German Chancellor Olaf Scholz and German Economics and Climate Minister Robert Habeck attend the budget debate at the lower house of the Bundestag in Berlin, Germany, September 7, 2022. REUTERS/Michele Tantussi
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BERLIN, Sept 7 (Reuters) – German Economy Minister Robert Habeck faced a backlash on Wednesday for saying he could envisage parts of the economy shutting down production due to rising energy prices, which German companies say are they threaten their existence.
When asked if he expected a wave of bankruptcies at the end of this winter because of rising energy bills from companies, Habeck said: “No, I don’t think so.
The answer triggered criticism of the minister for Europe’s largest economy in an ARD interview on Tuesday evening. The mass newspaper Bild said Habeck had “no idea about the economy”.
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Conservative opposition leader Friedrich Merz also took the opportunity to criticize Habeck, Germany’s second most popular politician, for not taking energy and economic issues seriously.
“How helpless Mr. Habeck you are with these questions was seen on German television last night,” said Merz in the Bundestag.
Habeck’s comments come at a time when economists and industry groups are warning that rising energy prices pose a growing risk to Germany’s medium-sized and small businesses, which form the backbone of the economy.
After decades of benefiting from cheap Russian gas, German industry faces a crisis as Russia cuts supplies and urges utilities to buy gas at high market prices and pass those costs on to consumers.
Rising energy costs and supply chain bottlenecks contributed to a 26% rise in bankruptcy cases in Germany in August, the economics institute IWH said on Tuesday, adding that more bankruptcies are expected in the autumn.
In a survey of 593 companies by the German industry association BDI, conducted from mid-August to early September, more than a third said their existence was threatened by rising prices, up from 23% in February.
About 58% saw skyrocketing costs as a major challenge, and nearly 25% were considering or in the process of relocating part of their business. Every tenth company had reduced or interrupted production due to the price jumps.
The Bavarian industrial group vbw announced on Wednesday that its energy price index had more than doubled in a year up to July 2022.
“For more and more industries, energy prices are becoming an existential problem,” said vbw boss Bertram Brossardt.
Berlin on Sunday announced a 65 billion euro ($64.33 billion) aid package to help citizens and businesses cope with soaring prices, but BDI chief Siegfried Russwurm said the package was not enough and was urging the government to co-finance the electricity network charges.
“Politicians must act now to prevent bankruptcies and further economic and social upheavals,” said Russwurm.
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Reporting by Riham Alcousa, editing by Rachel More, Kim Coghill and Chizu Nomiyama
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