2024-09-04 14:01:52
Cross: What are the announcements of the Volkswagen company closing the symptom of Germany?
Eileen Keller: It is clear that the very strong announcement sounded the alarm about the state of the company. But we are not faced with an alarming wave of closures in the German car sector, mostly due to a reduction in production. It is the leading company in Germany, with 5% of the GDP and 7% of the workforce. Last year’s sales hit a record.
That said, the situation for the car industry and the German economy in general is difficult. The Chinese market is closed, with Beijing reducing imports of hot cars. And the German company is struggling to find a place in the European electric car market with stiff competition from Chinese and American manufacturers.
Moreover, the German industry has been affected especially by the rising energy prices since the invasion of Ukraine, because Russian gas plays a much greater role than in other European countries. There are also structural reasons, such as the administrative burden which does not encourage investments and labor shortages. These factors are not new, but they are all more visible in the international situation that is not favorable to the German model.
How is the government doing?
EX: With the geopolitical environment and the slowdown in the economy, it is a time of great uncertainty. Indeed there have been political initiatives to simplify investment processes and facilitate the hiring of foreign workers, especially for the industry. But in general, the government is struggling to define a clear line and restore confidence to investors, especially regarding the evolution of energy prices.
The coalition brings together parties with very different profiles (Greens, social democrats and liberals). As state revenues decrease, it is difficult for them to find commitments to finance public policies, such as environmental change or social policy.
Does this explain the indiscretion of Chancellor Olaf Scholz?
EX: It is true that polls show dissatisfaction with government performance, and the economic situation can only contribute to this. But it is the main link to the management of the migration crisis. It is the same dissatisfaction that explains the recent electoral performances of the right wing (AfD). The success of this group against immigration also worries the engineers, who depend on it for work.
What does this mean for Germany’s place in Europe?
EX: Germany’s problems are bad news for the European Union. As political leaders focus mainly on the domestic situation, they are less available on the continental stage. However, we are in an important period of economic, geopolitical and security changes.
In addition to the war in Ukraine, the threat of Russia and the escalation of conflicts in the Middle East, the rules of the global business game are changing. There is also talk of “deglobalization”, with the United States and China banking on national preference.
Europe must adapt, re-export its production and diversify its supply chains, while defining a clear strategy for ecological change. But these strong decisions were all the more difficult to take with a weak Germany.
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