After the once-in-a-century event of a global pandemic, we are now experiencing something that we saw spellbound in the history books: a war of aggression in the heart of Europe that violates international law. Russia’s attack on Ukraine is a daily reminder of incomprehensible human suffering.
But the war is also affecting us economically, and this in a phase of upheaval. We want to operate climate-neutrally by 2045, digitization will fundamentally change the way we work and many business models, and demographic change poses major challenges for us. Our world will never be the same again.
Politicians provided extensive support for the economy during the corona crisis and thus prevented major upheavals. A once-in-a-century event like the pandemic called for an extraordinary fiscal response.
Financial and economic policies must also be used to respond to the war in Europe. However, the economic impact channels and the temporal perspective of the war are different from those during the corona pandemic.
Russia’s attack on Ukraine not only marks a temporary crisis, but in many ways a turning point for our economy. The sudden and steep increase in the price of fossil fuels was not intentional.
That’s why we try to relieve people and companies here quickly and accurately. In the long term, however, the prices for fossil fuels will remain high. Higher prices are also necessary to set incentives for renewable energies.
We are reducing our dependency on these energy sources and are driving decarbonization with hydrogen, synthetic fuels and other CO2-neutral technologies. Renewable energies are freedom energies. They are the path to achieving climate goals and geopolitical sovereignty.
Economic and financial policy: Do not freeze the status quo ante
At the same time, both the corona pandemic and the war of aggression against Ukraine make it clear to us that we must strengthen the resilience of our economy. For example, we need to diversify our supply chains.
We need to invest more in new technologies and in our security. Economic and financial policy must therefore not be about freezing the status quo ante.
The state cannot compensate for all the changes resulting from the war in Ukraine and the associated economic effects. But the changes are now rushing towards us at increased speed.
In order to cushion this impact, short-term help for companies and households, similar to a shock absorber, is necessary. It is important to cushion hardships in a targeted manner and to avoid macroeconomic distortions. This helps to reduce uncertainty and creates an environment in which investments in the future are worthwhile.
The aid must be effective and forward-looking. Against this background, the Federal Government has presented targeted support measures to cushion the economic impact on companies after the relief package that has already been adopted for energy efficiency and relief for citizens.
We’re going to do this step by step. In the current situation, the main concern for many companies is to ensure liquidity. We support companies that buy and sell electricity and natural gas on the futures markets (so-called margining) with low-interest loans and guarantees as well as liquidity assistance.
To a limited extent, direct cost subsidies for companies with exorbitantly high additional energy costs or targeted equity and hybrid capital support can also be used.
With the special framework for state aid, the European Commission is presenting the Member States with guard rails within which we can support affected companies.
Develop innovative strength again and again
In the current phase, against the background of the dynamic situation and the uncertainty, it is all the more important to use budget funds carefully and in a targeted manner. We must not exhaust ourselves completely in terms of financial policy, but must maintain our ability to act in order to be able to react to new situations.
In an economic environment in which the danger of stagflation, i.e. a phase of low economic growth coupled with high inflation, should not be underestimated, measured financial and skilful economic policies are required. Because it is also clear that a general loss of prosperity cannot be compensated for in the long term with the means of financial policy.
In this situation, we have to do everything we can to ensure that the transformation of our economy succeeds. This is the only way we can achieve economic growth. This is the only way we can maintain and increase our prosperity.
The chances are there. It would be wrong to sit back and relax now. I do not support the thesis that our prosperity has peaked, as Friedrich Merz did recently.
But the resilience and innovative strength of our economy cannot be taken for granted. They have to be worked out again and again.
We need new business models, new ideas, new supply chains and new trade relationships. We have to reduce one-sided dependencies, be it when it comes to importing energy from Russia or exporting to China.
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It is the task of politics to ensure good framework conditions in such a situation. An even heavier load, for example, would be more likely to hinder opportunities. It would make innovations and investments in Germany less attractive.
That is why we need a moratorium on stress for people and companies, especially in the current crisis. In an international comparison, Germany is already a top tax country.
Reduce bureaucracy and avoid false incentives
But there are also too many hurdles and burdens in other respects. We have to reduce bureaucracy to the necessary minimum, advance digitization and speed up planning and approval processes.
This is the only way we will be able to mobilize the private capital we need to restructure our economy on a large scale.
With the current support measures, we have to make sure that no false incentives are set. Aid is designed to be limited in scope and grants decrease over time.
We have to rely on market forces to set incentives for necessary adjustments. Because in the end it will be about mobilizing private capital on a large scale for the tasks that lie ahead of us. Almost 90 percent of all investments are still made by the private sector – many forget that.
I have great confidence in the creativity, innovative strength and inventiveness of German citizens and entrepreneurs. Unleashing this potential is the top priority of my economic and financial policy. If we succeed in this, I am convinced that we will emerge stronger from this crisis.
The author: Christian Lindner is Federal Minister of Finance and Federal Chairman of the FDP.
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