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- Bringing energy costs down will be key to Germany’s economic recovery.
- Businesses are urging the incoming government to act swiftly and decisively to lower energy costs and boost energy security in order to help Germany regain competitiveness.
- Siemens CEO Bruch called for major investment in new gas-fired power plants.
The new German government that will be formed following this weekend’s elections will face an uphill battle to lift Europe’s largest economy out of two consecutive years of recession.
Bringing energy costs down will be key to Germany’s economic recovery after three years of spiking and highly volatile power and natural gas prices after the shock energy crisis in 2022.
Domestic power prices have been very volatile in recent months amid low wind speeds. Germany has been experiencing lower-than-normal winds for four months, which have reduced wind power generation, boosting electricity prices and the reliance on fossil fuels. Electricity prices have been rising this year due to higher natural gas prices in Europe amid a cold winter, lower wind generation, and faster depletion of natural gas inventories.
For a few years now, high energy costs have dogged many of Germany’s key industries, including car manufacturing, steel making, and chemicals production. The once-revered German industries have been losing competitiveness due to shrinking margins and many manufacturing sites have temporarily or permanently closed. Even German carmakers have proposed what was unthinkable just a few years ago—slash jobs in Germany.
Germany voted in the February 23 snap election as Europe’s biggest economy had just registered a second consecutive year of recession.
GDP fell by 0.2% in 2024 from a year earlier, for the second annual contraction in a row.
“Cyclical and structural pressures stood in the way of better economic development in 2024,” said Ruth Brand, President of the Federal Statistical Office.
“These include increasing competition for the German export industry on key sales markets, high energy costs, an interest rate level that remains high, and an uncertain economic outlook. Against this backdrop, the German economy contracted once again in 2024,” Brand added.
In last Sunday’s election, German voters gave the conservative party, the Christian Democratic Union (CDU), a mandate to begin talks to form the new government. CDU leader Friedrich Merz is likely to be the new chancellor of Germany.
Apart from having to navigate increasingly complex geopolitical waters, the new German government will have to cope with the most pressing issues at home—revive the economy and industry and lower energy bills for industry and for households.
Businesses are urging the incoming government to act swiftly and decisively to lower energy costs and boost energy security in order to help Germany regain competitiveness.
“The first important step now is to quickly transform the election result into a strong government that is capable of action and willing to reform,” Markus Krebber, chief executive of German utility giant RWE, said.
Having a secure energy supply at competitive prices is a “prerequisite” for Germany to revive its economy and strengthen its industry, Krebber wrote in a LinkedIn post after the election.
Christian Bruch, CEO at Siemens Energy, called for energy policy measures, including policy supportive of industrial growth, tendering at least 12 gigawatts (GW) of new gas-fired plants to support the planned coal phase-out, expansion of wind energy and grids, and a strategic policy to secure supply of raw materials.
“In an extremely difficult global and economic situation, Germany now needs a stable government as quickly as possible,” said Hildegard Müller, president of the German auto industry association VDA, commenting on the outcome of the election.
“Companies as a whole and in particular the backbone of our prosperity – the medium-sized businesses – can no longer bear the high energy prices, the excessive bureaucracy and the taxes and duties in their current form,” Müller said.
“A commitment to the medium-sized businesses must be backed up by concrete measures that promise relief in the short, medium and long term.”
Germany’s top industries and power generators want strong, decisive measures from the new government to tackle the industrial downturn—and these actions include energy policy reforms.
By Tsvetana Paraskova for Oilprice.com
The post Can Germany Revive Its Industry Without Cheap Energy? appeared first on Energy News Beat.
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