Is Germany threatened with de-industrialization, Mr. Wirtschaftsweiser?

Created: 09/11/2022, 19:40

By: Thomas Schmidtutz

The economist Achim Truger has called for a tougher approach in the EU in view of the new US climate protection rules.

(Archive image) © Stefan Boness/Ipon via www.imago-images.de

The economist Achim Truger has

called for a tougher approach in the EU in view of the new US climate protection rules.

The US rules distort competition and put a strain on Europe as an automotive location, he says.

Berlin – The economist Achim Truger has defended the proposal to introduce an energy solis.

It is important "to put together a targeted relief package that does not unnecessarily burden public budgets and does not fuel inflation," said the economist on Thursday at the sidelines of the presentation of the annual report to the

of

Therefore, one should “not relieve those who can actually shoulder the higher burdens themselves”.

spoke to Truger about the annual report, the risk of de-industrialization and when inflation will drop again.

Wirtschaftsweiser Truger: "At the moment it is important to put together a targeted relief package"

Prof. Truger, in the fight against rising energy prices, the economists want to make higher earners more responsible.

In addition, in the current annual report you surprisingly bring into play a temporary higher top tax rate or an energy solo.

The suggestion of higher taxes and duties is rather unusual for the Council of Economic Experts.

Has the turning point now reached the economic wise too?

We propose a temporary increase in taxes for high-income households.

That is appropriate to the situation.

Whether and when taxes are raised or lowered depends on the economic situation.

And at the moment it is important to put together a targeted relief package that does not unnecessarily burden public budgets and does not fuel inflation.

That is why one should not relieve those who can actually shoulder the higher burdens themselves.

That doesn't seem spectacular to me.

I don't know what the turning point is supposed to be about it.

Well, the German Council of Economic Experts has advocated tax cuts in recent years.

And the tax and duty burden in Germany is already high enough without energy solos?

The relief packages provide gigantic sums of several hundred billion euros, with which households and companies will be relieved.

If you counter-finance part of it – for a limited time – that is not a net tax increase.

This has little to do with the fundamental question of how high the tax and duty burden should be permanently.

Relief such as the gas price brake on the one hand, burdens through energy solos on the other.

That sounds more like: left pocket, right pocket?

The relief packages contain many measures from which even very high-income households will benefit, for example the fuel discount, the energy price flat-rate and the planned gas price brake.

Even if the transfers are taxed, more than 50 percent of them remain with the households.

If we had a simple, quick-to-use tool for transfers to all households, this could be avoided.

Since there is no such instrument, there is no other choice but to use other taxes to compensate.

The move raises questions for another reason: Anyone who has around 60,000 euros in taxable income and thus has to pay the top tax rate of 42 percent is not necessarily on a bed of roses financially in a city like Munich or Düsseldorf.

Aren't you worried that you will demotivate the top performers of all people with higher loads?

After all, we don't make any specific recommendations; instead, we point out options and encourage discussion.

In a concrete form, the counter-financing could also be applied to higher incomes.

And once again: it's about partially compensating for relief that has already been granted elsewhere.

If this is temporary for the duration of the energy crisis, I don't see why it should demotivate.

It's about getting through the crisis well as a society as a whole.

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Achim Truger: "I don't think it makes much sense to speculate about permanently higher inflation"

The extremely high energy prices are not only a problem for consumers.

The development is also taking its toll on the companies.

Energy-intensive companies in particular are becoming less and less competitive internationally because of the high energy costs.

SPD leader Lars Klingbeil now sees the "industrial core of Germany threatened".

Deutsche Bank speaks openly of the danger of de-industrialization.

Is it really so bad?

We have analyzed the data on energy consumption and the earnings situation of the companies in great detail.

It goes without saying that the high energy prices hit the energy-intensive industry in particular, which faces competition from outside Europe.

That is why it is so important that companies are relieved of the gas price brake.

Of course, there is no guarantee that all companies will survive in the long term.

But if the support is done well and the transformation is tackled with determination, we don't see widespread deindustrialization in Germany.

SPD boss Klingbeil sees it differently and is therefore pushing for help to strengthen industry in Germany and Europe.

Do we need a more active industrial policy on the Old Continent?

Acute support measures are now very important.

In the medium term, it is important that the transformation succeeds.

A lot of measures are needed.

Renewable energies and the energy infrastructure must be expanded.

Supply chains must become more resilient.

It can also be about self-production of critical raw materials in the EU.

In the end, you need a total package.

US President Joe Biden launched a 400 billion dollar package to protect the climate and strengthen domestic industry in the summer.

According to the new Inflation Reduction Act (IRA), the government subsidy of $7,500 for new electric cars will only be available in the future if the vehicle was assembled in the USA and the battery comes largely from US production.

How dangerous is this development for BMW, VW or Mercedes-Benz?

It is good that the measures are also about climate protection.

However, it is difficult not to see this as a protectionist measure.

Of course, this distorts competition and puts a strain on Europe as an automotive location.

So this is a case for the World Trade Organization.

The EU should represent its interests strongly.

The inflation rate has skyrocketed in the current year.

In October, the inflation rate was 10.4 percent.

The SVR is now expecting an annual average of 8.0 percent for the year as a whole, and 7.4 percent for the coming year.

Many economists are assuming a decline in the medium term.

But at rates of four to six percent, inflation would still be well above pre-crisis levels.

So, in the long term, do citizens have to be prepared for the fact that their purchasing power will fall more sharply in the future than it has in the past few decades?

It can be expected that inflation will remain above two percent and thus the inflation target of the European Central Bank until 2024.

However, the value should already be declining in the course of the coming year if the strain on the supply chains eases and energy prices stop rising further.

The ECB has recently reacted very resolutely with strong interest rate hikes and inflation expectations are still anchored.

That's why I don't think it makes much sense to speculate about permanently higher inflation.