Economist: Anyone who wants state aid can leave

BASF is fleeing to China. Miele to Poland. Car supplier ZF Friedrichshafen and solar module manufacturer Meyer Burger are flirting with the USA. The message from German industry is clear: without state aid, we're gone. Reint Gropp would hold the door open for them. In ntv's “Climate Laboratory”, the president of the Leibniz Institute for Economic Research in Halle speaks out in favor of an end to the new subsidy economy. “Before Corona, that was not possible under the EU's state aid law. Now Pandora's box is out and companies are saying: 'I'd like something too!'” The economist does not accept geopolitical aspects: Intel is receiving ten billion euros for production in Magdeburg and is producing semiconductors that Germany will not need later. Gropp's suggestion? Don't fear the migration of production: other industries are “desperately looking for skilled workers,” Gropp tries to show new opportunities. But anyone who wants to produce dirty products for Germany abroad must be warned: the economist is calling for a climate tariff.

ntv.de: Do you shrug your shoulders when you read about layoffs at Miele or ZF Friedrichshafen?

No. This is part of a larger, very long-term process that is being accelerated by the climate targets. Especially in Europe and Germany. We are in a structural change in which there cannot only be winners. We will lose jobs in industry and gain jobs in other sectors.

So the industry is right to write its open letters?

There are several reasons for the letters. On the one hand, the Corona crisis in Germany and Europe has caused us to lose our innocence in the area of ​​”subsidies”. We are much more willing to support individual companies. Before Corona, this was not possible under EU state aid law. Now Pandora's box is out of the box and there is nothing nicer for a company than to say: I would like something too!

So when Miele announces layoffs, do you assume that it was poorly planned?

I don't know what the market for washing machines and dishwashers looks like at the moment. Historically, it's just like this: companies lay off people, other companies hire people. But it shouldn't surprise anyone that energy-intensive production in particular is unlikely to take place in Germany in the future. And that can't really be prevented if we want to achieve our climate goals.

But that is precisely the warning or accusation: we are adopting climate targets that are so strict that we are losing our industry. Do you think that is a good thing?

Our climate goals are undisputed. It's just a question of how we can achieve them as efficiently as possible without incurring unnecessary costs. One of the most important mechanisms for this is price increases for energy. Especially for CO2-intensive, i.e. dirty energy. This leads to two things: I use less. This has already happened, BASF has outsourced or scaled back production. From a climate perspective, we want this. Secondly, price increases are incentives to develop better methods for producing energy-intensive products. This has not happened in the past due to cheap gas from Russia.

But the CO2 emissions are simply shifted abroad along with production.

Absolutely. Whether the CO2 is emitted in China or Germany is irrelevant to the climate. That is why it is important to have a strategy that involves more than just increasing energy and CO2 prices in Germany and Europe: This must be combined with climate tariffs on the CO2 content of a product so that there is no incentive to produce dirty products in China and sell them in Europe. This would also be an incentive for China and other countries to produce more cleanly or efficiently.

We should pay a fine on products that BASF produces in China for the German market?

At least as long as the CO2 content is high.

So if I get laid off, I will have no income and at the same time higher expenses.

Social hardships should of course be cushioned. At the moment, however, it is not the case that you cannot find a job if you have been laid off from Miele. The opposite is probably the case: it is easy to find a new job, and companies are desperately looking for skilled workers. This shortage will worsen dramatically over the next 15 years. With the baby boomers of the 50s and 60s, around 400,000 people leave the job market each year. In fact, the situation is currently particularly good for this structural change. We should allow it to happen instead of holding it back with subsidies and gifts.

Wouldn't this climate tariff be just another example of an EU regulation that makes things complicated and expensive for our economy but is ignored by other countries? The dm boss had spoken of a form of “overreach” with regard to the supply chain law, because the rest of the world simply says: then we'll just sell our goods somewhere else.

The EU has 400 million consumers, which is an important market. But of course, ideally we would have the same targets and rules for emissions and global trade everywhere in the world. But we don't. We have to come to terms with what we have: That should be an EU that sets consistent targets for permitted CO2 emissions, which are reduced every year. Combined with climate tariffs, that would probably be the best strategy to bring about this structural change in a reasonably efficient manner. I don't see an alternative. It is certainly not one to subsidize industrial electricity in the short term so that the incentive to use less energy and change production processes disappears.

