German labor unions grow increasingly impatient with government ministers regarding subsidies for the industrial sector

01 Nov, 2023

German labor unions grow increasingly impatient with government ministers regarding subsidies for the industrial sector

Germany remains divided on the issue of subsidizing energy-intensive industries as electricity prices continue to be affected by the phasing out of Russian pipeline gas.

Economy Minister Robert Habeck supports a subsidised "bridge electricity price" for these industries, while Chancellor Olaf Scholz and Finance Minister Christian Lindner oppose the measure. The powerful industrial trade union IG Metall has threatened protests if the scheme is not implemented, as they believe it could jeopardize the future of industrial production in the country.

Jürgen Kerner, deputy head of IG Metall, stated, "The decision for temporary relief for energy-intensive industry is overdue," and announced protests scheduled for November 20th. He also noted that thriving companies like Siemens AG do not require the bridge electricity price.

Despite Siemens' resilience in the crisis, its subsidiary, Siemens Energy, is negotiating public guarantees with the government after a downturn in its wind energy division.

Habeck recently presented an industrial strategy aimed at helping companies adapt to the changing landscape caused by the war in Ukraine and increasing geopolitical tensions. While the strategy calls for a more active state role in transforming industrial production towards a greener and more digital economy, the debate over a subsidised electricity price for certain industries remains contentious.

Some industry associations, such as those representing the chemical, steel, and paper industries, support the introduction of the scheme. However, the umbrella organization BDI favors a broader reduction in electricity taxation.

Habeck emphasizes that reducing taxes alone is insufficient, as many energy-intensive industries are already exempt from electricity tax. He proposes financing the subsidy scheme with additional public debt, while others suggest reprioritizing public spending.

Habeck acknowledges that the chances of the subsidy scheme's approval are uncertain, with economists warning that it could delay necessary structural changes in the industry. He argues that the current energy prices are a result of Russia's actions in Ukraine and emphasizes the need to strengthen the supply side through labor market improvements, reduced bureaucracy, accelerated renewable energy expansion, and more trade agreements with third countries.