Germany’s finance minister questions need of state support for batteries, hydrogen, semiconductors

German finance minister Christian Lindner has questioned the need for generous state support to attract investments in future industries, such as battery, hydrogen or semiconductor production, in light of the government’s ongoing budget crisis.  “I don’t share the paradigm of autonomy,” Lindner said in an interview with business weekly WirtschaftsWoche with a view to onshoring key industries in Germany and Europe to reduce reliance on foreign suppliers. The Free Democrat (FDP) minister’s statements clashes with the position of cabinet colleague Robert Habeck, economy minister from the Green Party, as well with that of chancellor Olaf Scholz, who both support attracting investments through financial assistance by the state and have agreed support for a string of projects in the past year, including battery and chip production. “I’m not convinced that Germany can safeguard its competitiveness, its prosperity, and social security through subsidies in the long run,” Lindner said. While it would make sense to reduce reliance on single suppliers, especially China, this did not mean that production needs to be ensured domestically. “I don’t care whether semiconductors come from the USA, from Ireland or from Germany,” he argued, adding that it would be “silly” to plan for repatriating the entire production chain of certain products.

A court ruling in November has left the government short of 60 billion euros in new debt planned for climate and transformation projects in the next years, forcing the coalition to reshuffle its budget and debate possible spending cuts and new sources of income. The treasury has gauged the immediate funding gap in the 2024 budget, whose adoption has been delayed in recent weeks but is expected to take place before the end of the year, at about 17 billion euros. It also ordered a budget freeze that pauses new applications and funding agreements for a wide range of climate-related transformation projects, leaving industry and policymakers across the country anxious as to whether energy transition plans can be implemented as expected.

In a bid to get all sectors on track towards its goal of climate neutrality 2045 and in line with EU-wide industrial policy efforts under the Green Deal, Germany’s government has agreed on far-reaching support schemes for decarbonising its heavy industry, the automotive sector, expanding renewable power production and facilitating the creation of a European hydrogen and battery production industry. Apart from its climate targets, the country is also under pressure to safeguard its economic competitiveness, as governments around the world have drawn up major subsidy programmes for building up clean industries, for example in China or in the U.S. with its Inflation Reduction Act (IRA). Germany has teamed up with several other European countries on a range of projects to create strong European capacities in technologies seen as critical for a successful energy transition, for example through the EU’s Important Projects of Common European Interest (IPCEI) scheme.