Government meeting on Industry Day: In difficult waters – economy

Open stage coalition negotiations do not take place every day. A turning point is possible, and as the scene sets in at the industry’s annual meeting, top ministers appear alongside the federal chancellor. Because industry is the bearer of prosperity in this country; companies thrive in open markets and trade with China; Industry is where most of the research and investment takes place, with millions of well-paid workers. “Industry is now in difficult waters,” Chancellor Olaf Scholz said Tuesday in Berlin during the so-called Industry Day, as many companies in the manufacturing sector are particularly hard hit by energy prices. In order to make sure that “external shocks” would not lead to permanent inflation, on July 4 he invited social partners to joint action at the Chancellery.

“We rolled up our sleeves, Germany is picking up speed again,” said Scholz, trying to be optimistic. In this time of war, “we are in uncharted territory, but we have a plan and a compass, and we are not alone.”

Ambitious treasurer. Christian Lindner, wants to adjust to the debt brake, invest in the future and tax-free …Photo: dpa

The SPD chancellor does not necessarily have the FDP’s federal finance minister alongside. On July 4, the agreed action will concern further corporate and consumer concessions that the taxpayer community would have to bear. The reintroduction of the tax and duty free crown bonus for employees is under consideration. Christian Lindner, however, does not want to pay more and puts forward several arguments.

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Another increase in government spending will fuel inflation even further; next year the debt brake will be applied again and finally, after more than ten comfortable years, servicing the federal government debt will become significantly more expensive due to rising interest rates. He will have to spend 30 billion euros in interest in the coming year, Lindner told the accumulated economic power. In 2021, his predecessor as finance minister, Olaf Scholz, only had to pay four billion in interest. “It’s a cliff that opens up before us,” said Lindner. “With the growing interest burden, we can no longer afford to rise in debt.”

Lindner sees himself in front of a steep wall

The Minister of Finance distanced himself from both Scholz and the Minister of Economy, Robert Habeck (the Greens). In addition to the Concerted Action, Scholz brought together social partners and industry representatives to form the “Alliance for Transition” to jointly tackle the decarbonisation and digitization of the economy and society. The post-transition industry should be stronger than before, said Scholz. “Fighting inflation is a priority given the entire need for transformation,” Lindner replied.

No tax increases are needed

– We will achieve the debt brake without limiting investments and without raising taxes – announced the Minister of Finance. The discussion of the excess profit tax is counterproductive because if high profits are made in certain areas, Lindner cited the semiconductor industry as an example, there would be incentives to invest there. “Who should decide at the regulars table what is excess profit?” Lindner rejected both Habeck’s proposal and proposal to subsidize the small and medium income tax credit with higher taxes on higher incomes. In that case, the highest tax rate would have to be 57 percent of an annual income of € 80,000, Lindner calculated.

Industry CEO Siegfried Russwurm and Economy Minister Robert Habeck are more or less amused by the debate at …Photo: REUTERS

Friedrich Merz is for nuclear energy

In addition to the main players in the federal government, the opposition leader Friedrich Merz also appeared in the industry. Solving the current energy crisis would require “using all the resources available to the country”, including longer operating hours for coal-fired power plants and longer operating hours for the other three nuclear plants. According to Merz, due to the consequences of the war, the climate goals “are no longer achievable from today’s perspective”. Unless previously criticized the technology of “CO2 recovery and recycling”, as well as underground storage of climate gas.

Expensive wave of refinancing next year

Christian Sewing, CEO of Deutsche Bank, was skeptical about the prospects for the next 18 months. The first two quarters of 2022 continued to run well, but the likelihood of a recession is increasing, largely due to high inflation, as interest rate increases in Europe and the US are paying off. In the coming year there will be a wave of refinancing in the economy – said the banker – and it will be costly for companies. After all, “Companies and the economy as a whole are more resilient than they used to be,” Sewing said. The “Golden Decade 2010-2020” will help in the current crisis.

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