2023-11-02 15:10:40
The German growth figures are ultimately less bad than expected. Europe’s largest economy saw its GDP fall by “only” 0.1% between July and September, we learned at the start of the week. In Berlin, however, there are few illusions: growth should be negative over the whole year and confirm the forecasts of the International Monetary Fund. According to the latter, Germany should be the only G7 country to experience a recession in 2023.
For the Minister of the Economy Robert Habeck, who welcomed many industrialists to Berlin on Tuesday October 31, his country’s delay over its neighbors like France can be explained in particular by the difficulties of industry. “We are one of the rare European countries to still have an almost complete industrial value chain” he underlined, before recognizing it: the current challenges are “large, perhaps as rarely in the past”.
A risk of deindustrialization?
Among the guests gathered this Tuesday in Berlin around the minister, all agree on the cyclical causes of the problem: the upheaval of supply chains since the pandemic, the weakness of global demand – particularly from China -, the cessation of imports of cheap Russian gas since the invasion of Ukraine on which Germany had based its economic model. Added to this is the objective of moving the German economy towards carbon neutrality by 2045. An immense and very costly challenge in itself. The Minister of Finance, Christian Lindner, has just judged the objective of an exit from coal to be unrealistic. “ideally” in 2030; objective which was set in the coalition agreement.
In this context, many observers and political actors speak of a risk of deindustrialization. The question is taken very seriously, especially when the world number one in chemicals, BASF, announces net losses of 249 million euros in the third quarter of 2023 which will push it to increase its savings plan. BASF plans to close several production units in Ludwigshafen, its historic site, including its ammonia plant. “When BASF coughs, the whole industry catches a cold,” notes Christian Seyfert, president of the German Association of Industrial Energy Consumers.
The decline or even the possible disappearance of ammonia and aluminum production, impacted by the rise in gas and electricity prices, is giving rise to various reactions. While some believe the loss of unprofitable sectors is necessary, others fear the chain effects. “If ammonia or aluminum disappears from Germany, manufacturing certain other intermediate products will no longer make sense,” judge Christian Seifert. “It is not clear what effects this will have on the entire value chain,” he continues.
Without being existential, the concern also weighs on less energy-intensive sectors, such as machine tools or electronics. “In 2021 and 2022, we experienced our two best years in a hundred years of existence, but this year orders are in free fall. Our clients lack visibility and postpone their investments,” explains Angela Josephs from Phoenix Contact, a company specializing in automation systems. “It is important that the government supports the industry, because it is the basis of social cohesion and even democracy in our country,” she believes, recalling the central role played by industry in financing the social system and pensions.
Support measures
Supporting industry is no longer taboo at the Ministry of the Economy, which has long been allergic to any state intervention in this area. In addition to policies carried out for several years, with France in particular, in semiconductors and electric batteries, Minister Robert Habeck presented his ideas for a new “industrial strategy”. It includes, among other things, greater subsidies, reducing bureaucracy and capping the price of electricity for the most energy-intensive industries – a proposal opposed by Chancellor Olaf Scholz. For the Minister of the Economy, the issue goes beyond the survival and development of industry but concerns “identity politics” of Germany.
As a whole, representatives of the sector support the minister’s intentions but ask him to take action ” as soon as possible “. An appeal also launched by Jürgen Kerner, vice-president of the powerful IG Metall union: “If we act quickly, the process of deindustrialization can be stopped.”
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