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ENERGY

‘Fracking won’t save Germany from Putin’

Germany's reliance on Russian gas continues to limit the nation's diplomatic leverage in the Ukraine crisis. But as leaders once again explore fracking as an alternative, critics told The Local the risks were too high.

'Fracking won't save Germany from Putin'
Photo: DPA

Fracking – the process of extracting hard-to-access shale gas from the ground using highly-pressurized chemicals – has never been popular in environmentally-conscious Germany.

Last year a draft bill to allow companies to use the method had to be shelved when the extent of public feeling became apparent.

But as the Ukraine crisis has made clear, Germany's reliance on Russian gas imports is becoming increasingly dangerous. Now fracking is being put forward again as a way of liberating the country's energy supply from the whims of Russian President Vladimir Putin. 

Yet as calls for Germans to reconsider fracking grow louder, critics, including Environment Minister Barbara Hendriks and Friends of the Earth Germany (BUND), are calling for an outright ban. They say the country is not big enough to withstand large scale use of fracking chemicals, which carry a potential risk to drinking water. 

"Existing shale gas deposits in Germany would only last for about ten years. Long term price stability and independence through relying on Germany's own gas resources are therefore pure utopian fantasy," BUND fracking expert Inga Römer told The Local.

"Contamination of drinking water, increased risks of earthquakes, increased noise and air pollution in a densely populated country like Germany? It is unthinkable,” she added. “The high-risk and uneconomic fracking process should be banned here.”

Fracking dangers

Others, such as renewable energy blogger Michael Brey, have accused the pro-fracking lobby of manipulating fears over Germany's gas supply in the Ukraine crisis to force a dangerous technology on a skeptical German public.

Writing on the blog section of Econeers, a crowdfunding platform to raise money for German renewable energy projects, he argued the EU Energy Commissioner Günther Oettinger was boldly using the Crimean crisis as a way of bringing fracking back into play.

“He is not alone – Chancellor Angela Merkel has also suddenly taken a shine to the highly risky technology," Brey wrote.

“Günther Oettinger is not exactly known as an ardent proponent of renewable energy. He seems better known for his absurd advances in energy policy.

“In his latest political gaffe, Oettinger used the background of the Crimean crisis to speak up in favour of fracking in Germany – a dangerous technology used to extract shale gas, which contaminates soil and ground water for centuries with poisonous chemicals.

“If these chemicals find their way into drinking water, they can cause infertility and cancer in humans – among other things.

Merkel's U-turn

“Fracking also causes massive damage to natural habitats. Drilling in sensitive areas can lead to fissures and earthquakes. The gas extraction method is also seen as extremely risky for the climate because it can allow the greenhouse gas methane to leak into the atmosphere.

“Methane is 25 times more dangerous than carbon dioxide in terms of its warming affect on the atmosphere – a real danger to our climate. In this way, fracking could in some situations prove worse for the climate than burning brown coal as an energy source. 

“But Oettinger is not the only one pushing for fracking. In light of the Ukraine crisis and fears over German dependence on Russian gas, Chancellor Angela Merkel seems to be about to do a U-turn on her previously critical stance towards fracking.

“She is now considering importing liquid gas from the USA, where since the beginning of the last decade a fracking boom has been taking place.

“Back in May 2013, when Germany tabled a draft law to allow fracking that was later shelved, Merkel advised caution. ‘This technology would also very probably give Germany access to new gas deposits, but unlike large areas of the USA, we live in a very densely populated country,’ she told a crowd in Hamburg. ‘That is why we have to look very carefully into whether this technology should also be used here.’

“Yet as the Crimean crisis drags on and Germany explores how best to wean itself off gas imports from Russia, along comes a solution – just in the nick of time. Germany will begin importing gas from fracking in the USA.

“At an EU summit this March, Merkel was reported as saying US shale gas imports could be an option for European countries seeking to diversify their energy sources. Or in other words, fracking is fine as long as it happens a long way away and not here.

