Winter concerns – Wifo boss: Lack of gas could double inflation

The economy will continue to do well for the rest of 2022, but from December it will be “possibly very fat,” Felbermayr said Thursday evening at the “Energy Transition – But Safe” association discussion event in the German capital, Berlin.

“War economy conditions” threaten
“There is a huge potential for social conflict,” the Wifo boss warns. Then much will no longer be done according to the rules of the market economy. There was a threat of “war economy conditions” that “could drive people onto the streets”. Short-time working can then again be expected, “with very large numbers quickly”. One-off payments wouldn’t help, people wouldn’t realize until the middle of the month they would run out of money.

Former EU Commissioner from Germany, Günther Oettinger, also spoke about the wartime economic conditions in winter. There will be “a gas price that has washed up” because Russian President Vladimir Putin will “open and close the gas tap” and prevent the storage tanks from being filled.

Edtstadler speaks of ‘valley of tears’
Minister of Europe Karoline Edtstadler (ÖVP) spoke of a “valley of tears” that one had to go through and said that one had to face the reality “that we have to reckon with a loss of wealth”. The question arises “what can you endure”. Given what Europe may be dealing with now, “the coronavirus pandemic was just a warm-up,” the minister said.

In the fight against high energy prices, Felbermayr called for the electricity price to be decoupled from the gas price. A price cap should in any case be in line with Europe and would also cost “tens of billions”, but would still be more efficient than measures such as special taxes on energy companies or a fuel discount. However, it would entail numerous consequential costs, such as export bans for the electricity that is made cheaper with taxpayers’ money.

Verbundbaas wants more sustainable energy
Verbund boss Michael Strugl argued that such interventions in the electricity market would inevitably lead to a state-regulated price “like the one from 20 years ago” – which he rejects. The price cap in Spain and Portugal has also resulted in “gas plants running day and night” – which would further accelerate the gas shortage. According to him, the only alternative is to create new sustainable energy capacity as quickly as possible. “We have to build, build, build,” Strugl says. Fossil power plants would only be pushed out of the market if sufficient renewable energy plants were available. In the transition period, socially needy and affected companies should be supported.

The group agreed that Europe can only face the crisis together. If the EU countries were to work against each other now, it would make the situation even worse. The positive closing note that the moderator had vehemently demanded was only given in the long-term outlook. Strugl expects that while it will cost taxpayers billions to help the hardest hit, in the longer term, the transformation of energy supplies to renewables will accelerate. Felbermayr recalled a Wifo calculation according to which the long-term welfare loss was only half a percentage point of economic output. “In the long run, it’s manageable,” he said.

And while Edtstadler quoted Jean Monnet, one of the intellectual co-founders of the EU: “Europe was forged in the crisis”, Oettinger is sure that Putin will not achieve his goal of “bringing the EU to its knees”. Europe has become stronger and stronger during the crisis. And he has very positive memories of his grandparents’ living situation, where only the kitchen – with wood – was always heated, while in winter the living room was only heated on Sundays – with coal – and the bedroom was never warm.