However, that is the federal government's plan: to keep the energy-intensive industry in Germany at all costs and not to talk about deindustrialization.

And that is expensive and will not result in the costs of economic transformation being lower in the end. On the contrary, the costs will be higher. Incidentally, it would also have the greatest “bang for the buck” – in other words economic benefit – if energy-intensive companies like BASF were forced to change their production processes. Fifteen years ago, they would probably have done the same thing and bitten the bullet. At the moment, we see that Intel is getting 10 billion euros and we think: then the federal government can give us one too.

Has Germany forgotten that in some areas the market is a good tool for separating the wheat from the chaff, i.e. the bad companies from the good ones?

Definitely. But not just us, the USA too.

The world's capitalist country is luring with the largest subsidy package in the world…

Yes, that doesn't make things any easier for the EU. But that doesn't change the fact that price signals are incredibly important for change. We were forced to see that when we had to get rid of Russian gas. A lot happened in a very short space of time and nobody was left in the cold.

But that is also an argument of the federal government: We subsidize chips from Intel in Magdeburg, from TSMC in Dresden and solar modules from Meyer Burger in Freiberg because we suddenly had no more semiconductors during the Corona crisis and no gas after the Russian attack on Ukraine. And we are dependent on China for solar modules.

The subsidies paid to Intel in Magdeburg are the largest ever in Germany – with a multiplier of ten! The second largest are one billion euros! We are entering completely new dimensions that Saxony-Anhalt is still proud of. But that does not resolve the dependencies, because the products we need for production in Germany continue to come from China. There is no diversification when it comes to rare earths, lithium and things like that.

But you have to start somewhere. Germany is currently developing a raw materials strategy.

That is the next mistake: Germany should not have a raw materials strategy at all, because that is a European problem. Nation states can solve many things better than a union of states, but a raw materials strategy is certainly not one of them. We will not change our geostrategic dependence through these subsidies. That is eyewash. Intel does not build chips for cars in Magdeburg, but for computers and smartphones. Neither one nor the other is produced in Germany.

Should Meyer Burger receive state aid?

No. No one has yet been able to explain to me why we need solar cell production in Germany.

Because we need solar panels.

But it's a mass product. We could just as well subsidise warm sweaters if we don't want to be dependent on China in the winter. That would make just as much sense.

Are you not worried that China will stop deliveries to Europe in order to exert political pressure, for example because of Taiwan?

Yes, but that doesn't mean that we have to produce solar modules in Germany. Yes, we shouldn't import 100 percent of our solar cells from China, but rather diversify – with the Philippines, Malaysia, Vietnam and India.

But can we simply avoid this when the USA and China are subsidising their industries so massively and our production is moving away?

It's wonderful that the Americans subsidize semiconductor production so heavily. After all, they have to sell the chips. Over the past 30 years, we have also benefited from cheap production in China. There was once a calculation of how much an iPhone would cost if it were produced entirely in America: ten times as much.

And how will people earn their money in the future? Everyone is always worried about the car industry. Will it stay with us?

If we build sensible electric cars, yes. The problem is: the German car industry has been very successful and innovative over the past 50 years. It is possible that BMW, Mercedes, Porsche and VW are the best in the world at gradually improving a product within the company every year. But now it is no longer about making the combustion engine a little better. They have to make a completely new product. At the end of the day, an electric car is a great battery thrown into a chassis. After 50 years of hardly any new car manufacturers, there are now a lot with Tesla and the Chinese. Is the German car industry well positioned to take part in this disruptive change? I am one of those people who are rather skeptical about this and wonder whether the German car industry can continue to be successful in this form.

What can we still achieve as a country if industry disappears?

Industry is not disappearing, only mass production. That is a difference. A large part of industrial work consists in developing a product. Think of Apple: 25,000 people work at the headquarters in Cupertino. Zero is produced there. Nothing. People think up new products and marketing campaigns. That is the advantage of countries like Germany: China is not yet so good at that. That is why we must invest in research and development, improve our universities and the transfer of science into practice, and also offer accompanying services such as maintenance in industry. We will no longer be able to produce a mass product as cheaply as possible because of the energy costs.

Clara Pfeffer and Christian Herrmann spoke with Reint Gropp. The conversation has been shortened and edited for better comprehensibility. You can listen to the entire conversation in the “Klima-Labor” podcast.