Mulfingen, Germany (AP) – Germany needs a new business model. The old, fed by cheap natural gas from Russia and lucrative exports to China, has been broken, so that the largest economy in Europe has gained stagnation and fear of the future.
Delivering that new growth strategy becomes the biggest challenge for the government that takes place after a national elections that is on February 23, seven months earlier than planned. The nation that became known for the quality of its products has not seen any real economic growth for five years.
Several factors have been put together to bring Germany from an industrial powerhouse to post-pandemic disadvantage: too much bureaucracy, a shortage of trained employees, a slow deployment of technology and a lack of clear direction of the departing coalition government are among them. Rising competition from China and high energy prices due to the Russian war in Ukraine were extra hits.
“We really need a more business and business-friendly politics,” says Klaus Geissdoerfer, CEO of industrial fan manufacturer EBM Papst. “We have a clear talent in Germany. We have good companies, but at the moment we don’t have that consciousness at a political level.”
Business criticism becomes louder as the election approaches
With 2.5 billion euros ($ 2.6 billion) in annual turnover and factories on three continents, EBM-Papst describes itself as the world leader in his field. The company reported last year that “in particular suffering in Germany” and a fall in turnover of 4.1% had on his home market.
Geissdoerfer said that EBM-Papst’s heating technology department lost 18.7% of its turnover due to an awkwardly treated push to have owners of real estate replaced by gas ovens by less polluting electric heat pumps.
The requirements of the Building Energy Act of the three -part coalition of Chancellor Olaf Scholz were so confusing, people postponed the upgrades to their heating systems or hurry to buy new gas equipment before the law came into force, he said. That suppressed demand for the ultra-quiet-heat pump that fans make EBM-Papst.
Consumers wondered: “What is the right technology for my house?” Said Geissdoerfer. “And so everyone said,” If I don’t have to, I better wait. “
Geissdoerfer has filed a complaint in the industry: the bureaucracy of Germany is excessive. A law from 2023 that requires public and private entities to combat climate change by reducing their energy consumption means that EBM-Papst must allocate employees to detail what the company does to satisfy, he said.
“So now, instead of measures, writing and reporting,” said the CEO, adding that the documentation work is a poor use of time at a company whose core activities are energy -saving equipment. “I really hope that we can solve this with the new government, because it is too much at the moment.”
EBM-Papst is moving in the direction where economists say that Germany as a whole should place its industrial resources: in green and digital technology. The company, with head office in Mulfingen, a city of 3,700 inhabitants in the countryside of Southwest Germany, rests energy-hungry artificial intelligence data centers with efficient cooling systems for their servers. It also works on recording AI functions to help technology companies optimize their energy consumption and to predict when equipment should be replaced.
In the meantime, EBM-Papst is dealing with the German economic malaise by shifting his investment focus to Asia and the United States. The company now supplies American customers, for example from factories in Farmington, Connecticut and Telford, Tennessee. The steps to locate production abroad, date from before the Coronavirus Pandemie, but give EBM-Papst a shield against new import tax imposed by US President Donald Trump.
Tires with China and Russia brought Germany in a bond
In addition to the problems of their own soil, international relations have given a blow. Russia cut the majority of the country’s natural gas supplies about the support of the German government for Ukraine. Electricity prices, an important costs for industry, have risen to 2 1/2 times higher than in the US and China.
Metalworking company Mecanindus-Vogelsang Group, which makes precision components for car manufacturers and other manufacturers, says that it pays twice as much per kilowatt hour for the electricity that its German plants use as for its American locations in Mt. Sterling, Kentucky and Lakewood, New Jersey. That is 100,000 euros in extra costs and “a huge competitive disadvantage,” said CEO Ulrich Flatken.
“To prevent the industrialization, which is already taking place, we urgently need internationally competing energy prices,” said Flatken.
Another shock came from China, which during the years 2010 served as a lucrative market for German machines and cars. As soon as Chinese companies started making the same products, supported by government subsidies, German exports suffer.
The German economy has been contracted in each of the last two years. By the end of 2024 it was only 0.3% larger than in 2019, before the Pandemie. The US economy grew by 11.4% for more than the same period, while China was expanded by 25.8%, according to the federal statistical office of Germany.
Complacency and depression
Marcel Fratzscher, chairman of the German Institute for Economic Research, thinks that complacency will take place during the strict years of export to China. German companies were not fast enough to respond to technological trends, such as the switch to electric cars, he said.
“They enjoyed the success of the years 2010 and they have been too slow in understanding that they have to change and adjust themselves,” said Fratzscher.
As the economic misery is concerned about, “mental depression” started, he said. “Pessimism is enormously among companies and citizens, and that is an important explanation why companies are not investing.”
Many managers and economists claim that the next government of Germany must work to resolve the constitutional boundaries for debts, so that it can increase government spending on infrastructure and education. Fratzscher wonders whether political leaders, like the economy, will falter in hiring new ways to do things.
“For the past 75 years, Germany has been very built on consensus, stability -oriented, many checks and balances in the political system, and that makes rapid change very difficult,” he said. “We have to change the mentality to understand that we have to be much faster about economic transformations.”