'Centuries of damage'

“It is absurd that Oettinger, and indirectly Merkel, would like to encourage the use of this technology despite all the obvious dangers. How suitable for the role is any EU commissioner who sees health of the population, protecting the environment and stopping climate change as secondary concerns?

“It seems that Oettinger – who has spoken in favour of fracking in the past – is purposely using the Crimean crisis as a way of preparing the ground for companies such as Exxon Mobil, which have been interested in extracting Germany's large gas deposits for a long while.

“What seems certain is anyone in Germany or elsewhere considering turning to fracking to secure energy supply is accepting the risk of centuries of knock-on effects for humans, nature and climate. The only sustainable way to achieve energy independence for Germany is through renewable energy.”

This extract first appeared in German on the blog section of Econeers, a crowdfunding platform fundraising money for German renewable energy projects. It was translated by The Local and published with the author's permission.

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ECONOMY

Schuldenbremse: What is Germany’s debt brake and how does it affect residents?

Nothing sums up Germany's cautious relationship with money quite as well as the debt brake - but this little clause in the constitution has recently caused no end of chaos. Here's what you need to know about the so-called 'Schuldenbremse'.

Schuldenbremse: What is Germany's debt brake and how does it affect residents?

What is the debt brake and why did Germany introduce it?

Known as the Schuldenbremse in German, the debt brake is a cap on government borrowing that’s enshrined in Germany’s constitution. It states that the federal government can only take on a certain amount of new debt in each fiscal year.

This is capped at 0.35 percent of Gross Domestic Product (GDP) – the amount of money the country produces each year in goods and services. Though GDP varies from year to year, this generally gives the government enough wiggle room to borrow around €9 billion annually.

When it comes to spending on a regional level – i.e. by state governments in Germany – the rules are even stricter. States aren’t allowed to borrow any money to fund their plans and must therefore create balanced budgets that finance spending exclusively through tax income and money from the central government.

But why exactly has Germany decided to tie itself to such strict rules on spending? Well, there are quite a few answers to that. 

Back in 2009, the Grand Coalition of the Christian Democratic Union (CDU) and Social Democrats (SPD), led by Angela Merkel, decided to bring the debt brake into law. At the time, the global economy was struggling to deal with the fallout of the 2008 financial crisis, and Germany was racking up a huge deficit. 

The idea was to bring borrowing back under control as soon as possible and prevent leaving billions of euros in debt for future generations to pay off. It also paid homage to the main edicts of neo-liberalism, creating a streamlined state with little room for generous investments or high social welfare payments. 

Thanks to the ongoing effects of the financial crisis, the debt break only came into force seven years after it was put in the constitution. This means that since 2016, the federal governments have been tied to 0.35 percent cap on borrowing.

That said, there are a few exceptions to the Schuldenbremse: in periods of national emergency, such as natural disasters or pandemics, the government is allowed to put the debt brake to one side. That’s exactly what happened during the Covid pandemic in the years 2020 to 2022, and now it appears it will be put aside for the fourth year in a row. In other words, it has been sidelined for exactly half of the time it has been in place.

READ ALSO: Germany to seek debt rule suspension for 2023

Why has the debt brake been in the news recently?

The debt brake was put in the spotlight in early November when Germany’s Constitutional Court declared tens of billions of earmarked government spending to be ‘unconstitutional’.

The case related to €60 billion of borrowing that was originally intended for tackling the Covid crisis but had later been diverted towards a fund for fighting climate change known as the Climate and Transformation Fund.

In normal cases, moving unspent money around wouldn’t be a problem – but in this case, the specific rules around the debt brake came into play. Utilising the exceptions in the debt brake, the €60 billion was borrowed for the purpose of stabilising the economy during the pandemic – and as such it was only supposed to go towards tackling that emergency.

