8 minutes agoGermany: Energy capacity promotes deindustrisation
Periskopi(4 years ago)
(4 years ago)In recent months many basic principles of Germany's economic model have been questioned. How can Germany continue to remain an industrial country? When German Chancellor Olaf Scholz travels to China these days, he is accompanied by several managers especially managers of large industrial companies. BMW and VW chiefs are among [...]
When German Chancellor Olaf Scholz travels to China these days, he is accompanied by several managers especially managers of large industrial companies. BMW and VW chiefs are among them, just like those of large chemical firms, Bayer, BASF and Merck. All of them are very interested in continuing with production in China.
“We have a very profitable business in China, half of our market is there,” said the last few days, for example, BASF chief Martin Brudermüller, pointing out the question: “With what risks does a company face when giving up half the market?”
Businesses With China That Cannot Give Up
China remains necessary for many companies. However, since the Communist Party Congress was held several days ago, doubts have been growing about the future of so far co-operation. To date, in Germany as an industrial country, many enterprises have been worth the freedom of energy from Russia, while the first half-products and materials are especially obtained from China to produce expensive high-quality products in Germany.
Since the Russian attack on Ukraine, this formula is no longer valid.
In line with the situation, efforts are being made to make the needed changes quickly, compensate for gas needs by building liquid gas terminals with priority, and to boost renewable energy production more so far. And many enterprises, especially those that consume too much energy, have reduced production or suspended parts of production to cope with energy prices, at least in the short term. “Germanimania, as an industrial country, is falling under increasing pressure,” says Jupp Zenzen, conficture expert at the German Chamber of Industry and Trade, Deutschen Industries- und Handelskamers (DIHK). This is seen as the decline of new orders in the short term.
Tents Backward Turned
In the longer term, there's been a tendency back home for years: In 2016 industrial production in Germany totaled 22.8 percent of gross domestic production, and last year only 20.8 percent. And if this trend continues, says Eric Heymann, economist at Deutsche Bank Research: “If we look after ten years of the energy crisis we're going through now, then we can evaluate this time as the moment in Germany accelerated deindustrization began. ”
Ulrich Cutter, chief economist of the Decabank, agrees: “Enterprises that consume a lot of energy, which have now reduced production, will never increase production before the crisis.” Because production can become cheaper in other parts of the world. This is not about short-term restructuring. But if in the future it is about making investment decisions, then more often than by now decisions will be made in favour of other countries like North America. The main reason is that energy is cheaper there.
In addition, during the Corona crisis, supply chains broke. After this happened, many firms decided to attract more production back to Germany. But also the following: Enterprises will produce more in the country, and German firms that produce worldwide will send more production to other countries.
China will continue to close and will not want to import so many products so far, Cutter warns: “Industry's work areas in Germany will continue to be under pressure.” Because less qualified jobs will continue to become more automated, causing job losses. But that's all going to happen over a longer period, four to five years.
The current challenges created by China and the energy crisis made more clear also the other deficits Germany has as an industrial country: “There have been years we observe a erosion of Germany's quality as an industrial country,” says Jörg Krämer, chief economist of the Commerzbank bank.
In recent years this was not very evident because of businesses with China, but now it is very open. Krämer talks especially about the numerous gaps in infrastructure and the long time needed to avert these obstacles.
Hostage of Building infrastructure
Thus, the government coalition has announced on the coalition pact that it will see that the first year of governance for <x0-ther-higher infrastructure construction”. But the relevant package of laws compiled by Transport Minister Volker Wissing has stalled in the country because of Greens' opposition. Here, the priority construction of liquid gas terminals, LNG, can become an example of rapid, non-commercial process of giving permission: “Deindusttriisation is not just the horror scenario for economic groups,” warns Komerzbank chief economist. If these problems are not solved, then in the future big enterprises will provide fewer jobs and produce fewer in Germany as an industrial country. For small firms this road remains closed: “for the German middle economy, especially the sectors that spend a lot of energy, adapting to a new energy world will be a big challenge and some companies will fail at this point”, says convinced Eric Heymann by Deutsche Bank Research. / DW
