BDI President about Germany: "We have become a snoring country"

If one addresses Dieter Kempf on the German automobile industry, the otherwise rather comfortable coming Bayer can become very passionate. Finally, the president of the Federal Association of German Industry (BDI) also likes to tinker with old-timer engines.

Also SUVs thinks Kempf quite handy. The political debate on possible prohibitions for such city SUVs, which has developed after a fatal accident in Berlin, he finds nonsensical. "In Berlin, a particularly bad accident happened with an SUV - which shocked us all," says Kempf in the SPIEGEL interview. "The fact that some people exploit the event immediately to cook their own political soup, I find totally wrong."

One must not come immediately with prohibitions, means Kempf. "The SUVs are not bought because they are produced, but they are produced because they are bought."

Read in the interview, why the BDI President politicians a complicity in the current crisis in the German car industry, what he thinks of US President Donald Trump and why he was so angry about a British vacuum cleaner seller.

SPIEGEL: Mr. Kempf, the car industry was Germany's flagship industry for decades, now it is becoming the biggest problem case. Is an era coming to an end here?

Kempf : No way. The German car industry is more sustainable than some people think. I dare to predict that the car industry will have more battery-powered vehicles in the coming year than what demand will be. In ten years we will see a very differentiated product range: electric cars, hydrogen vehicles, combustion engines. The industry has to tackle the change in a technology-friendly way - and that's what German manufacturers do.

SPIEGEL: It often seems that the car industry has not realized the seriousness of the situation. For years, it has continued to rely on climate-damaging SUVs, which could now also be politically targeted.

Kempf: In Berlin a particularly bad accident happened with an SUV - which shocked us all. That some people use the event immediately to cook their own political soup, I find totally wrong. The fact is that we must massively reduce CO2 in the transport sector in the coming years. I am convinced that there are better approaches than a ban on SUVs, which today consume an average of six to eight liters per 100 kilometers.

SPIEGEL: But it would also be possible with other cars significantly better fuel consumption.

Kempf : That's true - and the best-selling SUVs have them too. I refuse, that we come immediately with prohibitions. The SUVs are not bought because they are produced. But they are produced because they are bought. That the state regulates the choice of the vehicle, I think the wrong way.

SPIEGEL: The upcoming technology change is just one of several problems that the auto industry is struggling with. The economic downturn is also hitting the industry particularly hard.

Kempf : If every day a new bad news is spread as an idea - from diesel driving bans in inner cities to SUV driving bans - I'm not surprised that domestic customers are unsure and at the moment hold back on the purchase. In addition, the global market, and especially the Chinese, has long been much more important - and it is massively turning to electromobility because there is a huge problem with air pollution in the big cities there.

SPIEGEL: With the SUVs, you say the customer is asking for it. In China, the customer is asking for electric cars. And since the German manufacturers have apparently too little to offer.

Kempf : China works with quotas that make a dirigist planned economy easier than our social market economy. And it's not set in stone that Chinese should only drive German cars. At the same time, economic growth in China is currently falling. This also means that overall demand for cars is growing less strongly.

Either or, Mr. Kempf?

The interview in miniature for those in a hurry.

SPIEGEL: It's not just the car industry that is in dire straits, the whole German economy is in a downturn. How bad will the recession be?

Kempf : The ever-escalating trade conflicts have a bigger impact on the German economy. In the current year, we will see economic growth of only 0 to 0.5 percent. Should it come to a Brexit without a deal, we go closer to the zero than to the 0.5. Industrial production in Germany is already in a downturn. Already in the current quarter we could slip into a technical recession. We are experiencing strong declines in order intake. The tariff dispute between the US and China paralyzes the economy in Europe.

SPIEGEL: Is there any way left for the two states to emerge from this race for ever new and higher punitive tariffs?

Kempf : Well, the US negotiation was not going to make it possible for the Chinese to save face - which is very important for many Asians. That makes it difficult to reach an agreement. Nevertheless, I do not exclude that there is still a solution - because the American president wants to be re-elected and for that also needs to be demonstrated. In the end, there will be proof that Donald Trump's initial thesis - "Trade wars are easy to win" - was simply wrong.