Wind turbines in Germany

Wind turbines in the northern German state of Schleswig-Holstein. Photo: picture alliance/dpa | Christian Charisius

Beyond this amount, which already represents a huge chunk of the national budget, the court decision also invalidated the Economic Stabilisation Fund (WSF). This fund was also originally set up during the Covid crisis and later repurposed as Olaf Scholz’s ‘Doppelwumms’: a €200 billion pot that paid for the energy price breaks and other relief measures in the wake of the Ukraine war. 

READ ALSO:

Finance Minister Christian Lindner (FDP) announced that the debt brake would be set aside for one more year to allow the government to meet its financial commitments for 2023. However, the budget for next year – and how the significant gaps in funding will be filled – still remain unclear.

The crisis has sparked a major debate among politicians about whether the debt brake is still fit for purpose. 

What do critics of the debt brake say? 

As you might expect, the tight controls on spending aren’t popular with everyone – especially those on the left on the political spectrum. 

Proponents of the debt brake say we should lower the deficit to avoid lumbering future generations with unmanageable debts, but critics of the mechanism make the opposite argument. They say that straightjacketing spending will actually put a strain on future generations as the government will be unable to invest in modern infrastructure and could therefore be hindering growth.

If borrowing is slashed too much and tax revenues don’t increase, projects like the green transformation, upgrading public transport and pushing ahead with digitalisation will inevitably be put on the backburner. The government will be forced to prioritise its urgent day to day spending in the present rather than trying to invest in the future – and it could also be forced to cut vital public services.

Deutsche Bahn train

Deutsche Bahn staff give the sign for an ICE high speed train to leave the main railway station in Stuttgart, southern Germany, on August 11, 2021. Photo by THOMAS KIENZLE / AFP

Other critics argue that the debt brake was appropriate at the time when it was introduced but that times have changed and governments require more flexibility. 

In the early to mid-2000s, Germany was riding high on a booming manufacturing and exports sector fuelled by cheap Russian gas, and had made little attempt to invest in renewable energy. Now, however, with Germany transitioning away from cheap Russian gas while trying to slash the country’s carbon emissions, Germany is faced with numerous expensive challenges at a time when the economy is especially weak – meaning borrowing more or raising more taxes feel like an inevitability. 

READ ALSO: ‘2024 a turning point’: When will Germany’s rail network run on time?

Could the debt brake be reformed in the future?

That’s certainly an idea that’s come from multiple camps – not least Economics Minister Robert Habeck of the Green Party. Speaking at the recent Green Party Conference, Habeck slammed the current rules on borrowing, stating: “With the debt brake as it is, we have voluntarily tied our hands behind our backs and are going into a boxing match.”

According to Habeck, the debt brake should be reformed according to the “green golden rule” to allow borrowing for investments rather than everyday spending. This is an idea that has also been put forward by economists.

Saskia Esken, the co-leader of the SPD, has also spoken out in favour of a reform of the debt brake to avoid putting a drag on growth in the future. 

However, the likelihood of this happening seems low at the moment, even if Greens and SPD politicians – and some members of the CDU – are in favour of it. 

That’s because it takes a two-thirds majority in the Bundestag to change any aspect of the Grundgesetz, or constitution – a much higher bar than the simple majority needed to change a law.

The FDP, who are in the coalition alongside the Greens and SPD, are also fiercely opposed to any reform of the debt brake and want to rein in government spending instead. 

Christian Lindner

German Finance Minister Christian Lindner (FDP) speaks in the Bundestag. Photo: picture alliance/dpa | Michael Kappeler

Messing with this fiscal rule could also prove unpopular: a recent poll found that 61 percent on Germans were opposed to any reform of the debt brake, as opposed to 35 percent who were in favour of it, and 4 percent who didn’t know. 

It means that in the medium term at least, the government may have to take a scalpel to its previous spending plans, cutting spending on investment projects, public services like healthcare and transport and social welfare such as child and unemployment benefits. Or it may find a way to raise some taxes without upsetting the FDP. 

READ ALSO: How Germany’s budget crisis could affect you

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