Construction costs are currently skyrocketing

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@all: Are there any ideas, fantasies, constructs, notions, factual arguments regarding whether interest rates might possibly fall again? What do you think about it, under what conditions would that be possible? What I hear/read more often is that interest rates cannot rise that high because then the southern EU countries would become insolvent, but this connection is also not entirely clear to me. It also belongs to the topic of construction costs.

Why only the southern EU countries?
At 5 or 6% interest rates, the interest on federal debt will also quickly rise to 80-100 billion EUR, which is almost 1/4 to 1/3 of the federal budget.
The subsidy for pensions makes up another third; not much is left over...

The southern ones even more, but the ECB has already dealt with that and restarted government bond purchases for these EU countries shortly after the first interest rate hike :(

No matter how you look at it, interest rates cannot remain high permanently. Especially since the interest rate hikes do not change the cause of inflation: The era of cheap pipeline energy from Russia is over. Classic inflation arises because supply can no longer meet demand.

We are currently experiencing the exact opposite. Supply is huge, but many people can hardly afford anything beyond the essentials.

PS:
But this only applies to Europe. In the USA, interest rates achieve exactly what they are supposed to. An overheated economy is meant to be cooled down.
But the USA does not have anything close to the energy problem that we have.

We are currently experiencing strongly opposing effects. On one hand, a shortage; on the other hand, a collapse in demand. Due to the shortage and rising cost of building materials, prices are increasing despite lower demand. The regulation of the market is therefore currently not working at all.

Hello,

but rather the Merit Order principle, meaning the situation is politically influenced (with lobbying).

That is exactly the problem here. Your calculation of the fuel costs for gas is roughly correct, but only a portion of the electricity is generated by gas. I don’t have the exact share at hand right now, and it will vary greatly depending on the yield situation of the renewables, but we can assume average values of 20-30%. And technically speaking, this results in significantly lower price increases. Only the Merit Order principle ensures that electricity prices are aligned with the most expensive producer at the time.
As far as I know, this was introduced back then to give renewable energy priority (which at the time still had significantly higher generation costs than coal power). But this no longer really makes sense in the current situation and causes these crazy distortions. Whether the Merit Order principle can simply be abolished, others should judge; I’m not deeply involved enough in that.

However, we will face such situations even more frequently in the future. Even though I am a fan of the free market, the transition to renewables probably needs much more sensible steering and decisions “from above.”

Best regards,

Andreas

I don't have the exact share at hand right now, it will also fluctuate greatly depending on the earnings situation of the renewables, but we can assume average values of 20-30%.

It is less. In summer it was usually about 5% fluctuating, now in winter gas is about 20%. Although this certainly also includes some combined heat and power plants, which are needed just for heating alone.

We currently have strongly opposing effects. On the one hand a shortage, on the other hand a drop in demand. Due to the shortage and rising cost of building materials, the price rises even though demand is lower. So the regulation of the market is currently not working for the time being.

The immediate regulation of the market is more of a theoretical construct. In practice, there are long-term supply contracts with fixed prices. Once these are worked off, the adjustment does work. We can see that construction projects are being cancelled left and right or not planned at all anymore.