Deindustralization of Germany Means Disaster for All of Europe
In addition to the European Round Table of Industry, many other warnings have been issued over the prospect of “deindustrialization” of the EU’s largest economy. The Handelsblatt of Oct. 24 discusses the fear that the difficulties of one single supply branch could paralyze production in entire industrial sectors, taking the example of hot-dip galvanizers. A recent survey shows “the full drama of the energy crisis: the gas contracts of almost one third of the companies that weatherproof steel in zinc baths will expire by the end of the year”, the daily writes. “For 50%, the contracts will end next year. 40% expect a fivefold increase in gas prices, 50% a threefold or fourfold increase. The remainder fears even a tenfold increase. The situation is similar for electricity contracts.”
Statista, the leading online statistics portal in Germany, took note on Oct.19 that “in Germany, the danger of so-called deindustrialization is currently being discussed. In parts of the German economy, production is in jeopardy due to the rapid rise in gas and electricity prices. In view of the further round of price increases expected by the beginning of next year, both companies and their industry associations fear that production in Germany could become permanently unprofitable.”
But this is not only a German dilemma. Among the major European countries, Germany has the highest share of productive sectors in the total economic balance, at 26.6%, followed by Italy at 22.6% and France at 16.8%. Because of the close interconnectedness among industries, German exports to and imports from European countries account for 27% of the total amount in Europe. Therefore, any substantial drop in its output would spell catastrophe for many other industrial companies.
The illusory “green agenda” based on renewable energies had considerably weakened German industry well before the conflict in Ukraine. Since the current tripartite coalition (SPD, Greens, FDP) took office about one year ago, business associations have complained of the absence of knowledgeable experts in the Economy Ministry headed by Green Party politician Robert Habeck. They have NGOs as interlocutors, but not people who understand the requirements of an industrial nation like Germany.
That explains the government’s chaotic conduct of insisting on the green agenda, while making minor concessions on some aspects of the energy supply: continued operation of a few coal-burning power plants for several months; postponing the shutdown of the three remaining nuclear power plants, to serve as an “emergency reserve” until April 2023; hectic LNG purchases on the global market at outrageous prices to replace affordable gas from Russia. What particularly infuriates businesses and the population, is is that the price cap on gas is not to go into effect until March 2023, and not in the two critical winter months of January and February.