Volume 71, Issue 2

Germany’s labour market faces substantial challenges caused by demographic change in the next decade. However, a country comparison with Sweden and Switzerland reveals hidden labour market potentials. Raising the employment rate towards the Swiss level implies an increase of 1.83 billion labour hours. An alignment of weekly working hours as well as annual working weeks in Germany with the (higher) values of those in Sweden and Switzerland would raise annual labour volume to 4.71 billion working hours. A reduction of involuntary part time work in Germany leads to an increase of 691 million working hours. A better utilisation of the existing labour force potential can thus contribute to tackle the adverse effects of demographic change and enable a state budget consolidation after the crisis.

In this article, we provide the results of a simple quantitative analysis of the potential remedies to reduce the supply gap in Germany that arises if Russia stops delivering natural gas. We take into account the supply potential of other suppliers, and combine this with an analysis of the additional supply potential by stopping electricity generation from natural gas. Moreover, we investigate the effect of minimum storage requirements. We find that a realistic expansion of supply by other providers, in particular Norway, combined with the temporary replacement of gas-fired power plants by coal-fired power plants and expansive storage filling to 90 % of storage capacity strongly reduces the winter supply gap. In summer months, the supply gap is even negative, indicating the potential to store even more for the winter. In other words, most of the natural gas consumption can be maintained even if Russia fails to supply to Germany. It is important that the temporary replacement of gas-fired power plants by coal-fired power plants is not accompanied by an expansion of the CO2 emission cap, in order to ensure emission neutrality of the measure. If the expansion of renewable generation capacities proceeds as planned in the German government’s „Easter Package“ of spring 2022, the increased use of coal-fired power plants can be temporary and the coal exit in 2030 can be maintained.

In view of an impending termination of Russian gas supplies, it is necessary to take a closer look at the existing regulations in the event of a shortage in German gas supply. In this context, the legal framework provides that in the event of an acute shortage, the gas supply of individual consumers will be restricted or even stopped by the competent authority, thereby rendering the effect of the market for the distribution of scarce goods ineffective. This situation must be prevented. In principle, priority is given to private households and social services, so that primarily the industry would have to reduce their consumption of gas. However, given the threat of widespread disruption to German industrial production, saving potentials should be leveraged in all sectors. This is because an extensive supply disruption to German industrial operations would result in extensive and incalculable societal costs due to cascading effects. It is therefore also in the best interests of the population to avert such an undersupply through joint efforts. First of all, the usage of natural gas in power generation should be reduced significantly to enable or increase the filling of storage facilities. Additionally, current studies also point to possible reduction potential in the household sector, for example through moderate adjustments of room temperature. Such measures can help to get through the next winter without endangering Germany too much as an industrial and business location.

The article discusses the German government’s reaction to the perception of an excessive dependence on Russian gas that was caused by the Ukraine war and to the reductions in Russian gas supplies that have taken place. First, the article lists various policy deficits: Naivité of the expectation that Russia would watch German attempts to reduce its dependence without interfering, restricting thinking about gas scarcity to the mobilization of additional supplies, without paying much attention to demand, complete neglect of the allocative role of prices, finally an inability or unwillingness to communication the bad news to the population that we have become poorer. Thereafter, the article addresses some of the difficulties that stand in the way of flexible price adjustments, existing contracts as well as social concerns. Finally the article discusses the concept of supply security, indicating the difference between private and social concerns, and pleading for an assumption of government responsibility for those concerns that cannot be expected to be met by private suppliers.

Economic developments are often accompanied by narratives, which correspond to popular or generally understandable as well as easily reproducible descriptions, images and interpretations. In debates about European integration, the sovereign debt crisis, and solutions to the Corona crisis – the latter of which has rekindled concerns about the public finances of thrifty states – the narrative of Europe as a “transfer union” plays a major role. Unilateral payments from economically strong to economically weaker countries are assumed. An evaluation of all plenary minutes of the German Bundestag shows that this narrative has spread since the introduction of the Euro. Its peak has been reached with the European sovereign debt crisis of 2010/11. However, this is a distorted picture, which identifies Germany as the loser of European integration. The advantages to all member States deriving from currently discussed – or already implemented – measures to stabilize the EU can be explained by means of more appropriate descriptions of Europe as a “stability union” or “risk community”.