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World and Press January 2 2023

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10 Business January 2 2023 | World and Press Chancellor Olaf Scholz of Germany at a BASF plant in November 2022. | Photo: Picture Alliance/EPA Germany got rich on exports and cheap Russian gas. Now it’s in trouble. ECONOMY Economists say Germany is poised for recession next year. The ripple effects would be felt around the world. The BASF chemical plant in Ludwigshafen, Germany. | Photo: Getty Images/Thomas Lohnes By Anthony Faiola and Vanessa Guinan-Bank in Ludwigshafen 1 LARGER than Lower Manhattan, the sprawling BASF chemical plant on the Rhine River is a symbol of both German industrial might and how much Europe’s largest economy has to lose in its worst energy crisis in generations. On any given day, the plant uses more power than Switzerland as it churns out everything from rubber for sneakers to coatings for cars. But the fallout from the war in Ukraine is exacting a high price. During the second quarter of the year alone, sky-high natural gas prices jolted the company’s energy bill up by the equivalent of 6 million. 2 To contain costs, the plant has begun streamlining operations and cutting high-energy production of ammonia for fertilizers – compounding a fertilizer shortage on the continent that is threatening the global food supply. Should energy availability in Germany turn critical in the coming months, Chief Executive Martin Brudermüller has warned, the company may have to shift more production to “plants outside of Europe.” “We have a war on our doorstep in Europe and an unprecedented energy crisis that is threatening the very existence of Europe’s industrial production,” Brudermüller told chemical industry executives last week. He added, “many of our value chains are breaking up as we speak.” 3 Russia’s revival of war in Europe has prompted seismic shifts in Germany. In the early days of the invasion, the German government moved away from a posture of military restraint adopted in the shadow of World War II. Officials announced a dramatic increase of defense spending and dropped opposition to weapons deliveries to conflict zones. 4 Now, fallout from the war is forcing a further reassessment of modern Germany’s foundations. The nation grew prosperous, establishing itself as the economic engine of Europe and the world’s fourth-largest economy, by relying on the twin pillars of cheap Russian energy and manufacturing exports. But as the German economy sputters – threatening to drag down Europe with it – the economic model that gave rise to Germany, Inc. has been thrown into doubt. 5 “We were too dependent on one country – Russia – and we’re paying for that now,” said Claudia Kemfert, one of Germany’s leading energy experts. “Germany has to change, and we’ve known that for a long time now. This business model is not really sustainable.” 6 The souring of Western ties with Moscow has had outsize impact here. Before the war, Russia supplied more than half of the natural gas used in Germany – for industrial production, to heat homes, and to generate electricity. Now, with the main pipeline from Russia shut off, Germany has had to seek other suppliers and is paying seven to ten times last year’s prices. 7 At the same time, the country is feeling the ramifications of its reliance on industrial exports. Germany is the world’s third-biggest exporter, behind the United States. But manufacturing makes up roughly 20 percent of the economy, compared with about 11 percent in the United States. That’s made Germany particularly vulnerable to turbulence in world trade and energy prices. 8 Already, energy price shocks, layered on top of pandemic-related supply-chain disruptions and a softening of global demand, have eroded the country’s legendary trade surplus. Economists say Germany is poised for recession next year – the International Monetary Fund predicts it could suffer the worst hit among major economies other than Russia. 9 But the ripple effects would be felt far beyond Germany, especially if a recession coincides with energy shortages. A German slowdown would put pressure on a single currency of the euro zone. Some economists are predicting it could push the euro below parity with the dollar for a sustained period. Especially hurt would be countries in Eastern Europe that house suppliers for major German manufacturers, and whose economies are closely linked to Europe’s juggernaut via trade. 10 Production delays in Germany could also compound pandemic-related global supply-chain woes, especially for finished products such as cars, medical equipment, and the other specialized industrial products that Germany is known for. “If we have a recession in Germany, and I think this is unavoidable now, that will impact the broader European economy and the rest of the world,” said Emily Mansfield, Europe economist for the Economist Intelligence Unit. … 11 Meanwhile, a nation that once scolded other countries in Europe for profligate spending is – to the chagrin of its neighbors – deploying hundreds of billions of euros to keep its economy afloat and shield its companies and consumers from high energy prices, a solution critics say could fan the fires of already-high European inflation. 