History turns full circle as G7 alarm bells ring over energy once again

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26.06.2022 - 13:55

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theguardian.com:

It is Germany’s turn to host the annual summit of G7 leaders this year and while the war in Ukraine will be top of the agenda at the gathering in Bavaria the economic damage caused by Russia’s invasion will come a close second.

Nobody saw what was coming when the G7 last met in Cornwall a year ago. Back then the talk was of global post-pandemic recovery; now the fear is of imminent recession as central banks turn hawkish and Vladimir Putin plays the energy card.

The Kremlin has cut supplies of gas through the NordStream pipeline by 60% in the past two weeks and alarm bells are ringing in Berlin as the downside of being so dependent on Russian energy becomes apparent. Olaf Scholz, Germany’s new chancellor, is in the unfortunate position of having to clear up a mess caused by his predecessor, Angela Merkel, a politician whose reputation will certainly not improve with time.

Last week, the German government triggered the second stage of an emergency gas plan. There is no rationing as yet but such a step is possible, as is the re-opening of coal-fired power stations. One of Germany’s goals for the G7 is “strong alliances for a sustainable planet”, which sits oddly with German energy companies being told to get ready to burn more coal this winter.

As far as the G7 is concerned, the wheel has turned full circle. The first meeting of the group (which then included only six countries) was held in France in 1975 as the big western economies struggled to find a response to the oil shock that had put an end to the long post second world war boom. Now all of them once again face the prospect of recession.

The US Federal Reserve raised interest rates by 0.75 points earlier this month and has signalled further such increases are on the