Germany's industry in crisis: financial expert calls for subsidized electricity prices

Germany's industry in crisis: financial expert calls for subsidized electricity prices

According to a report by amp.dw.com, Germany is heading towards a recession. The Confederation of German Employers' Associations (BDA) conducted a survey in October 2023 and 82 percent of the entrepreneurs surveyed expressed great concerns about Germany as a location. 88 percent are of the opinion that the government does not have a well-thought-out strategy to deal with the crises. Economics Minister Robert Habeck (Greens) shares these concerns and has presented an industrial strategy to provide massive government support for the German economy. The central component of this strategy is a subsidized electricity price, which should be six cents per kilowatt hour.

The rising energy prices following Russia's attack on Ukraine have led to an increase in electricity prices in Germany. Industry currently pays 24 cents per kilowatt hour, while the electricity price for citizens was previously 40 cents. Economics Minister Habeck argues that a subsidized electricity price is necessary to maintain the core of the German industrial value chain.

However, there is disagreement about how to finance subsidized electricity prices. The Greens are open to additional debt, but BDI President Russwurm is against new debt and emphasizes that the state has a spending problem.

The situation will also be discussed in the Bundestag during the budget negotiations for 2024. Economics Minister Habeck hopes for an agreement and points to the budget discussions, which could bring some clarity.

The potential impact of a subsidized electricity pricing policy can be significant. Reducing the price of electricity to six cents per kilowatt hour would significantly reduce energy costs for industry and improve its competitiveness. This could lead to energy-intensive companies staying in Germany instead of moving abroad. A strengthened German industry could have a positive impact on the entire market by boosting exports and economic growth.

However, there are concerns that a subsidized electricity price could increase demand and create shortages. It could also mean that companies feel less pressure to convert their operations to carbon neutrality. A careful consideration of the advantages and disadvantages of a subsidized electricity pricing policy is therefore necessary.

Source: According to a report by amp.dw.com