12 But fully replacing Russian gas imports will be a costly and complicated process that might leave energy prices elevated in Germany for years and sharply higher for at least the next 12 months. A particularly cold winter, analysts say, could spark shortages as soon as early next year. “Even if the economy in general is relieved by the price brake,” said Peter Adrian, president of the Association of German Chambers of Industry and Commerce, “there are two economically challenging winters ahead of companies. Gas conservation and big business efforts remain central to getting through the energy crisis.” … 13 And Germany’s difficulties could run beyond energy, to Berlin’s close trading ties with China. The Chinese economy has already been slowing. And some experts fear that market could become as poisoned as Russia’s in the event of a future showdown with the West over Taiwan. “Russian gas was one mistake,” Kemfert said. “Our reliance on China could be our next big problem.” © 2022 The Washington Post 0 – 1 TO BEpoised for h.: auf etw. zusteuern — ripple effects Nachwirkungen — sprawling weitläufig — might Macht; Stärke — to churn out (fig) produzieren — coatings Lacke — fallout Folgen — to exact fordern — natural gas Erdgas — to jolt up hochschnellen lassen — the equivalent of umgerechnet 2 to contain eindämmen — to streamline optimieren; straffen — operations Betriebsabläufe — ammonia Ammoniak — fertilizer Düngemittel — to compound verschlimmern — food supply Nahrungsmittelversorgung — to shift verlagern — unprecedented nie da gewesen — value chain Wertschöpfungskette 3 – 4 seismic h.: dramatisch — posture Haltung — restraint Zurückhaltung — defense spending Verteidigungsausgaben — reassessment Neubewertung — foundations Grundfesten — prosperous reich; erfolgreich — pillar Säule — manufacturing exports Export von Industriegütern; s.w.u. manufacturing verarbeitendes Gewerbe — to sputter ins Straucheln geraten — Germany, Inc. Wirtschaftsstandort Deutschland 5 – 7 sustainable nachhaltig; tragfähig — souring Verschlechterung — ties Beziehungen — ramifications Auswirkungen — reliance Abhängigkeit — vulnerable anfällig 8 – 9 to layer schichten — supply-chain disruptions Störungen der Lieferkette — to soften abschwächen — to erode aushöhlen — trade surplus Handelsbilanzüberschuss — International Monetary Fund Int. Währungsfonds — to coincide zus.fallen — slowdown Konjunkturabschwächung — single currency Gemeinschaftswährung — parity Parität — sustained anhaltend — juggernaut Gigant 10 – 11 woes (fig) Probleme — unavoidable unvermeidlich — to scold schelten — profligate verschwenderisch — to the chagrin of s.o. zu jds. Ärger — to deploy aufbieten — billion Milliarde — to keep afloat (fig) am Laufen halten — to shield abschirmen — to fan anfachen 12 – 13 to elevate erhöhen — price brake Preisbremse — chamber of industry and commerce Industrie- und Handelskammer — gas conservation Gaseinsparung — to poison vergiften

World and Press | January 2 2023 Silicon Valley’s unbridled euphoria runs into economic reality Business 11 COMPANIES Once-buzzy startups had held out against the new reality that the good times are over. No longer. Übungen | Mediation By Erin Griffith 1 LAST YEAR,a startup called Party Round announced itself with a flurry of memes. For months, amateur investors had been going gangbusters, buying up stocks, cryptocurrencies, and digital art known as NFTs. But getting in early on the next hot tech startup was still a professional’s game. Party Round’s big idea was to let startups easily raise money from family members, former co-workers, bosses, and others in their networks. “Invest in friends,” Party Round’s tagline urged before its launch. 2 For a while, it was fun. The tech industry soared to record heights during the pandemic, and Party Round rode the frenzy with self-aware marketing stunts that poked fun at and celebrated startup culture. There was a venture-capital-themed puzzle with corresponding NFTs and a game called “Burn the Runway,” where players killed startups by spending all their money on silent retreats and Teslas. In one stunt, Party Round paid a woman ,000 to quit her job at Facebook and start a company focused on cryptocurrency literacy. 3 Then the party abruptly ended. Russia invaded Ukraine. Inflation soared. Tech stocks crashed. Crypto crashed harder. Funding dried up. Startups began laying off workers and cutting costs. Investors who had cheered on the exuberant market switched to ominous warnings about a downturn. The woman with the crypto startup got a job. 4 So Party Round adjusted. Making jokes about the absurdities of tech culture is fun when | Illustration: Laura Salafia/The New York Times everyone is getting richer by the day, but they don’t land the same when everyone is getting laid off. “Party Round is now Capital,” the company announced this month. With the new name, the company moved into banking services. It plans to trade absurdist marketing campaigns for something more practical – a co-working space that its customers can use in New York. “The Capital brand is definitely an evolution,” said Jordi Hays, the company’s CEO. “It’s more mature. It’s more sustainable.” 