SPIEGEL: What does that mean for the German economy?

Kempf : That has a massive impact on Germany as a country that exports far more than its actual importance. Our companies are suffering from the trade conflict. And Brexit does the rest. We are in the mood. This is extremely important in the economy. Mood shapes whether someone invests or does not invest.

SPIEGEL: And the mood is bad?

Kempf : The mood is at least very, very muted.

SPIEGEL: Trump will decide on possible punitive tariffs on European cars by mid-November. Would such a step give the rest to the German car industry?

Kempf : Personally, I assume that everyone in the industry has long since come up with a concept of how to deal with it.

SPIEGEL: Do you think that Trump is still to be retuned?

Kempf : Even the American president knows by now that the largest American automobile exporters are two German companies. In other words, if one looks at the international value chains, the tariffs will massively affect a substantial part of American automobile exports and thus also American jobs. What does an international company do? It will seek to sell its cars more expensive at the markets or reduce production costs. Maybe it's trying to cut some of its profit margin. In the long term, the carmaker may then have to relocate his work. That's why our contacts to these economic policy issues in the US are now much more the governors in the states.

SPIEGEL: And how do they see that?

Kempf : There we meet very much understanding. We Germans are regarded as attractive employers there. I'm not saying that you can not talk to the government in Washington. But it seems to me that economic policy decisions are often made for reasons other than substantive reasons.

SPIEGEL: You also mentioned Brexit as a business cycle risk. As it stands, there will be either an unregulated exit at the end of October or another reprieve. Would you rather be frightened of it than another hanging party?

Kempf : All companies want the most disorderly exit. But of course there is a point at some point where the uncertainty becomes so great that the difference to the consequences of an unregulated Brexit becomes smaller and smaller. It should play a role, that one knows beforehand, what a further extension because realistically at all to bring. Nevertheless, we would like to have an agreement in the industry.

SPIEGEL: Which parts of the German economy would be hardest hit by a hard Brexit?

Kempf : That's going right through. It starts with the logistics chains, which are also a big problem for the industry. In the meantime, even the most conservative Brexiteers have understood that it will be a bit difficult with the fruit. I do not want to satirise that, but the gesture of Mr Rees-Mogg in the parliamentary session annoyed me.

SPIEGEL: You mean the nap of the Tory MP on the parliamentary bench.

Kempf : Yes, because I have the feeling that some of the political leaders are playing their own game and no longer have the welfare of the entire nation in mind. And I find it equally annoying that one of the most economically important Brexit hardliners relocates the headquarters of his own company to Singapore so that he himself is spared the consequences of Brexit.

SPIEGEL: Mr. Dyson and his vacuum cleaner group ...

Kempf : By the way, he also owns one of the country's largest agricultural companies. But he still stays in England with this part of the business. Because of that he has another advantage.

SPIEGEL: If you take all these risks together, the impact on the German economy could be considerable. Is it possible to counteract this sensibly if, like SPD Finance Minister Olaf Scholz, you insist on keeping the black zero at the same time?

Kempf : After the financial crisis, there was much that spoke in favor of the concept of black zero, just as Mr Schäuble was the then Minister of Finance. Only the situation has changed since then. The state can now borrow at negative interest rates. Since it is already worth considering, the leeway between black zero and debt brake useful to use. But not for a Baukindergeld three or more consumptive government spending.

The rules of debt making

debt ceiling

"The budgets of federal and state governments are in principle to be compensated without income from loans", says Article 109 of the Basic Law. In the future, the federal states will no longer be allowed to make indebtedness independent of the economic cycle, while the federal government will limit it to 0.35 percent of the gross domestic product.

Valid since

For the federal government since 2016, for the states from 2020 onwards.

liability

The debt brake has constitutional status. In economic crises or emergencies such as a natural disaster, the debt may be higher. But there must be a binding plan for the repayment of the loans.

Debt scope for Germany (measured by GDP 2018)

For the federal government about 12 billion euros.

implementation

So far, the federal government has kept the debt brake.

