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"Social Peace Is In Great Danger": Germany Is Quietly Shutting Down As Energy Crunch Paralyzes Economy

by Tyler Durden Saturday, Jul 09, 2022 - 11:00 AM

Earlier today we wrote that Germany's largest landlord, Vonovia, had taken the unprecedented step of restrictring heating at night, a terrifying preview of what lies in stock for the "most advanced" European nation this winter. Alas, it's going to get worse, much worse.

According to the FT, Germany is now rationing hot water, dimming its street lights and shutting down swimming pools as the impact of its energy crunch begins to spread like the proverbial Ice-Nine wave, from industry to offices, leisure centers and residential homes.

The reason behind Germany's slow motion paralysis is well-known: the huge increase in gas prices triggered by Russia’s move last month to sharply reduce supplies to Germany has plunged Europe’s biggest economy into its worst energy crisis since the oil price shock of 1973

With electricity prices hitting never before seen levels, gas importers and utilities are fighting for survival while consumer bills are going through the roof, with some warning of rising friction (not to mention the infamous wheelbarrows full of cash).

“The situation is more than dramatic,” said Axel Gedaschko, head of the federation of German housing enterprises GdW. “Germany’s social peace is in great danger.”

Unfortunately, as tensions over Russia’s war in Ukraine escalate, officials fear the situation could get worse. On Monday, as we reported last week, Russia is shutting down its main pipeline to Germany, Nord Stream 1, for 10 days of scheduled maintenance. Many in Berlin fear it will never reopen.

Commenting on the infamous July 22 day when Russian gas flows are expected to resume, DB's Jim Reid writes that "while we all spend most of our market time thinking about the Fed and a recession, I suspect what happens to Russian gas in H2 is potentially an even bigger story. Of course by July 22nd parts may have be found and the supply might start to normalise. Anyone who tells you they know what is going to happen here is guessing but as minimum it should be a huge focal point for everyone in markets."

The bank also conveniently warns that "if the gas shutoff is not resolved in coming weeks this would lead to a broadening out of energy disruption with material upfront effects on economic growth, and of course much higher inflation."

Anticipating the worst case outcome, Germany last month took a crucial step towards rationing gas when economy minister Robert Habeck activated the second stage of the country’s gas emergency plan. “The situation on the gas market is tense and unfortunately we can’t guarantee that it will not get worse,” he said on Tuesday. “We have to be prepared for the situation to become critical.”

Habeck, who says he is now taking shorter showers, has appealed to the population to save energy — and municipalities and property owners have heeded the call.

As we reported this morning, Vonovia, the country’s largest residential landlord, said it would be lowering the temperature of its tenants’ gas central heating to 17C between 11pm and 6am. It said the measure would save 8 per cent in heating costs.

A housing association in the Saxon town of Dippoldiswalde, near the Czech border, went a step further this week, saying it was rationing the supply of hot water to tenants. From now on they can only take hot showers between 4am-8am, 11am-1pm and 5pm-9pm.

“As we announced in our general meeting, we have to save for the winter,” a notice in the affected blocks reads.

https://www.zerohedge.com/markets/social-peace-great-danger-germany-quietly-shutting-down-energy-crunch-paralyzes-economy