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BDI worried about gas supplies: industry association warns of recession

BDI worried about gas supplies: industry association warns of recession

Status: 06/21/2022 3:03 p.m

German industry expects the economy to be significantly weaker this year. Should Russia no longer deliver gas to Germany, BDI President Russwurm fears an even more severe slump.

The Federation of German Industries (BDI) has drastically lowered its economic forecast for this year. Growth in economic output in Germany is only expected to be around 1.5 percent, as the association announced on Industry Day. At the beginning of the year, before the start of the Russian war of aggression in Ukraine, the industry had still assumed an increase of around 3.5 percent for 2022.

According to the association’s president, the economy could be even worse if gas supplies from Russia stopped completely. “The reduction in Russian gas exports worries us,” said BDI President Siegfried Russwurm at the event in Berlin. “An interruption would have catastrophic effects on the manufacturing industry and would inevitably send our economy into recession.” A recession occurs when economic output falls for at least two quarters in a row.

“Double Crisis”

“The industry is struggling with the double crisis of the Russian invasion of Ukraine and the effects of the Covid pandemic,” said Russwurm. “From today’s perspective, accepting massive dependencies as the price for cost advantages and economies of scale was just as wrong as our country forgoing sufficient investments in its own defense capabilities,” said the association’s president. “We skipped the fire brigade because we considered the risk of fire to be negligible. Now it’s ablaze.”

For the near future, Russwurm called for the procurement of raw materials to be placed on a broader basis, to focus more on recycling and the circular economy, to invest more in the development of important technologies such as semiconductors in Europe and to further diversify the sales markets. In addition, the BDI President called for increased investments in liquefied natural gas. In order to fill the natural gas storage tanks more quickly, electricity should no longer be generated from natural gas, instead coal must be used to produce electricity. The energy transition must be accelerated.

Criticism of the combustion engine ban from 2035

“Industrial policy is the focus,” said Russwurm. Economic strength is a prerequisite for social stability and participation. The head of the association called for an “innovation turbo” to transform the analogue state into a modern, digital state. So far you can see “not little, but nothing”.

The soot worm rejected “prescribed innovations” – referring to the decision of the European Parliament to ban the registration of cars with internal combustion engines from 2035. It is “presumptuous” to believe that one knows which technology will prevail in the future. The association president calls on Chancellor Olaf Scholz (SPD) to avert the decision at the meeting of the European Council next week.

Scholz fears an inflationary spiral

Scholz, in turn, warned at the event of a “permanent spiral of inflation” in Germany. The Chancellor referred to what was planned for early July Meeting of the “Concerted Action” with representatives of employers and trade unions in early July. Difficult problems can be solved better together than against each other. Germany is facing major challenges, said Scholz, referring to climate protection, digitization and the Russian war of aggression against Ukraine. The aim is for German industry to emerge stronger from the change and not have fewer, but more jobs.

Federal Finance Minister Christian Lindner called for a “reversal” in the federal government’s budgetary policy. With a view to drastically rising interest costs, he spoke of “a steep wall that opens up in front of us” at Industry Day. Fighting inflation must have absolute priority, according to the FDP leader. In the budget for the coming year he has to budget 30 billion euros for interest costs – after four billion euros last year. For him, this was “a signal”: “We can no longer afford additional debt.”

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