The European Failure: The Editor-in-Chief’s Weekly Recap

Good morning dear readers,

This week we have dealt more intensively than we have for a long time with the future of European industry and with the biggest economic policy omission of this year: For months the Europeans underestimated the “Inflation Reduction Act” (IRA), the US government’s multi-billion dollar subsidy program, the to promote green technologies and, one has to put it that way, to reverse parts of globalization. The US government wants to spend billions to bring the production of raw materials and industrial goods back to the USA.

At first it sounded goodthat the Americans now also want to take care of climate protection. Only after the law came into force did the Europeans realize that there were geo-economic ambitions behind it and, above all, aggressive industrial policy, which “could lead to falling investments in Germany”, as Robert Habeck has now warned. The Economics Minister is therefore working on an answer to the law, reports our Berlin office exclusively.

Habeck’s suggestion: a “European program for the promotion of transformation technologies”. Because the federal government has now recognized that the Americans prefer companies that produce in the USA with their subsidies. Brussels is also alarmed about the IRA. Last weekend, EU Commission chief Ursula von der Leyen made headlines in response to the IRA with the proposal for a “sovereignty fund”. Their idea: a separate subsidy program for European industry.

The matter is particularly delicate for Germany. 40 percent of companies are already thinking about investing more in the USA in the future – and less in Europe. Because in addition to the subsidies, you can also count on permanently low energy prices there. The energy-intensive chemical industry in particular is moving west, as research by our corporate departments shows.

It’s a vote with feet. And so the IRA was also the big topic at the Handelsblatt industry summit a few days ago, where US industrial policy dominated almost every debate. This is reported by my colleague Kirsten Ludowig, who met numerous managers and politicians there. And these deal intensively with the new industrial policy paradigm in the USA and the consequences. Many fear a new trade war – which Europe could lose. I just recently heard from a green tech start-up from Munich that was specifically approached by US authorities as to whether it would like to relocate its business to the USA.

The whole debate showsthat Europe was too naïve – and with all the new geopolitical unity underestimated the industrial policy ambitions of the Americans. The answer, which will not please fans of old-school regulatory policy, will have to be an industrial policy response from Europe. And yes, also a financial instrument to accelerate the green transformation of the economy in Europe.

I was particularly surprised Incidentally, against the background of the whole debate, a guest article by US Treasury Secretary Janet Yellen, who is promoting more intensive trade between friendly countries in the Handelsblatt. The only question that remains is whether, if this proposal is really meant seriously, these friends should be alienated in terms of trade policy in the same way that the Americans have just done to the Europeans.

What else kept us busy this week:

1: Despite everything, we have to hold on at the end of this week: So far, German industry has come through the crisis surprisingly well. Compared to the previous year, industrial production increased by 0.8 percent. The auto industry even recorded an increase of 13.9 percent. And in the rest of the EU, too, industrial companies have increased their production surprisingly significantly in recent months. Meanwhile, things are looking bleak for energy-intensive companies: the chemical industry has reduced its production by 21 percent.

2: For a long time, China was the mainstay of the global economy. But that should be over in the foreseeable future. Chinese exports, a key economic indicator, have plummeted – more than twice as much as feared. At the same time, the country is facing difficult months: the number of corona infections is skyrocketing, the vaccines are not working – and now the antipyretics are running out. The country is going from being a pillar to being a factor of uncertainty. Handelsblatt opinion leader Jens Münchrath comments: “Xi Jinping has put the People’s Republic in an impossible position,” he writes. The state no longer delivers: “The arbitrariness in Covid politics affects the sense of security, the economic crisis signals thwart the promise of prosperity.”

3: It didn’t stay quiet for long around the new Volkswagen CEO Oliver Blume. He prescribed a new company architecture for the group, the Handelsblatt car team learned this week. At the core of the reorganization is a new software strategy that is nothing less than a minor revolution for the company. Blume is also postponing important future models – and putting the new plant in Wolfsburg up for sale. In the meantime, there was stress with Audi boss Markus Duesmann: The two of them had gotten so heated that some in the company feared that Duesmann might leave, several sources in the group reported.

4: Our investigative team has waited a long time for this week: The Wirecard trial began in a Munich high-security courtroom, where ex-Wirecard boss Markus Braun met the man who brought him to prison. If you still want to get into the story, you will find a summary of the six most important points of the 474-page indictment here, which is very worth reading. And if you still have a little time this weekend, I would recommend that you do extensive research from our archive, for which Handelsblatt reporters have evaluated thousands of e-mails from the Wirecard universe. This resulted in a captivating report on the last 48 hours of the scandalous company, a time in which unbelievable scenes took place there.

5: Buy now? Or still wait? These questions were at the beginning of a major research by our real estate team, which we have now published as a large report for the weekend. In it you will learn the seven most important real estate trends that buyers and sellers should know about.

6: A few years ago, the discussion caused concern still for emotional debates: the data toll, through which companies such as Netflix, Meta or Youtube should share in the costs of the Internet infrastructure. But then the subject went quiet. Until a few days ago, the Handelsblatt got its hands on the EU Commission’s plans to regulate such payments. Things could get concrete as early as next year.

7: It was the personality of the week: Fresenius Medical Care (FMC) CEO Carla Kriwet resigned after just 66 days. The reason was “strategic differences”, as it is always said. In fact, the departure should have been preceded by quite a rift. My colleagues Maike Telgheder and Tanja Kewes describe why Kriwet is really going – and what the plan of their successor is, the previous FMC CFO Helen Giza.

8: And then there’s the issue of time tracking, which is causing many companies headaches. What the current case law means – and why all of this probably also applies to managers – you can read here.

9: Silicon Valley produced lately mostly bad news. Mass layoffs, homelessness, stock market crash – and more and more founders who withdraw from day-to-day business (also because they are overwhelmed). The high-tech valley is in a crisis of identity, writes Silicon Valley correspondent Stephan Scheuer in his major report. But however deep the crisis may be, Silicon Valley is already in the process of reinventing itself. And that is what makes this place so attractive. And so Scheuer’s text ends logically with the sentence: “The current crisis can also become a catalyst for the next boom.” Because transformation has always been the Valley’s business model.

Have a relaxing weekend, without any transformation.
sincerely
Her
Sebastian Mathes
Editor-in-Chief of the Handelsblatt

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