The German government is triggering phase two of its emergency gas plan, in which theoretically higher prices can be passed down to customers – in order to lower demand and prevent longer-term shortages. This is likely to help gear up for the winter months, which will just exacerbate the shortage in supply.
Uniper says that phase two isn’t exactly a solution if the situation remains as it is or deteriorates further. I don’t think they are wrong. In any case, the announcement of phase two is also in part a necessary one as it it a prerequisite for the government to start firing up coal power plants again.
For now, gas rationing is off the table but it is just one step away i.e. phase three.
Either way, when you weigh up this situation alongside the already slowing economy and the tight chokehold from inflation pressures, it doesn’t present a good outlook for the German economy in Q3 and Q4 this year.
This article was written by Justin Low at www.forexlive.com.