Germany’s new economic system minister has warned that the survival of the nation’s heavy trade is significant to Europe’s sovereignty, as she pleaded for Brussels to approve a plan to help German energy-intensive corporations.
Katherina Reiche mentioned she was hopeful the European Fee understood the necessity for Berlin to subsidise electrical energy prices for sectors similar to chemical substances and metal to assist finish Germany’s longest postwar interval of stagnation.
She emphasised that Berlin was decided to “do its homework” by implementing structural reforms and unleashing a €1tn funding plan into its infrastructure and its defence trade. However she additionally made the case for safeguarding different manufacturing industries, underscoring earlier errors that led to an over-reliance on Russia and China.
“Not having metal manufacturing in Germany would imply getting into into new dependencies,” Reiche informed the Monetary Instances in her first interview to a global media organisation. “To now not have primary chemical manufacturing would imply getting into into new dependencies.”
She added: “Development in Germany is vital to generate progress in Europe once more. The Fee needed to revise down its progress targets for this yr . . . We should due to this fact do all the things we will to strengthen Germany as a enterprise vacation spot once more.”
The Eurozone’s largest economic system is reliant on heavy manufacturing industries, which have been going through larger vitality prices partially due to its exit from nuclear vitality and Russia’s full-scale invasion of Ukraine in 2022. This has added to the burden for its export-focused corporations, that are additionally fighting competitors from China and home labour shortages. Now Donald Trump’s risk of fifty per cent tariffs on EU imports might tip Germany into contraction this yr, after three years of stagnation.
The brand new coalition of conservative chancellor Friedrich Merz has promised to cut back electrical energy prices by a minimum of 5 cents per kilowatt-hour by slicing taxes and grid prices as a part of a broader drive to revive progress and help the nation’s carmakers and different producers.
It has additionally pledged to introduce a particular diminished electrical energy charge for energy-intensive industries similar to metal, glass, cement and chemical substances.
The plan dangers falling afoul of EU guidelines on state help, which can be designed to forestall member states from introducing unfair benefits for his or her economies. However the guidelines had been made extra versatile following Russia’s 2022 invasion of Ukraine in order that international locations might backstop industries affected by document excessive fuel costs.
“With the intention to hold energy-intensive industries — however not solely these — in Germany, we’d like state help approval”, Reiche mentioned, including {that a} present value compensation system linked to oblique carbon dioxide prices must also be “prolonged”.
She argued that progress was important to the well being of democracy on the continent: “We’re additionally in competitors between methods and Europe should present — and we are going to present — that we’re capable of react shortly. To get higher and nonetheless safeguard our democratic processes and uphold our values.”
Reiche, 51, is one in every of two former chief executives introduced into the cupboard by Merz, whose Christian Democrats (CDU) received parliamentary elections in February and took workplace earlier this month.
Although she beforehand spent 17 years as a CDU member of the Bundestag and served twice in junior ministerial roles throughout Angela Merkel’s time in workplace, she spent the previous decade working in enterprise. For the final 5 years she was the chief govt of Westenergie, a subsidiary of the German energy large Eon.
Reiche signalled a break with the earlier authorities on European vitality co-operation. In Brussels former chancellor Olaf Scholz’s coalition fought French efforts to push nuclear vitality as a part of the EU’s decarbonisation drive. Reiche mentioned it was vital to work constructively with Paris on such points.
“My strategy is to look much less at what divides us and extra to search out the frequent floor,” she mentioned, including that one space can be nuclear fusion know-how, which in contrast to fission, wouldn’t generate any long-lived radioactive waste.
Reiche pressured the necessity to strike a stability on China, which is without doubt one of the most vital markets for German exporters together with massive carmakers however can be more and more seen as an financial and geopolitical risk to Europe.
Germany, she mentioned, wanted to cut back its dependency on Chinese language merchandise and uncooked supplies over time, whereas including that it ought to preserve a “affordable, good relationship” with Beijing. “It’s a enormous market, it’s an financial energy, it’s a navy energy . . . Our corporations are closely invested there. Numerous added worth comes from investments in China.”
Reiche was scathing about current calls from a string of German politicians, together with a number of in her personal get together, for the Nord Stream fuel pipelines between Russia and her nation to be resurrected.
“Again to Russian fuel? With a regime that bombs Kyiv each day? It’s completely inconceivable for me,” she mentioned.
She argued that Germany — which was once Gazprom’s largest buyer in Europe — as an alternative wanted to accentuate efforts to diversify its provide. “We should do all the things we will to faucet into different sources of vitality.”
Reiche, who grew up beneath communist rule in east Germany, mentioned that the deep-rooted sympathy for Russia amongst some elements of the area had been “alien” to her. “My mother and father, grandparents and great-grandparents had an organization that was expropriated a number of occasions, so my relationship with the previous Soviet Union shouldn’t be freed from pressure,” she mentioned. “I used to be very comfortable when the wall fell.”
Germany, she mentioned, had “succumbed to a fallacy” in believing that Russian fuel provides had been safe it doesn’t matter what occurred on this planet, including: “We paid a bitter value for this naive perspective.”
The far-right Various for Germany, which got here first in lots of japanese constituencies in February, was “exploiting the sensation of uncertainty” there, she mentioned, noting that these states went by many years of political and financial upheaval beneath the Nazi regime, the German Democratic Republic and reunification.
She recalled a number of the prejudice West Germans held in direction of their japanese cousins. “What I can say is that within the 90s, East Germans’ curiosity about west Germany was positively larger than west Germany’s concerning the East,” she mentioned.
“This area is present process everlasting structural change, or there’s a feeling that there’s by no means a break as a result of it’s by no means completed,” she added. “Again and again, there may be one other change. And that’s additionally mirrored within the feeling of uncertainty, a worry of shedding prosperity, of decrease prospects.”
Further reporting by Alice Hancock in Brussels
