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Germany has two options Bad and Very Bad says Economist

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For the West, and especially for Germany, there are two options for further developments: bad and very bad, says economics expert Daniel Stelter. If a boycott of Russian oil and gas is introduced, Germany will simultaneously endure further price increases and a stagnant economy. In addition, we should expect problems in the food sector and, possibly, a new wave of refugees, he warns in an interview with the German Focus magazine.

Sanctions against Russia have been tougher than expected, but they change little, says economics expert Daniel Stelter. In an interview, he said that Russia remains self-sufficient and still receives income from oil and gas exports. ‘Ultimately there are two options for what can happen: bad and very bad,’ warns the economist and founder of the discussion forum Beyond the Obvious, which specializes in strategy and macroeconomics.

In the case of a bad option, Germany will get stagflation. That is, rising prices against the backdrop of economic stagnation. Rising inflation is already noticeable, ‘and we will get a big problem in the food sector,’ Stelter said. Russia and Ukraine supply about 25% of world wheat exports, Ukraine, about 90% of sunflower exports. Also, from there comes a lot of corn and barley.

As if this is bad enough, Stelter does not rule out a new wave of refugees. If the situation in the states of the Middle East becomes unstable again, refugees will again pour in from there. To prevent this, it may have been worth buying wheat at a higher price and reselling it to these countries at a cheaper price, the German economist suggests.

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From his point of view, China has acted smartly: they have created storage facilities and secured their stocks of raw materials, while Germany does not have such reserves. ‘You see: gas, coal, food, prices will rise significantly. It worries me,’ Stelter told Focus journalists.

However, there is also a ‘very bad’ scenario. ‘If the world decides to boycott Russian oil and gas, we will get a double-digit inflation rate and our economy will sag significantly,’ the expert notes. Sanctions always hurt both sides. It’s just a matter of who lasts longer. ‘Germany will suffer seriously, because its dependence on Russia is disproportionately high,’ emphasizes the German economist.

In this case, the country will slide into recession. ’Thus, we have a choice between stagflation and a stag-flationary recession, when the economy contracts and inflation rise at the same time,’ Stelter warns. In addition, he notes the risk of unrest in North Africa.

According to the economist, in the conditions of a shaky situation throughout the world, China will receive the greatest benefit. The proximity of Beijing to Moscow is known to everyone, India’s position is not completely clear. 

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However, there is a great danger that more technology will come from China to Russia and more raw materials to China. ’This is tragic because we had to do everything to bring Russia and Ukraine closer to Europe. Now it doesn’t work anymore,’ Stelter regrets. Source

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