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German trade unions lose patience with ministers over industrial subsidies

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German trade unions are insisting on subsidies for energy-intensive industries in Germany, while the government and business representatives are split.

With electricity prices continuing to be influenced by the phasing out of Russian pipeline gas, the German government is still split on subsidising energy-intensive industries with a temporarily reduced electricity price.

While a subsidised “bridge electricity price” for industries is supported by Economy Minister Robert Habeck (Greens), Chancellor Olaf Scholz (SPD/S&D) and Finance Minister Christian Lindner (FDP/Renew Europe) oppose the measure.

Germany’s powerful industrial trade union IG Metall has now announced protests if the scheme is not implemented, which it says could endanger the future of industrial production in the country.

“For months, the federal government has been engaged in a public debate about the bridge electricity price, with no result in sight,” Jürgen Kerner, deputy head of IG Metall, told journalists on Tuesday (31 October). “The decision for temporary relief for energy-intensive industry is overdue,” he added.

“We have to convince the Chancellor and the Finance Minister,” Kerner said. “We must also make it clear, also to a finance minister, that we are also willing to ultimately get the workers onto the streets,” he added, announcing protests on 20 November.

However, he acknowledged that “flourishing companies such as Siemens AG or others do not need the bridge electricity price”.

While industrial giant Siemens has so far mostly withstood the crisis, its subsidiary Siemens Energy, of which Siemens holds 25% of shares, is currently negotiating public guarantees with the federal government, after its wind energy division tumbled.

Industry split on subsidies

Last week, Habeck presented an industrial strategy which should help companies adapt to the new situation caused by the war in Ukraine as well as increasing geopolitical tensions.

In the strategy, he called for a more active state role in transforming industrial production towards a more green and digital economy, and to ensure more resilient supply chains and to reduce dependence on China.

On Tuesday, he invited representatives of trade unions and industry associations to discuss the main points at an annual industry conference, hoping to receive their backing.

“Quite rightly, the industrial strategy places great emphasis on securing the breadth and depth of industrial value chains in Germany,” Siegfried Russwurm, head of German industry association BDI said.

However, on a subsidised electricity price for certain industries, “our position is a little more differentiated,” he added.

While some industry associations such as chemical, steel and paper industries, have demanded the introduction of the scheme, the umbrella organisation BDI supports a broad reduction in electricity taxation.

“If we are in a situation where we de facto want to electrify this country, electric heating, electric mobility, electric processes in industry, then it makes no sense from our point of view to tax every kilowatt-hour of electricity,” Russwurm said. 

Habeck stressed that reducing taxes alone would be insufficient, as many energy-intensive industries are already exempted from electricity tax, which is also a subject of the ongoing negotiations.

While Habeck would like to finance the subsidy scheme with additional public debt, Russwurm said that he would “not support the idea of financing through debt”, instead calling upon the government to reprioritise public spending.

Chances ’50/50′

Habeck repeated his estimate that the chances of the subsidy scheme would be “50/50”.

Responding to criticism by economists, who warn that the subsidy scheme could delay necessary structural changes in the industry, Habeck stressed that current energy prices are caused by the reaction to Russia’s war in Ukraine.

“Putin, in turn, should not decide on the structure of German industry,” he said.

“Subsidies are only one part of the industrial strategy,” he said, adding that “quite a lot of the industrial strategy and the work that I want to do, or that we are in the process of doing, is strengthening the supply side”.

This would include addressing labour shortages, reducing bureaucracy, accelerating the expansion of renewables as well as more trade agreements with third countries, Habeck said.

[Edited by János Allenbach-Ammann/Benjamin Fox]

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