Fearing uncertainty, German industry calls for fast snap election (updated)

Covestro AG

07/11/2024 11:37

* 
      Industry leaders demand quick vote to address economic
challenges in Europe's largest economy
    

        * 
      Warn of investment risks, need for regulatory support
    

        * 
      'We have seen Chancellor Scholz ignore our warnings too
often
and for too long,' chemicals group CEO says
    

  
 (Adds company reactions in paragraphs 3, 6-7, 9, 16)
    By Christoph Steitz
       FRANKFURT, Nov 7 (Reuters) - German industry, reeling
from high costs and fierce Asian competition, urged Berlin on
Thursday to hold snap elections as soon as possible after the
ruling coalition broke up, warning Europe's top economy had no
time to waste to get back on track.
    The comments from the automotive, chemicals and energy
sectors, which together form Germany's industrial backbone,
highlighted the need for fast reform as German companies are
increasingly falling behind international competitors.
    Some of Germany's top blue-chips, including top lender
Deutsche Bank  DBKGn.DE  and insurer Munich Re  MUVGn.DE , came
out in support of quick elections to reduce uncertainty and
ensure Germany remains attractive to investors.
    On Wednesday evening, German Chancellor Olaf Scholz fired
Finance Minister Christian Lindner after weeks of deadlock over
budgets and other policy, dissolving the three-way "traffic
light" coalition consisting of the Social Democrats (SPD),
environmentalist Greens and neo-liberal Free Democrats (FDP).
    The move has thrown Europe's economic powerhouse into a
leadership vacuum at a time of industrial weakness, with several
companies having warned for months that Germany needed a
masterplan for its economy.
    "Unfortunately, we have seen our Chancellor Olaf Scholz
ignore our warnings too often and for too long," said Matthias
Zachert, CEO of chemicals group Lanxess  LXSG.DE .
        "Under this chancellor, our country and the German
economy have already lost far too much time."
  
        The coalition breakup also coincides with concerns over
the likely impact of Donald Trump's election to a second term in
the White House on Germany's export-dependent companies, with
U.S. import tariffs being one of the scenarios that have weighed
on investor sentiment.
  
    Scholz, a Social Democrat, said he aimed to hold a vote of
confidence in January, paving the way for elections in March, a
timeline key industry representatives said raised the risk of
prolonged uncertainty when the sector needs regulatory support.
    
    RISK OF STANDSTILL
        Siegfried Russwurm, who heads Germany's main industry
association BDI and serves as chairman of Thyssenkrupp
 TKAG.DE , said continued uncertainty as to who will govern
Germany and with what program was damaging its economy.
  
    German exports and industrial output fell more than expected
in September, underlining the weakness of two of the pillars of
Germany's economic model at the start of the fourth quarter.
    "We cannot afford a months-long standstill and political
deadlock," said Wolfgang Grosse Entrup, who heads pharma and
chemicals lobby group VCI, representing companies such as BASF
 BASFn.DE , Covestro  1COV.DE  and Evonik  EVKn.DE .
    His remarks were echoed by Hildegard Mueller, president of
the powerful car lobby group VDA, which speaks on behalf of
Germany's major automakers Volkswagen  VOWG_p.DE , Porsche
 P911_p.DE , Mercedes-Benz  MBGn.DE  and BMW  BMWG.DE .
    The situation in the car industry is particularly dire, with
all automakers suffering under growing global trade tensions,
particularly between top markets U.S. and China, while Asian
rivals are entering the European market with cheaper products.
    Volkswagen CEO Oliver Blume, currently locked in a major
dispute with unions over potential pay cuts and plant closures,
met with Scholz last week as part of an exchange with industry
over how to support the troubled sector.
    Scholz said on Wednesday he was planning a draft law on
immediate support measures for the industrial sector before
Christmas, raising the question how he intends to do that
without a majority in parliament.
    The disarray has also stoked fears over Germany's appeal to
investors, with Heidelberg Materials  HEIG.DE , the world's
second-biggest cement maker, saying political delays were bad
for the investment decisions of German and European industry.

 (Reporting by Christoph Steitz with additional reporting by
Linda Pasquini in Gdansk; editing by Matthias Williams and Mark
Heinrich)
 ((christoph.steitz@thomsonreuters.com; +49 30 220 133 647;))