5 It is one of a growing number of signs that the startup world’s season of unbridled euphoria is really, truly over. Technology was largely immune to the pandemic’s economic devastation, and many in the industry had hoped the current slump would be a momentary reset. But after months of funding declines, layoffs, and cost-cutting, the realization that startups are stuck in a sustained, gloomy, no-fun downturn has finally set in. “Founders are starting to see the writing on the wall,” said Angela Lee, a finance professor specializing in venture capital at Columbia Business School. For years, market observers have predicted a downturn that never arrived, she said. Now, “we’re finally right.” 6 Between July and September, startups around the world raised billion, a 53% drop from the same period a year ago, according to Crunchbase. It is the largest such decline since the site began tracking funding in 2007. More than 700 startups have laid off 93,000 workers this year, according to, which tracks job cuts at startups. Over the past two weeks, weaker quarterly results at big tech companies, including Snap, Meta, Amazon, and Microsoft, sent the broader tech industry spiraling further downward. 7 The term “party round” itself once had a bad reputation in tech. It describes instances in which a startup raises small amounts of cash from a large number of investors. If things went badly, industry leaders argued, none of the company’s many investors would step up and help. “No single investor cares enough,” Sam Altman, a tech investor and founder, wrote in a blog post criticizing the practice in 2013. “Everybody assumes that somebody else is playing parent,” Mark Suster, an investor at Upfront Ventures, wrote in 2011. 8 But the last decade of tech prosperity, growing valuations, and an expanding pile of capital earmarked for startups has changed attitudes, taking the party round from stigmatized to something to brag about. And new entrants like celebrities, athletes, midlevel tech execs, or your allergist all sought to join the party. 9 Services with names like Pump and Cabal sprang up to help founders manage their expanding pools of investors. And of course, Party Round, which raised million in funding from more than 50 investors last year, valuing it at million. “The best companies in every single category are all doing quote unquote party rounds,” Hays said in Jordi Hays, the chief executive of Capital. | Photo: Philip Cheung/The New York Times an interview when Party Round opened last year. 10 AbstractOps, a software provider, announced in February that it had raised million from more than 300 individual investors. In a blog post, its CEO, Hari Raghavan, said the investors would be evangelists for the company. In a message, Raghavan said his array of angel investors had been helpful, but adding professional investors to the company’s board earlier could have helped with accountability. “We might have confronted harder questions sooner, ahead of – instead of during – a market downturn,” he said. 11 At Party Round, the people in charge of the viral marketing gags and memes at the company are now making “Nike-style” promotional videos about its customers. But Hays said he expected to revive the brand at some point. Like many in tech, he saw how quickly the industry recovered from the initial shock of the pandemic in 2020. Now even with the gloom, venture capital firms are sitting on enormous sums of capital. That money will have to be invested in startups. “Eventually,” Hays said, “we’ll come back to euphoria.” © 2022 The New York Times Company This article originally appeared in The New York Times. 0 – 1 UNBRIDLEDzügellos — buzzy lebhaft — to hold out against s. gegen etw. behaupten — a flurry of e-e Welle von — to go gangbusters (coll) in die Vollen gehen — stocks Aktien — cryptocurrency Kryptowährung — NFT = non-fungible token — co-worker Arbeitskollege(-in) — tagline Slogan — to urge auffordern 2 – 3 to soar in die Höhe schnellen — to ride the frenzy den Hype mitmachen — to poke fun at s. über etw. lustig machen — venture capital Wagniskapital — silent retreat Schweige-Retreat — … literacy Kompetenz im Umgang mit … — to lay off entlassen — exuberant überschwänglich — ominous unheilvoll — downturn Konjunkturabschwung 4 – 5 to trade for e-e S. gegen etw. eintauschen — sustainable nachhaltig — devastation Verwüstung — slump Konjunkturrückgang — sustained anhaltend — gloomy düster — founder Gründer(in) — to see the writing on the wall (fig) die Zeichen der Zeit erkennen — observer Beobachter(in) 6 – 8 billion Milliarde — to track nachverfolgen — to send spiraling downward (fig) fallen lassen — industry leader führende Persönlichkeit der Branche — to assume davon ausgehen — prosperity Erfolg; Blütezeit — valuation Bewertung — to earmark vorsehen — to brag about mit etw. prahlen — entrant Teilnehmer(in) — midlevel exec Mitarbeiter(in) des mittleren Managements — allergist Allergologe(-in) 9 – 11 quote unquote in Anführungszeichen — array of (fig) Aufgebot — angel investor Business Angel; Investor(in) — board (of directors) Verwaltungsrat — accountability Rechenschaft — promotional video Werbespot — eventually irgendwann

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