Putin ‘thunderbolt’ spells end of globalisation, Olaf Scholz warns

Olaf Scholz has warned that the era of globalisation that powered the German economic miracle is “coming to an inevitable end” after Vladimir Putin’s “thunderbolt”.

The German Chancellor admitted that Europe’s largest economy faces a “very special challenge” as the industrial powerhouse is hit by soaring energy prices.

Mr Scholz launched a defence of globalisation at the World Economic Forum in Davos but admitted that its era is drawing to a close as inflation rises.

He said: “We are experiencing a watershed; history is at a turning point."

Germany’s huge manufacturing base has benefited from an interconnected world and cheap energy from Russia. However, the war in Ukraine and trade chaos caused by Covid has forced governments and businesses to rethink supply chains and energy security.

Mr Scholz, the only G7 leader to speak at Davos this year, said that Europe had been struck by a “thunderbolt” from the war in Ukraine and a new “multipolar world” is emerging.

He said: “The special phase of globalisation we have experienced in North America and Europe during the last 30 years, with reliable growth, a high level of added value and low inflation is coming to an inevitable end.

“One reason for this is that the low cost producers of the global south are gradually becoming thriving economies with their own demand, which aspire to the same level of prosperity as we have.

He admitted that globalisation had created losers and said it needs to become more “intelligent”.

Mr Scholz said the scramble to bolster energy security “will have an impact on Europe's economies”.

“We are feeling it, not least through rising energy prices and of course, this presents a very special challenge to a country like Germany, which is an industrialised nation.”

Germany is one of countries most reliant on Russia energy imports and has refused to back a gas embargo to put the squeeze on the Kremlin. German households and factories are being hit by the surge in energy prices and the Bundesbank has warned of a big contraction if the Russia gas supply is turned off.

“We cannot allow Putin to win his war, and I firmly believe that he will not win it,” Mr Scholz said.

“He has failed to meet any of his strategic goals. Russia capturing all of Ukraine seems less likely now than it did at the start of the war, thanks not least to the remarkable defensive actions fought by the Ukrainian army and the European population.”