Maastricht criteria

The convergence criteria of the Maastricht Treaty must be met by countries wishing to adopt the euro. According to this, the new debt (deficit) may amount to a maximum of three percent and the total debt to a maximum of 60 percent of the gross domestic product. Thanks to the Stability and Growth Pact (SGP), these guidelines must be adhered to even after joining the euro.

Valid since

1993 (Maastricht Treaty) and 1999 (SWP).

liability

Although the Maastricht criteria are enshrined in EU law, they have often been violated. The EU Commission has therefore launched numerous so-called deficit procedures, but without financial consequences.

Debt scope for Germany (measured by GDP 2018)

Nearly 102 billion new borrowing and a good 2 trillion total debt.

implementation

Germany violated early against both rules. In recent years, however, Germany has always complied with the deficit burden. The total debt falls in 2019 for the first time in 17 years again below 60 percent.

fiscal Pact

The Fiscal Compact was adopted as a tightening of the Stability and Growth Pact, which was unable to prevent the European debt crisis. Instead of only meeting the three-percent limit of the Maastricht criteria, the signatories of the fiscal compact should aim for balanced budgets in the medium term. The indebtedness of the general government, which is independent of the economic situation, may amount to a maximum of 0.5 percent of the gross domestic product. If the total debt level is well below 60 percent, this limit increases to 1.0 percent.

Valid since

2013

liability

The signatory states must anchor their goals in the constitution, as Germany has done with the debt brake. The Fiscal Compact provides for the first time the possibility of financial sanctions for non-compliance. So far, this possibility has not been used.

Debt scope for Germany (measured by GDP 2018)

Nearly 17 billion, as long as the total debt is over 60 percent.

implementation

So far Germany has complied with the debt rules of the Fiscal Compact.

Black zero

If government revenue and expenditure are the same, the bottom line is the proverbial black zero. New debts are not necessary in this case. We also speak of a balanced budget.

Valid since

-

liability

The black zero is not a legal requirement. As a common goal of the Union and the SPD, however, it finds itself in the current coalition agreement.

Debt scope for Germany (measured by GDP 2018)

none

implementation

For the first time in 45 years, the black zero was reached in the federal government in 2014 and has been held ever since.

SPIEGEL: FDP leader Christian Lindner has proposed to pay the state surpluses to the citizens. Is this a good idea?

Kempf : At the moment, the consumption side of the economy is not the problem. This can be seen, for example, in the high utilization of the building trade. What is missing are investments.

SPIEGEL: Where would you like to use the money?

Kempf : For example, in the energetic renovation of buildings. It depends completely on the back. Or for the digital infrastructure, where it is simply not economically worthwhile for companies. Let's take the new federal states, which have been very strongly suspended on this topic. For a long time, we thought the flowering landscapes are when you build roads. But they are not alone. Infrastructure for the people and the companies on the ground, that is also a 4G network today.

SPIEGEL: For years, the federal government has been making more money available for investment. But every year billions of them are left because they are not available to the communities. Why is that?

Kempf : That's a big problem that lingers a bit like mildew all over the country: no one dares to decide anything. Every district administrator and every mayor who complains to me that there is no efficient internet with him, I ask: What did you actually do, so that in your district or in your community a fiber-optic cable is? Have you ever thought about laying the fiber optic cables on poles along the road leading to your commune? That would reduce the cost of expansion by about 80 percent. And the next time the road is renewed, the cable can still be buried under the ground.

SPIEGEL: So the municipalities are too snobbish?

Kempf : We have become a snoring country. Instead of using all the energy to simplify procedures and clarify responsibilities, they entrench themselves behind approval procedures. No one dares to decide anything. A few days ago, a wonderful example of such a bureaucracy by the media went: Since a baker has awarded the kilogram price of his goods with KG, which of course is not the correct abbreviation for the kilogram. And then he faces a fine of 25,000 euros. I'm afraid there are thousands of such cases. And that annoys and paralyzes, robs the flexibility to tackle things courageously. We have to break this trend together in Germany.