Expensive energy, lack of skilled workers: German economy sounds alarm | TBEN | 13.09.2022

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Working in a T-shirt in the winter? At the car dealership Rosier in Braunschweig, this used to be normal for the mechanics in the heated workshop. Car salesmen and other staff were even allowed to place fan heaters under their desks if it wasn’t warm enough in their offices. “We can no longer afford that,” said Stefan Becker, head of the Mercedes branch.

Fan heaters will be banned and instead of 20 degrees Celsius, the workplace will probably not get warmer than 15 degrees. It’s a sunny September morning when Becker explains his plans with Saskia Esken, co-chair of the ruling centre-left Social Democrats (SPD), who is on his way to Lower Saxony, where state elections will take place in early October. “Gas and electricity are costing us about €2 million more per year than before,” says Becker, peering through the workshop gate at the warm day outside. The store doesn’t need heating yet, but it’s only a matter of time.

SPD chairman Saskia Esken (l) received many complaints – also from car mechanics

Esken looks serious as she listens to the car dealership. Only when he complains that the photovoltaic system that has just been installed on the roof is no longer financially supported by the state, does the Social Democrat interrupt him. Why did he only now come up with the idea of ​​generating his own electricity? “Because electricity and gas have always been cheap until now,” Becker replies with a shrug.

Wherever the SPD co-leader stops during her tour, there is only one subject: the energy crisis turning into an economic crisis. It even affects waste incinerators. “People are consuming less, resulting in less household and bulky waste, and we can feel that,” reports Bernard Kemper, director of Energy from Waste GmbH (EEW) in Helmstedt.

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Export waste? That was yesterday

The plant produces district heating, supplying many thousands of households in the region. “We have to come up with something to meet our heating value and therefore our contracts,” says Kemper. In the past, Germany was one of the countries that exported waste to other countries for disposal. Now it is all burned here to generate energy.

Bernard Kemper 8l) and Saskia Esken

Bernard Kemper’s factory produces district heating and supplies many thousands of households in the region

While they are concerned, the power plant operator and car dealership are among those who say they will likely get through the winter financially. In many other sectors, things are looking less rosy.

“We have a dramatic economic situation, we are struggling with rising inflation, immense energy prices and severe shortages of raw materials, semi-finished products and other goods,” said Rainer Dulger, president of the Confederation of German Employers’ Associations (BDA) on German Employers’ Day in Berlin.

In the business world, the mood is getting worse by the day. The crisis caused by the coronavirus is still fresh in our minds and now a new recession seems inevitable. The situation is paradoxical: many companies have full order books, but broken supply chains are leading to a shortage of materials from all over the world. The skilled labor shortage is greater than ever and energy prices are becoming unaffordable. Bakers feel the effects just as much as steel producers or chemical companies.

If customers don’t agree to price increases, manufacturers have only one option: downsize their operations or stop production. But if a company stops making money, it will be declared bankrupt. According to surveys by industry associations, a third of companies in Germany already think their very existence is under threat.

What does it cost to protect companies?

Production restrictions also have far-reaching consequences for other companies. There is a threat of a domino effect because chemicals and steel are basic materials that are needed everywhere. The business community is calling for quick help from the state, but the government has so far mainly focused on the population itself with its emergency packages, heating costs subsidies, increased child benefit and the 9 euro public transport card.

After fierce protests from companies, Economics Secretary Robert Habeck announced a comprehensive protective umbrella for businesses, especially for small and medium-sized businesses and skilled craftsmen. But what does it cost in an emergency? Triple-digit billions, like the bridging measures put in place during the coronavirus pandemic? How many employees are out of work in the winter and have to be kept afloat with short-term allowances? The Ministry of Economic Affairs is still feverishly calculating the possible costs. Habeck had to admit on Employers’ Day that there was still no agreement in government on how much money would be available for company assistance.

The government’s announcements to get a grip on energy prices also look less concrete. Chancellor Olaf Scholz (SPD) promised quick help when it comes to power: Electricity producers that produce renewable energy and nuclear energy have no extra costs, but still receive high prices, have to give some of their so-called “unexpected profits” to poorer households and to support companies. Habeck believes a corresponding regulation could come into effect from the end of the year and said it should also apply retroactively.

But the German government still has no quick fix for gas prices. By the end of 2023, Germany will be completely independent from Russian gas. Thanks to import terminals for liquefied gas, which are expected to be ready by then, all the necessary gas can be obtained from other countries. The raw material then comes from Norway, the US and many other countries. Until then, it’s just a matter of perseverance. “We will probably get through this winter, and that is good news at the moment,” says Scholz, who does not think there will be a gas shortage.

Polite applause for the chancellor

However, that does not solve the high prices. Finding solutions to this is the task of a committee of experts comprising scientists, employers and trade unionists. But that’s not enough for employers’ associations, which rarely cheered the chancellor on Employers’ Day.

The business community does not understand the decision to shut down the three nuclear power stations that are still in operation after the end of the year. However, the chancellor said that care will be taken “that the nuclear power plants in southern Germany can continue to operate in January and February and March, so that under no circumstances a bottleneck arises in the German electricity market.”

The entrepreneurs would have preferred a clearer commitment. “What’s happening now is like throwing all the lifeboats overboard on the Titanic, but at the same time, the band is allowed to continue playing in the dining room,” Dulger said. “That’s not a responsible policy.”

This article was originally written in German.

While you’re here: Every Tuesday, TBEN editors round up what’s happening in German politics and society. You can sign up for the weekly Berlin Briefing email newsletter here.

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