There’s no help coming for German industry | Forexlive

The next few years will determine the path for the remainder of the century in Germany and the early returns aren’t good. The country’s industrial base is facing intense competition from China while it struggles under the weight of high electricity costs due to the Ukraine war.

It’s unlikely that Russian natural gas is ever coming back so there will be a race to import LNG and build out a green grid. The leader of the opposition CDU said they would immediately restart nuclear power plants if elected but the vote is two years away.

In the meantime, Germany’s industrial base is being hollowed out. A survey by German Chamber of Commerce and Industry found that 32% of companies now prefer investing abroad compared to 16% last year.

Economy minister Robert Habeck made an impassioned plea for energy subsidies last month as a way for industrial companies to survive until a new grid is built out.

“The question is: Do we borrow money or do we no longer have industry?”

He got his answer this week as the coalition government rejected subsidies for energy-intensive industries.

Now we watch the weather. Gas prices are far below last year’s panic levels but still well-above pre-covid norms. Some of the salvation last year was due to a warm winter and whether German industry survives will depend on the same this year. But can they bet on 5 more years of warm weather?

In the shorter term, the path of the eurozone will depend on interest rates. A battle royale is shaping up at the September ECB with the market now pricing in a 57% chance of a hike, up from 50% at the start of the week in large part due to today’s hotter German CPI.

More: The pillars of Germany’s economy are crumbling. Three reasons for worry