Five months ago, Germany was the first country that was emboldened to cut its ties with Russian energy. The move was not so kind to the whole of Europe. As a repercussion, several gas giants have started to fall in midst of the crisis, and some have also impacted the economy of their respective countries on a large scale.
Now, the decimated German economy needs a savior and Germany has seen that savior in Sanna Marin…
The ongoing Ukraine war has ensured that the German economy suffers to the core as if the Global Pandemic wasn’t enough to do so. The declining natural gas supplies, parity of the Euro with the dollar, and other headwinds have caused Germany to contract.
The situation has fallen to such an extent that the Deutsche Bank has confirmed that Germany is heading into a recession. With this, it means that many companies and renowned firms are now at stake too. One such company is none other than German gas giant Uniper.
A few days ago, the already loss-making Uniper submitted a bailout application to Olaf Scholz-led German government as Russia squeezed energy supplies. The company was already running under extreme financial distress and this war worsened all the recovery aspects of the company.
Uniper was among the first German energy companies to raise the alarm over soaring energy bills due to reduced supplies of Russian gas. It has been in talks with the German government over a possible bailout for a month now.
The crisis hit Germany sought to bail out a company by a different purview. For this, they have sparred with Finland.
Finland to save Germany’s economy
Germany has called for Finland to help in bailing out Uniper. As per Reuters, German economy minister Robert Habeck has asked Uniper’s main shareholder, Finnish state energy company- Fortum to contribute to Uniper’s rescue.
While answering the Deutschlandfunk radio, the economy minister Robert Hardback stated, “It (Uniper) belongs to someone, someone who is solvent and can provide support, so it’s right to consider models where the owners also bear an obligation.”
This call by Hardback was heavily chastised by Fortum. The Finnish shareholder of Uniper rejected the call for aiding in bailing out the ailing company. Fortum Chief Executive Markus Rauram in an emailed statement reminded Germany of its duties.
Uniper submitted its bailout application as there is fear in the company that losses due to reduced supplies from Russia and soaring gas prices could reach 10 billion euros ($10 billion) this year. But, Germany wants Finland to rescue Uniper because, at present, the state of the German economy is pretty bad.
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Uniper is important for German Economy
For Finland, its economy is 13th the size of Germany’s and with a 15th population, the challenge is serious.
Germany’s coffers are running dry. At present, it is struggling to manage the effects of supply restrictions from Russia that have pressured gas prices to jump above normal rates.
In order to ensure that gas storages are full by the winter, Germany has already allotted 15 billion euros in public funds to purchase gas from other countries. Still, Habeck urges the public to conserve energy and cautions that if gas prices continued to rise, these efforts may fall short.
Uniper has been hit hardest by reduced Russian gas flows. The company has received only 40% of Russian volumes in recent weeks and has been forced to source the replacement volumes at significantly higher prices.
People are also moving out from stocks of Uniper. The stock prices have collapsed by over 73% year-to-date. This is all impacting the German economy in the form of the rising cost of living.
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If this is the state of the German state giant which has an extreme impact on German energy prices and the economy, just imagine what is the condition of other energy firms.
