When the Federal Chancellor arrives at the Hotel Adlon in the morning, he has at least one tiresome matter off the table. The gas price brake, a key instrument for the winter crisis, is now to apply retrospectively to the first two months of next year. It was originally supposed to start in March. However, the federal states and the opposition had vehemently demanded that the “winter gap” be closed. On Tuesday morning, shortly before the start of the SZ economic summit, the federal government cleared up the conflict. Olaf Scholz, who opens the summit, gets it right.
The Chancellor’s speech was initially shaped by his trip to Southeast Asia last week. Before the G-20 summit in Bali, Scholz visited Vietnam and Singapore, two very different economic powerhouses in the region. He wants to share some of the insights from this trip, says Scholz at the beginning. “An increasingly multipolar world is currently being fundamentally reorganized,” explains Scholz, a development that can nowhere be observed more clearly than in Southeast Asia. The global shifts in power and what they mean for the people in Germany are the big issues that Scholz had taken on for his chancellorship – long before the Russian invasion of Ukraine and his turning point speech in the Bundestag. It is therefore a kind of keynote speech that Scholz brought to the Adlon and which ultimately culminates in an appeal to the assembled business representatives to show “willingness to change”.
Gone, Scholz makes it clear right at the beginning, are the happier times when Europeans and North Americans could enjoy the best of all economic worlds: stable growth, low inflation and high employment rates. This “economic exceptional situation” could not last, says Scholz. “Russia’s war and the economic consequences of the pandemic may have accelerated its end, but they were not the trigger for it,” he explains. For decades, countries like Vietnam and Indonesia had been producing goods relatively cheaply, primarily for the European, North American and increasingly also for the Chinese market. In the meantime, however, a billion people have risen to the middle class – with the corresponding purchasing power. From Scholz’s point of view, this is one of the deeper causes of inflation, but also the great success story that globalization has written.
“De-globalization is a dangerous wrong track”
It is not the first time that Scholz has revealed himself to be a big supporter and, above all, a defender of globalization. “De-globalization is a dangerous wrong track. Not only because large parts of the world would not go down this path,” he warns. Germany and Europe, with their highly technological and export-oriented economy, depend on the international division of labor. The aim must be more trade with the up-and-coming regions of the world, “under fair rules, of course.” The Chancellor’s words express a longing for a renaissance of free trade agreements. After the failure of TTIP during the Trump administration, Scholz is feeling his way – albeit cautiously – towards a new attempt at an agreement with the USA.
“We should take a very close look at the idea of an industrial tariffs agreement with the United States,” Scholz said. After all, such an agreement is always better “than an overbidding competition for subsidies and protective tariffs, such as some see as a result of the American Inflation Reduction Act see us coming”. The new US law to combat inflation provides for massive subsidies and protective mechanisms for US industry and has therefore met with sharp criticism in the European Union. Scholz is therefore concerned about a trade war with the USA at a time when Americans and Europeans need all their strength to do what is necessary to counter the Russian war against Ukraine.
“This mistake will not happen to us a second time”
As a lesson from the Russian war of aggression and the misuse of energy as a weapon by Kremlin chief Vladimir Putin, Scholz also reaffirms his commitment to diversification. Finally, one experienced “what it means to become too dependent on a strategically crucial resource such as gas”. His perception from discussions with German business representatives is: “This mistake will not happen to us a second time.” In concrete terms, this means that the dependency on China in particular should be reduced by looking for new sources of supply and sales markets.
Scholz packs what that means for the economy into a kind of motivational speech. After all, German companies are “sought partners” who, for example, are developing the technologies that are needed worldwide for the transformation towards a climate-neutral economy. The German economy must therefore “not fear the changes associated with a multipolar world – on the contrary”. In particular, the Chancellor praises the middle class. Due to their size, their structure and their innovative strength, German companies are often “quicker in reacting to upheavals in the global economy and in using the opportunities of diversification and transformation”.
Of course, Scholz also knows that the current mood is different and more in line with the cold, wet weather in Berlin. “We will ensure that Germany’s economy, that Germany as a business location, survives the difficult times,” promises Scholz. In this context, he unsurprisingly praises the gas price brake, but also promises to tackle structural problems such as the shortage of skilled workers. The changed world requires a willingness to change in Germany, concluded the Chancellor. But according to his observations in the past few months, there are. And that, Scholz assures at the end, gives him hope.