Dusseldorf Germany is an industrial country. Still. Because our strong industrial base, a foundation of our country’s prosperity and a pillar of the economy throughout Europe, is under threat. Deindustrialization in Germany and Europe is no longer just a specter, but a very real danger – such are the challenges that have become over the past two years.
The corona crisis was already a real endurance test for the resilience of the industry. She has passed this test, but not yet fully digested. Now the industry is in the perfect storm. It feeds on the consequences of Russia’s war of aggression against Ukraine, but also on domestic deficits.
With Corona, the vulnerability of global supply chains had already become apparent. There were also already indications that the interests of important players in the world economy were drifting apart. The war has turned doubts into certainty that there will be no going back to the status quo ante.
Russia has completely discredited itself as a political and economic partner, and in view of China and its behavior towards Taiwan, there is growing uneasiness that something similar could be threatening here. Meanwhile, world trade is faltering, globalization is halting, trade flows are shifting. Logistics services have become a luxury good, and important primary products in all areas have become scarce. Inflation is not only reaching unimagined heights here in Germany, and the energy markets in particular are completely out of joint.
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“The short-term consequences of the energy crisis are fatal”
The mistakes of the past in German energy policy were relentlessly exposed. Today everyone knows that the simultaneous phasing out of nuclear power and coal, combined with a half-hearted energy transition and a naively increasing dependence on Russian energy supplies, was a toxic mixture.
Now there is a radical change of course, and there is no alternative. But the short-term consequences of the energy crisis are fatal, not only for the many people in the country who will hardly be able to afford heating, but also for industry.
The exorbitant rise in energy costs is threatening the competitiveness of energy-intensive production in Germany and Europe. If the German energy prices remain at the current level, we will see that companies in key German industries will close down in droves. And what is now being lost to more competitive regions like the US will not be coming back.
A noticeable reduction in energy costs for industry is therefore necessary. So far, however, the industry has largely been left out when discussions and decisions are made in Berlin on how to cushion the economic consequences of the energy crisis.
“Industry can’t keep up with the pace of bureaucratic requirements”
It is just as incomprehensible that the regulatory thumbscrews are tightened massively in a situation of high economic tension. Industry is fully involved in the sustainable transformation of the economy and society. In many areas, German industry is even the international technology leader. But with the best will in the world, it can hardly keep up with the pace at which bureaucratic requirements and environmental regulations are being tightened.
The chemicals industry, for example, is being confronted with an increasingly restrictive chemicals policy on the part of the EU, which simply bans anything that could even be remotely dangerous. This policy ignores how well the industry manages potential hazards. And it takes no account of the fact that substitutes cannot be developed in a hurry and that competitors will not hesitate to fill the gaps in the market that are emerging and thus weaken their European competitors.
When it comes to European regulation, we Europeans still have it in our own hands to avert home-made mischief. And to a lesser extent, this also applies to trade policy. When autocrats change the rules of the game at whim, those countries that feel committed to freedom and democracy must move closer together.
Ceta, the trade agreement with Canada, seems to be revived, although it is still not ratified everywhere in Europe, not even in Germany. But when Federal Finance Minister Christian Lindner suggests a resumption of the talks between the EU and the USA on the TTIP trade agreement, which were suspended in 2016, he immediately reaps criticism, not least from the Green coalition partner, who should do his best to keep up with the times here as well.
“Industry is not a necessary evil, but the engine of progress”
Anyone who is active in the global markets, and this applies to large parts of German and European industry, cannot avoid one thing anyway: the world is currently being redistributed, and in this delicate phase of all times we are further weakening ourselves Right now it’s about doing the right thing pragmatically and free of ideology – and doing the right thing quickly.
The dramatic about-face in energy policy shows that more is possible than we would have thought possible. The expansion of the energy infrastructure is no longer just discussed, it is finally picking up speed. The hurdles to expanding renewable energy capacities are getting lower. And LNG terminals are being approved and built in record time.
This is the de-bureaucratization that the industry has been demanding for a long time. It should not only take place in the energy sector, but across the board in Europe.
As a society, we should use the momentum that has arisen in the face of the crisis to promote acceptance of the urgently needed expansion of critical infrastructure. To raise awareness that change is necessary and possible. To lay the foundations so that we can emerge stronger from this test.
This absolutely includes an efficient and competitive industry. It is not a necessary evil, but an engine of progress and a guarantor of sustainable prosperity. We should not delude ourselves that deglobalization could bring us back production lost to third countries on a large scale. Rather, let us work together to ensure that the industry that we have today in Germany and throughout Europe can continue to show what it is worth to all of us in the future.
The author: Matthias Zachert is CEO of Lanxess AG.
More: Germany is stuck in the energy price trap