German companies are increasingly tense because the industrial superpower has collapsed

While Chancellor Olaf Scholz faced criticism of the government from large companies at the Sunday opening of the Hanover Fair, noted as the world’s leading industrial fair, Germany’s largest industry association, the BDI, showed a ruthless picture of the economy’s prospects.

It was announced on Monday: German industry has been struggling with a continuous decline for years, and the prospects for this year are also bad, as a result of which overall production may decrease by one and a half percent compared to 2023.

The industry has not yet recovered from the cost and demand shocks, extremely high energy prices and inflation, stated the BDI president. According to Siegfried Russwurm, although the decline in goods exports seems to have stopped, one of the most important drivers of the economy, foreign trade will not stimulate growth for a long time.

That’s why it’s not worth chasing vain dreams, the recovery is waiting for you. Urgent political reform is needed in Germany, without which “companies will have an unnecessarily difficult time,” he pointed out.

The big guns of the industry are demanding a change of strategy

The industry association, known as one of the harshest critics of the Scholz cabinet, is also pessimistic about the economy as a whole. With a bit of luck, companies are expecting a growth of only 0.3 percent in 2024, while in the global economy ten times this may occur.

According to Russwurm, this could mean a further break in the ranks of the large industrial countries, while the only way German companies can withstand the challenges at home is if their profits at their foreign production sites “increase pleasantly”.

In his speech, he sharply criticized the government’s strategy so far and demanded competitive, long-term energy prices.

As he said, for this, electricity network fees must be significantly reduced, and the government must quickly define the announced power plant strategy and the hydrogen strategy, and then implement them as a matter of priority. Companies urgently need a significant reduction in bureaucracy and corporate tax, the industry leader listed in Spiegel’s coverage.

Investors are fleeing far and wide

With more than one million employees and an annual turnover of more than 200 billion euros, mechanical engineering is considered the backbone of the German economy. The predominantly medium-sized industry, which includes listed companies such as Thyssenkrupp and Siemens, sells about three-quarters of its systems abroad.

According to the German Association of Mechanical and Industrial Engineers (VDMA), new investments and orders are hindered by conflicts in Ukraine and the Middle East, high interest rates and inflation, as well as great uncertainty among customers. Therefore, the weakening of the German economy is exacerbated by the fact that companies invest primarily abroad, for example in the USA, which, according to the association, must be stopped as soon as possible by the government.

The chancellor expects companies to act responsibly

Olaf Scholz explained at the opening in Hanover: companies must also take responsibility for making Germany stronger again as a business location, instead of saying that the country is weak.

At the same time, the Chancellor admitted that the last two years had been difficult, because the traffic light coalition had to make a whole series of decisions in order to achieve climate neutrality.

It is also clear that the collapse of the world economy and the substitution of Russian gas will cause problems, especially for Germany as an exporting country, he said, noting that many measures have been taken to support the economy. He also indicated that they are open to reducing bureaucracy, most of the rules anyway come from Brussels, not the state.