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Political risk?

March 30, 2011

The Green party's election victory in the German state of Baden-Württemberg is expected to have a major impact on industry, especially for energy giant EnBW. The party has already announced massive restructuring plans.

Winfried Kretschmann celebrating in Stuttgart after the first results showed his party's success in state elections
Germany is likely to get its first Green state premier in MayImage: dapd

Shiny Mercedes and Porsche cars, village churches with onion domes, the Black Forest – the southern state of Baden-Württemberg fulfills many people's postcard visions of Germany.

The state's economy has traditionally been strong, making it one of Europe's most competitive regions. When it comes to research and development, no other region in the EU can hold a candle to Baden-Württemberg.

In no other German state is unemployment as low as in Baden-Württemberg: the state's average is a mere 4.5 percent.

Number one industrial location

It's Germany's most important industrial location – 34 percent of the country's industrial companies have their headquarters in Baden-Württemberg.

Worker checking car in Daimler factory in Stuttgart, Germany
Car manufacturer Daimler is one of the state's biggest employersImage: AP

Among the biggest employers are renowned car manufacturers Daimler and Porsche, as well as the country's third biggest energy group, EnBW.

For decades, industry has had it comparatively cosy in the Ländle, as Baden-Württemberg is affectionately called. Ruled by a conservative government for 58 years, the state leadership has been known for its industry-friendly politics.

Ahead of Sunday's state election, a group of influential managers signed a petition supporting Christian Democrat leader Stefan Mappus.

But when voters went to the polls, they ushered in a new era: Winfried Kretschmann is set to become the nation's first Green state premier in May after forming a coalition government with the Social Democrats.

Greens 'simply horrible'

Many regional industrial leaders are disappointed with the result, to say the least.

Prior to the poll, Martin Herrenknecht, head of a major German tunnel construction company based in Schwanau, reportedly called the Greens "softies." Nicola Leibinger-Kammueller, CEO of Ditzingen-based technology company Trumpf, was quoted as saying she thought the Greens were "simply horrible."

The online edition of the Handelsblatt business newspaper reported that the head of the Foundation of Family Enterprises, Brun Hagen Hennerkes, expressed concerns that a coalition government led by the Greens could mean an end to the state's economic strength.

Baden-Württemberg's Employers' Association pointed out that the state's automobile and electronics industries, which are exposed to a highly competitive market, form the basis of the state's wealth.

"Many companies we represent are heavily export-oriented," association spokesman Hubertus Engemann told Deutsche Welle. "The new government must provide a political framework which doesn't threaten these companies' competitiveness."

Not all companies are opposed to the idea of a Green-led coalition, however. Car manufacturer Daimler said it was looking forward to "good collaboration" with the new state leadership: "Daimler has been leading in future technologies, and this is a core issue also for the new government," a company spokesman said.

Aerial shot of nuclear power plant Philippsburg near Karlsruhe
The Greens now have significant influence over EnBW's nuclear power plantsImage: dapd

EnBW affected the most

Baden-Württemberg energy group EnBW will likely feel the brunt of the incoming government's decisions. The state government owns 45 percent of EnBW shares, which means the Greens now have a great deal of influence over a nuclear power company.

The Green party has already announced a massive restructuring of the firm. It wants EnBW to move away from nuclear power and make renewable energy its core business.

Hans-Peter Villis, CEO of EnBW, told Deutsche Welle in a written statement that it was "not up to companies to evaluate nor judge a democratic election."

He added that the company was convinced they would "collaborate well and constructively with the new state parliament and further develop energy supply sustainably."

The coming years will likely be a learning process for both sides: Baden-Württemberg's industrial concerns will have to speed up the transition to sustainable production methods and energy sources, while the Greens will have to learn how to run a state and its economy.

Author: Nina Haase
Editor: Sam Edmonds