Industry wants “smart combination” of growth, climate action in Germany, EU

The influential business association Federation of German Industries (BDI) has urged the government of chancellor Olaf Scholz to quickly implement measures that will encourage more investments in Germany. The coalition government as well as the European Commission would have to “take economic growth into focus as an important target again,” BDI head Siegfried Russwurm said in an interview with public radio Deutschlandfunk. With a projected growth of 0.3 percent for 2024, Germany could not at all afford to become complacent, given that the U.S. is projected to grow 2.5 percent and China even five percent this year, Russwurm argued. He stressed that growth is not at all opposed to climate action as another guiding policy principle. “It’s about achieving a smart combination of the two,” Russwurm said, arguing that neglecting global warming “is a luxury that we cannot afford” either. A European Industrial Deal that complements the bloc’s Green Deal would be an appropriate instrument to this end, he said. According to the BDI, the need for additional investments in the country amounts to 400 billion euros over the next ten years. However, even if some of these additional investments could be financed through borrowing, the country does not have to abdicate its controversial ‘debt brake,’ Russwurm added.

The constitutional limit on new government borrowing that was reinvigorated by a court ruling in late 2023 currently weighs on the government’s ongoing 2025 budget negotiations. The court's decision that the so-called "Climate and Transformation Fund" worth 60 billion euros, which was set up to finance urgent climate and energy transition policy measures, was not compatible with the debt brake has thrown the government's climate plans into disarry at a time when infrastructure investment needs are growing across the country.

At the German Industry Day conference hosted by the BDI in Berlin on Monday, chancellor Scholz said he was open to “topping up measures, such as write-offs and research support” to unleash more financial means for new investments, public broadcaster ARD reported. However, this would also depend on the consent of Germany’s 16 state governments, the chancellor added. Regarding industry complaints about energy prices in Germany, Scholz said the government understood these concerns and had initiated measures, such as lower electricity taxation, to give companies greater leeway. Economy minister Robert Habeck at the conference said that the government did not plan to open up special credit-based funds for industry investments outside of the regular budget, a measure proposed by the BDI. At the same time, Habeck said that administrative procedures in the country had to be greatly sped up to make life easier for companies seeking to launch new projects. With a view to the looming trade conflict between the EU and China, which many German companies fear due to planned additional tariffs on Chinese electric vehicles, Habeck said he would seek to avoid a situation in which “the world becomes segregated into separate tariff zones,” which would trigger a spiral that ultimately makes many goods more expensive for everyone, news station n-tv reported.