Bread, rolls, cakes and tartlets – “We are a classic artisanal bakery where what comes out of the oven is sold at the front,” is how Tobias Plaz advertises his business in Eutingen in southern Germany, a village southwest of Stuttgart. The family business has existed since 1890, Plaz is the fourth generation of master bakers. Only last year he completely remodeled his shop. Through a pane of glass, customers can see from the counter how the back part is being baked.
But Tobias Plaz just doesn’t know how to continue his business economically. At the end of August he received mail from his gas supplier. Instead of just under ten cents per kilowatt hour of gas, he should now pay just under 35 cents. “We want to share this information with you so that you understand if we have to adjust the prices for our baked goods,” writes the baker on Facebook and Instagram, where he posted a photo of his gas supplier’s notification of the new advance payments.
Bakers protest in Hanover
In other bakeries in Germany, too, the new discount demands from the energy suppliers are fluttering into the house these days. Sometimes with such high demands that the entrepreneurs are stunned to think about how they can still bear the costs. Eckehard Vatter, who runs a large bakery in Lower Saxony with 35 branches and employs 430 people, will in future pay more than 75,000 euros a month for gas. So far it was around 5,800 euros.
In Hanover, Vatter and many of his colleagues took to the streets. “Save us bakers” was written on signs and banners held up by around 1,000 demonstrating bakers and their employees. Many shops have been selling in the dark for days to draw customers’ attention. “The light is going out for us – today the light and tomorrow the stove?” is the motto.
A bun for five euros
The ovens cannot run without energy, but how are the bakers supposed to cover the high costs? Increase the price of bread and rolls accordingly? A roll for five, a loaf for ten euros? The bakers are sure that the customers would not support that. The central association of the German bakery trade warns that many companies will have to give up if there is no state financial aid.
So far, the federal government’s relief packages have primarily focused on private households and less on companies. 95 billion euros are estimated to make the skyrocketing energy prices manageable for the citizens. It took the coalition of SPD, Greens and FDP longer to realize that the economy would not be able to get through the crisis without support.
Who should pay the high prices?
“Every day we receive emergency calls from companies that are about to stop their production – also because these enormous energy price increases can no longer be compensated for by price increases and passed on to customers,” warns Hans Peter Wollseifer, President of the Central Association of Crafts, in an interview the “Rheinische Post”. The dynamics of bankruptcies are much worse than in the peak phases of the corona pandemic. According to a survey by the Federation of German Industries, a third of industrial companies see their existence threatened.
There are more examples of the crisis every day. The toilet paper manufacturer Hakle has filed for bankruptcy and justifies its inability to pay by saying that the increase in costs cannot be offset by retail prices. The steel company Arcelor Mittal has stopped two production plants in northern Germany and sent its employees on short-time work: the state unemployment insurance system steps in and pays the wages.
Germany is threatened with a recession
If a company stops production, this often has far-reaching consequences for other sectors of the economy and consumers. After the nitrogen works Piesteritz in Saxony-Anhalt can no longer operate their ammonia plants economically and have therefore shut them down, the company no longer supplies Adblue. This is the urea solution that cleans exhaust gases in modern diesel vehicles – including delivery vans.
Economists and the economy itself expect that Germany is on the way to a recession – comparable to the slump in the corona pandemic. At the German Employers’ Day, Federal Economics Minister Robert Habeck promised financial support, but had to admit that there was still no agreement within the government on the specific scope.
Economics Minister Robert Habeck cannot yet estimate how expensive the financial aid will be for taxpayers
What is certain is that not only large industrial companies that are in international competition should benefit, but also medium-sized companies and above all energy-intensive companies. So are bakeries. The government wants to decide on the program in the next few weeks, said Habeck in Berlin. However, it should take effect retrospectively from around September. “We now have to muster all the financial strength that is necessary to secure the good substance of our economy and jobs in this country,” said Habeck after a meeting with 40 medium-sized business associations. “It is to be expected that this will significantly relieve the burden on medium-sized companies, that it will take all the costs away from them, isn’t it?” It is not yet possible to estimate how expensive the program will be for taxpayers.
No permanent subsidies
Habeck announced that the financial aid would be paid for a limited period until efforts were made at national and European level to curb the high electricity and gas prices. But will that be enough? Steffen Müller, Professor at the Leibniz Institute for Economic Research in Halle (IWH), points out that rising energy prices and rising interest rates on loans are not temporary phenomena, but will remain so in the medium and long term.
“In this situation, aid programs that can only bridge a certain period of crisis postpone the problems by a few months, primarily at the expense of the taxpayer,” Müller wrote when asked by DW: “Measures that lower energy prices for a are also not useful, since they take incentives to save energy. That’s exactly what we can’t afford.”
The crisis is accelerating structural change
Low-interest loans make more sense, argues Müller, which should be granted with the proviso that production processes be converted to energy-saving ones. “The core of the argument is that energy prices will not fall back to the level of the last few years after this winter either. So something is changing structurally.”
The scientist writes that it is normally the task of companies to adjust to this. In a “structural change towards a greener industry, which has been greatly accelerated by the crisis”, the state can help and accompany the companies.
Collaboration: Klaus Ulrich
This article was first published on September 8, 2022 and updated on September 15, 2022