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Germany's Energy Crisis Sends It Tumbling Down Investment Rankings

The energy shortages plaguing Europe’s largest economy since 2021 have affected its attractiveness as an investment destination.

According to a report in the German daily Augsburger Allgemeine, Germany now ranks 18th out of 21 countries, falling four places in the ranking produced by the German economic research institute ZEW, Reuters reported.

The institute cited higher energy costs and a labor shortage for the revision of Germany’s place in the ranking, along with the slow pace of innovation and a complicated bureaucratic environment.

Soaring gas prices have shaken the German industry and prompted the government to spend billions of euros on helping businesses, as well as households, survive. Even with the state aid, however, many German businesses are curbing their activities or moving them to lower-cost energy locations such as the United States and Asia.

In September last year, the German government approved a 200-billion-euro support package for businesses and households that included a gas price cap, to run until the spring of 2024.

In addition to the support package, Germany, like other EU countries, has imposed a windfall tax on energy firms, also to be in effect until the spring of 2024.

Besides financial support, the government also prompted lower gas consumption both from businesses and households to ensure supply security for the winter.

According to the country’s energy regulator, the Federal Network Agency, Germany’s natural gas consumption dropped by 14 percent in 2022 compared to the average consumption for the past four years.

Industrial demand fell by 15 percent compared to the average for the past four years. Between October and December, industrial gas consumption fell by 23 percent, and consumption by private consumers and businesses was 21 percent below the previous years.

Still, energy costs remained higher because Germany switched from Russian pipeline gas to LNG, which pushed its gas import bill significantly higher than it used to be.

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By Irina Slav for Oilprice.com

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