We are visiting medium-sized companies in Germany,
companies with up to 5,000 employees.
There are hundreds of thousands of them -
the driver of the German economy.
But the mood has never been so bad.
What are the problems?
Take Duravit, for example.
A family business that has been producing ceramics for bathrooms
for over 200 years.
Duravit has several locations abroad,
with many thousands of employees.
But here in southern Germany, the high cost of gas is becoming a problem.
The kiln is the heart of ceramics production.
We run our products through the kiln for around 20 hours and
reach peaks of over 1,200°C.
And consumption isn’t just short-term, it is 24/7
all year long.
So we consume as much as a small village.
Sales and production in Germany have now collapsed for the first time.
The reason?
Gas prices have risen sharply since the war in Ukraine and the prices
for the company's massive electricity consumption have also
remained at a very high level for many years.
This has made management nervous.
The associated price increase has reduced demand enormously and we
are not working at full capacity in our German factories compared
to other countries.
The price of electricity is six times higher here than what we pay
in Canada.
The result: Duravit is building a new state-of-the-art,
climate neutral factory in Canada.
They are receiving subsidies for 25 percent of the costs from
the Canadian government.
Planning, including construction, has taken just over a year so far.
The furnaces there will use green electricity.
Germany was no longer an option as a factory location for
the medium-sized company.
The dilemma: In Germany, the CO2 tax for companies increases if they
do not reduce their CO2 emissions.
But there are also hardly any financial incentives
compared to Canada.
Green electricity is much more expensive here and green hydrogen
isn’t even available yet, which makes planning dificult.
What’s the current status of international electricity costs?
Italy has the highest price for industrial electricity at 56 US
cents per kilowatt hour.
Germany is in the upper range at 29 cents.
France's electricity is a third
lower than Germany’s.
And at 15 US cents, industrial electricity in the US is only half
as expensive as in Germany.
Could state subsidies prevent industry from moving abroad
or going bankrupt?
We asked an economist.
If you want to prevent this you have to take public money to make
it attractive for these companies to stay in Germany, which means
using scarce taxpayer money to preserve what was yesterday.
My proposal is, if we're going to use public money, let’s use it to
build what will drive growth tomorrow, as these industries won't
be the future growth engine of the German economy.
Another problem for German industry is the slow bureaucracy and sluggish
planning process for new projects.
This is Wolfgang Frey from southern Germany.
He's an architect and building developer.
In China, he was able to complete a huge construction project
within 2 years.
In Germany, he's also doing a construction project near
the southern city of Stuttgart.
The car manufacturer Porsche is interested in investing there.
But the plans have stalled.
The project that we are now working on here, for example, is in
the German Sino Eco Park.
This is an industrial area covering 24 square kilometers.
Here, we’re talking about 16 hectares, which is
many times larger.
We started the project at the same time as here in Stuttgart.
We are almost finished with the shell here.
The automaker Porsche would like to move into its new office space in Germany.
So what's the problem?
In Germany, there are many different interests that are all
justified, yes, they are all justified.
But if we do not succeed in balancing these interests and
bringing them together, then we will all block each other endlessly
and this will lead to major projects simply getting stuck in
the approval backlog. The third example takes us to
the center of Germany.
I'm stuck right in the middle of it.
It's a good feeling when someone helps you.
But you don't get that feeling at Gießerei Tweer.
This family business has been around for over a hundred years.
Reinhard Tweer is the managing director and is supported by
his son Johannes.
Their six electric cast iron furnaces consume as much
electricity as a small town, but their competitors abroad are able
to get their energy much less expensively.
Our problem is that the German foundry industry in general
and we at the Tweer company specifically, are at a disadvantage in
international competition.
In Turkey, India, Brazil and France, electricity prices are much lower.
This casting will be used to make a coupling for a truck and
parts for wind turbines, cranes and the railroad.
However, domestic buyers are also holding back, as
the economy is weakening.
Germany had negative growth of minus 0.3 percent in 2023 and
is in recession.
China was once again the winner with the highest economic growth
at 5.2 percent.
Followed by the developing countries and all
other G7 countries.
Due to the insecurity we’ve seen on the market since last summer,
our incoming order level is down significantly.
They're still working on existing orders, but in three months they could even be
threatened with part-time work.
They would like to run their electric ovens on pure green
electricity or even hydrogen, but they need government support for
the conversion and also money to reduce the price of electricity.
We aren’t normally a fan of subsidies, but in this case we
would like to see some help from the German government to preserve
German industry, at least the energy-intensive industry.
Other countries are financing their industries’ energy
transformations with billions in loans and government debt.
And Germany would have a lot of leeway here.
At 66% of its gross domestic product, Germany has the lowest
national debt of the G7 countries, followed by China with 83%.
In Canada and France, it’s almost twice as high as in Germany.
In the USA, it is even higher.
And Italy has the highest national debt at 144%.
Germany was once the economic engine of the European economy.
At the moment, it’s the brakes.
And there is a danger that more and more companies will go bankrupt
or move abroad.