’s knee-jerk reaction was to blame Russia for what stands as one of the most significant acts of industrial sabotage in history (FAIR.org, 3/3/23, 10/7/22). Yet with emerging evidence suggesting a Western nation—either the US, Ukraine or possibly a combination of the two—as the likely perpetrator, self-appointed media doctors who have dubbed Germany the “sick man of Europe” are declining to associate German economic woes with the $19 billion elephant in the room.
Misdiagnosing the patient
Hundreds of corporate media articles have recently focused on Germany, and many of them have characterized the country as the “sick man of Europe.” There is consensus in the reporting that skyrocketing energy costs, particularly the surging price of natural gas, are the primary drivers of inflation, recession and the plummeting industrial output of Europe’s largest economy. But omission of a key source, if not the main source, of the illness appears to be a significant oversight by the corporate press, akin to medical malpractice.
The case of Spiegel is a serious one, especially given the outlet’s recent history of breaking consequential stories about the Nord Stream sabotage. The attack is absent from a 7,000-word article—“Why Germany’s Economy Is Flailing—and What Could Help” (9/7/23)—bylined by no fewer than 11 reporters. The following week, the outlet continued to feign ignorance, posing the question “How Can That Be?” (9/12/23) in reference to Europe’s growing imports of Russian LNG.
NPR has covered the Nord Stream sabotage as well. However, an NPR article (9/27/22) on Germany's energy crisis immediately following the attack excluded its impact. Published on the very day following the sabotage, NPR’s piece about Germany’s return to coal as a fuel amid the urgency to find alternatives to Russian gas notably neglected to mention the unprecedented attack on both the environment and industry.
“Nord Stream” and “sabotage” are missing words from these Spiegel and NPR reports, as well as from hundreds of articles assessing Germany’s energy crunch (e.g., PBS, 7/19/23). Here the omission is the bombshell news. The unreported constitutes the core of the story, serving as the viral headline that remains unwritten.
What connects the Spiegel pieces and much of NPR’s reporting is a suppression of the specifics of the breaking news. Euphemisms are employed to avoid providing an accurate diagnosis. In the case of Spiegel, the Nord Stream pipelines are rechristened “the Baltic Sea pipelines” and the deliberate act of sabotage is called “failed Russian pipeline gas.” For its part, NPR (12/26/22) found it suitable to bowdlerize the bombed pipelines as “now-defunct.”
Prescription: less rights for workers
Having sidelined the sabotage as a major cause of Germany's economic troubles, many in the corporate press went on to recommend dubious remedies. Take CNN (8/24/23):
One problem—the cost of natural gas—has been particularly acute for its [Germany’s] energy-guzzling manufacturers. European gas prices soared to all-time highs last summer. Although they have fallen steeply in recent months, they are ticking up again as the possibility of strike action at liquefied natural gas (LNG) plants in Australia has raised fears of a global supply crunch.
The “possibility” of a labor strike is scapegoated for the high “cost of natural gas.” The subtext is that workers’ rights, already dangerously widespread and infecting the economy, must be curtailed.
CNN appears to be constraining the wider facts. The outlet defines recession “as two consecutive quarters of declining output.” The data confirming Germany’s fall into recession are based on its GDP performance in the first quarter of 2023. Output, in other words, contracted over the first three months of the year, following a contraction of 0.4% in the fourth quarter of 2022. Both time periods precede the pathogens of organized labor allegedly “ticking up” gas prices and Germany’s recent designation as the “sick man of Europe” (New Statesman, 6/7/23).
This is not the first time FAIR (e.g., 8/10/23, 6/1/23, 9/1/97) has documented the corporate press scapegoating workers’ rights for economic conditions.
Slashing corporate taxes rates are also among the medications recommended in various articles about the “sick man of Europe.” The expertise of the chief economist at Commerzbank was sought by a number of media organizations (e.g., Financial Times, 8/20/23; Deutsche Welle, 8/1/23; Yahoo! Finance 5/25/23). The expert told CNBC (8/24/23) that
Germany needs lower corporate taxes, less red tape, faster approval procedures, more investment in roads, bridges and digital infrastructure, competitive electricity prices and better schools.
Some of those prescribed economic and structural restoratives may very well improve the patient's economic health. But the articles touting corporate tax cuts as a cure overlook a critical fact: Corporate tax rates in Germany averaged 38.5% from 2001 to 2007, and have hovered at approximately 30% since 2008. How, despite these rates, the German economy managed to become, after 2008, a “powerhouse” and “economic superstar” doesn’t seem a question worth considering.
Too much social spending?
Politico (7/13/23), too, seems to have recommended treatment unrelated to the disease:
A big flash point will be social welfare. Germany operates one of the most generous welfare states, with social spending accounting for 27% of the economy last year (compared with 23% in the US). With Berlin under pressure to spend vastly more on defense, the belt-tightening—and the public backlash—has already begun.
A lot to unpack there. Large military contractors, such as Lockheed Martin and Raytheon, provide Politico with advertising revenue. Axel Springer, the multibillion-dollar German media company that owns Politico, has a documented history of hostility toward social democracy.
Like the CNBC article, the 3,400-word Politico piece does not contain even one sentence informing readers that “social spending” by the German government has seen a minuscule increase—from 25.5% to 26.7%—over the last quarter-century. Nor are readers told that although social spending in countries such as France and Austria accounts for around 30% of GDP, their economies are being given much cleaner bills of health than Germany’s.
US no model patient
The implication is that health would be regained if sickly Germany adopted an economic model more closely resembling that of the United States. But Germany’s economy minister seems to disagree that the German welfare state is a weakness that makes the economy sick.
“At the same time, the German economy retains a host of strengths,” Robert Habeck wrote in the Economist (9/14/23) in response to its August 17 cover story, “Is Germany Once Again the Sick Man of Europe?” “Our social-market economy maintains its traditions of employer-union co-operation and a powerful welfare state,” Habeck declared.
Is Habeck wrong to reject the US model as a cure for the “sick man of Europe”? Nein.
Following the pandemic, life expectancy in many other high-income countries rebounded. But life expectancy in the US, already lower than in peer nations, declined. The US spends more on the military than the next 10 countries combined, including China, Russia, India and Saudi Arabia. “Among industrial nations, the United States is by far the most top-heavy, with much greater shares of national wealth and income going to the richest 1% than any other country,” according to Inequality.org.
Perhaps most damning of all for the US, a country that prides itself on the “American Dream,” is its failure to even crack the top 25 on the list of nations with the highest socioeconomic mobility. Germany is ranked 11th, well ahead of the US.
But the health of the two countries may be more intertwined than initial diagnoses suggest. According to an MSNBC op-ed (7/13/23), “The US also has a lower inflation rate than any other G7 member—it’s not like Biden’s policies are driving up inflation in Germany.” But if the United States, either directly or through proxies, blew up the Nord Stream pipelines, it would bear a significant responsibility for the deteriorating condition of the “sick man of Europe”—and it’s going to need a really good medical malpractice defense lawyer, despite what establishment media have told readers.
|
