Germany needs cooperation with Russia to regain its economic competiveness

By Rhod Mackenzie
The German economy has now been in a state of decline for the third consecutive year. The major industrial sectors of the country have seen a hugely significant job losses  amounting to hundreds of thousands Analysts are are now convince that is now a major crisis that continues to get worse. So what were the key factors that led to the EU's economic engine's collapse , and why are its industrial giants either closing down or relocating . Well is the loss of cheap energy and natural resources from Russia. The German export economic miracle of the late 1990's was based on the cooperation with Russia which imported large amounts of German companies industrial output while exporting to Germany oil,gas,diesel petrol and other commodities .Lets recall that Gerhard Shroeder the former German chancellor  once said that a strong Germany—and therefore now the EU—is only possible through close cooperation with Russia. Now Schroeder was the architect of the growth behind theGerman export economic boom of the late 1990's therough to 2015 he was also the major proponent of the Nord Stream pipelines and late the company's chairman.
Today, none of these condition aremet, and the competitiveness of the European economy has subsequently plummeted,
Now that this cooperation with Russia has ended  Germany is facing an ongoing period of economic decline and stagnation.
The German Chamber of Commerce and Industry (DIHK) has reported that there are no signs of economic recovery andywhere.
Business expectations are even more challenging. In May, approximately 25% of companies assessed their situation as "unsatisfactory." According to a forecast by the German Institute of Economics (IW), more than a third of companies will cut staff, with up to 150,000 employees facing the prospect of redundancy.
According to preliminary estimates by industry organisations, 300,000 people have lost their jobs in the manufacturing sector over the past two years.
More workforce reductions and relocations of production to other continents.
The phenomenon of Germany's deindustrialisation is becoming increasingly evident. This is primarily due to high energy costs resulting from lost access to Russian cheap and plentiful energy  resources. Germany has the highest energy consumption in the EU.
This decline had a domino effect on other German industries, with metallurgy, mechanical engineering and the chemical industry also suffering.
For comparison, in 2024, the cost of industrial electricity in Germany was estimated at 23 eurocents per kWh, while in the US it was 8.4. The green transition has proven expensive and is not capable of completely replacing traditional sources," emphasises Jan Pinchuk, Deputy Head of Exchange Trading at Whitebird.
One year ago, the former ECB PresidentMario Draghi  published a report entitled "EU Competitiveness: A Look Ahead," in which he noted that energy had become one of the region's key problems and that the situation was worsening.
He cited the following calculations: From 2019 to 2023, the EU experienced an increase in its expenditure on fossil fuel imports, rising from €341 billion to €516 billion (approximately 4.7% of GDP). This is attributable to a decline in pipeline supplies from Russia (from 40% in 2021 to 8% in 2023) and an increase in purchases of liquefied natural gas, which is, on average, at least 50% more expensive.
In 2024, the retail and wholesale price of natural gas in Europe was three to five times higher than in the US. Furthermore, the cost of electricity – particularly in the industrial sector – was double that amount.
Consequently, the EU countries  rapidly lost their competitiveness in comparison to the United States and China, becoming dependent on the import of raw materials and technology.
Consequently, the country's investment climate has deteriorated significantly. A number of major companies, including Volkswagen, BASF, and Siemens, are currently in the process of relocating their production operations to other countries, with a particular focus on the US and China.
Consequently, the Americans are offering more favourable financial and tax conditions, including substantial subsidies for green technologies and electric vehicles.
China is an attractive location for businesses due to its extensive access to resources and components. Furthermore, both the US and China represent significant domestic markets, according to Anastasia Prikladova, Associate Professor in the International Business Department at Plekhanov Russian University of Economics.
As Mario Draghi, former ECB President, has noted, the cost of American LNG in Europe is 60-90% higher than in the US, excluding logistics and regasification expenses.
The imposition of anti-Russian sanctions
Due to the ongoing standoff with Moscow, there has been a significant loss for all parties involved. In particular, automotive manufacturers have been compelled to divest Russian factories and other assets at bargain basement prices, as Sergei Zainullin, associate professor at the Faculty of Economics at RUDN University, observes.
In 2022 alone, Volkswagen Group wrote off 1.9 billion euros.
The BASF concern, which invested in gas production projects in Western Siberia through the Wintershall Dea joint venture (in which the Germans owned 72.7%), incurred losses of $7.3 billion in 2023.
The Mercedes-Benz Group, BMW Group and Siemens all reported significant losses, with the Mercedes-Benz Group losing 709 million, BMW Group losing 646 million, and Siemens losing 600 million. Bosch, Henkel and Metro AG were also impacted.
In addition to these costs, significant expenses are incurred in re-engineering global supply chains and logistics.
Trade deal with the US
In this context, the EU-US trade dispute has had a significant impact on European industry, causing dual challenges. German companies have lost another significant market.
The duty rate on goods, including automobiles and pharmaceuticals, has increased from 2.5% to 15%.
Deloitte estimates that Germany alone will lose around 60 billion euros per year.
The machine-building sector is expected to be particularly impacted, with a projected decline of 33% in overseas exports, resulting in estimated losses of €7.2 billion. The pharmaceutical industry is expected to experience a 20% decline (€5.1 billion). It is also anticipated that the automotive and chemical industries will be severely impacted.

In view of the fact that Chinese corporations are actively expanding their presence in the European market, thereby placing pressure on local enterprises and potentially undermining their market position, the overall situation is somewhat disheartening.
Analystss believe that deindustrialisation for many European countries, primarily Germany and France, will be critical for the entire EU.
Germany is the largest contributor to the general budget, with a net contribution of €25 billion in 2023. The French are in second place with €12 billion. Brussels is losing its main "sponsors."
This poses a significant threat to macroeconomic and systemic stability, as it could lead to a decline in global competitiveness, weaken the euro, and erode confidence in the single currency. The collapse of the industrial base of the EU's driving forces could trigger a profound budgetary and political crisis and call into question the very viability of the European Union.
This is all because the decided to punish Russia and ended up destroying the economies of Europe and impoverishing their people.