The German economy increasingly sees its global competitiveness at risk due to high energy prices. Requirements for companies and a high level of bureaucracy in the energy price brakes are increasingly criticized.
Industry President Siegfried Russwurm said on Tuesday in Berlin that Germany was falling behind other regions of the world. The drastic jump in energy prices is a significant threat to the site. Russwurm warned against relocating production.
For example, gas produced locally in the USA currently costs just one-fifth of what it costs in Germany. The cost factor of energy has long since weakened not only energy-intensive companies, but also has noticeable effects on the entire value chain in industry, said Russwurm. Production relocations in other sectors cannot be ruled out.
BDI: Improving framework conditions
The federal government must improve the framework conditions. Blockades for the energy price brakes would have to be resolved “very quickly”. Many companies could not even take advantage of the price brakes due to the overly restrictive framework conditions.
The gas and heat price brake has been in effect for large consumers since January, for private households and small companies from March – with retrospective relief for the months of January and February.
Russwurm cited the requirement that a company must record a more than 40 percent decline in earnings before interest, taxes, depreciation and amortization (Ebitda) to receive full funding as a “main brake” on relief. The companies would only know that at the annual financial statements in the coming year. Therefore, companies would have to make provisions for a possible repayment of state aid. Russwurm also called it “unworldly” that there was a ban on dividends and variable income for large parts of the economy in the event of state support.
The energy price brakes were actually planned as “insurance against price peaks,” said Russwurm, who, as President of the Federation of German Industries (BDI), co-chaired the gas price commission. This had made a proposal for price brakes.
Complaints about too much bureaucracy in the price brakes
The family entrepreneurs also complained about too much bureaucracy in the price brakes. Reinhold von Eben-Worlée, President of the family entrepreneurs, told the German Press Agency: “Many entrepreneurs are unsure about the information required for approval. The help can probably only be requested with enormous bureaucratic effort.”
Many entrepreneurs were deterred by the fear of repayments due to incorrect assessments of the future or the threat of dangerous liability issues in the event of errors in the applications. Large corporations could hire new people and hire consultants for this purpose. “However, many medium-sized companies will not even get involved in these aid programs. But those who do not receive the aid lose their competitiveness and will reduce, relocate or stop their production,” said Eben-Worlée.
The Federal Ministry of Economics explained that the price brakes for industry were designed as flat-rate as permitted by European state aid law. The specifications of the European Commission provide for special regulations for the relief of larger companies, which will be relieved by a total of more than 2 million euros per group of companies. For particularly large industrial consumers, different regulations apply depending on the company’s decline in profits, classification as an energy-intensive company or the energy and trade intensity of the respective industry.
tax cut required
Russwurm called for the EU to adjust state aid law, even independently of immediate crisis aid. The federal government should also reduce taxes and duties on energy.
However, as Russwurm made clear, there will be no feared deep recession in Germany due to the energy price crisis or problems in global supply chains. The BDI expects a slight decline in gross domestic product of 0.3 percent for 2023. From spring onwards things should improve. So far, the federal government has been expecting the economy to shrink by 0.4 percent this year.
