Energy prices have surged, causing real wages in 2022 to drop more than in any year since 1950.

A study highlights the severe economic downturn in Germany, warning that the next decade might result in significant setbacks if industries are not shielded from rising energy costs, potentially bolstering the far-right AfD party's popularity.

Isabella Weber and Tom Krebs, former advisors to the German government, connect the historical drop in living conditions with the growing support for the AfD, emphasizing the urgency of the political and economic situation.

Germany's economy faced a contraction in late 2023 and is predicted to shrink further in early 2024, characterizing a technical recession. Forecasts indicate that Germany's growth will trail behind most advanced economies except for Argentina. The ineffective response to energy price increases and resultant living standard impacts may have amplified the AfD's surge in support.

Weber and Krebs note that German wages and economic output have significantly declined compared to pre-crisis levels, with wages being 10% lower in 2023. They suggest the government's energy price controls were necessary, but implementing them sooner might have mitigated some of the political fallout.