Germany’s new industrial strategy under fire

February 1, 2019

BERLIN (Reuters) – A new industrial strategy for 2030 to be released by Economy Minister Peter Altmaier next week is facing sharp criticism from some top economists, industry groups and opposition lawmakers for giving government too big of a role in shaping the economy.

The strategy, elements of which were leaked to German media on Friday, urges moves to shore up “national champions” and strengthen the competitiveness of firms in nine key technology areas, including the automotive industry; aerospace, space and weapons; raw materials and medical equipment.

It also says the success of some specific firms – including Siemens, carmakers Daimler, Volkswagen and BMW, BASF, Thyssenkrupp and Deutsche Bank – is in Germany’s national interest, the Frankfurter Allgemeine Newspaper reported.

“One can’t give companies virtual guarantees of existence, the state should not go that far,” Lars Feld, a leading German economist, told the newspaper’s Saturday editions.

Another measure, which calls for boosting industry’s share of the overall economy to 25 percent from 23.2 percent, would be difficult to implement, critics said.Michael Theurer, deputy head of the parliamentary caucus of the pro-business Free Democrats, told the newspaper it was a scandal that Altmaier was seeking to protect big conglomerates and the government should enact better conditions for all firms.

Wolfgang Steiger, head of the business wing of Altmaier’s conservatives, called for governmental restraint, and warned that Altmaier was effectively setting himself up as “Germany’s economic politburo.”

Competition expert Justus Haucap told the newspaper that another plank of the strategy that seeks to ease big mergers was “completely wrong, defied economic evidence and would be very damaging.” He said history had shown that large-scale mergers reduced innovation and drove up prices.

Eric Schweitzer, head of the DIHK German Chambers of Commerce, told Die Welt newspaper he welcomed efforts to strengthen German industry but said he was skeptical of any moves by government to determine and shape companies’ investments.

Economist Gabriel Felbermayr warned against protecting big German corporations, and said it was more important to foster more rapid development of business ideas and help them grow.

(Reporting by Andrea Shalal; Editing by James Dalgleish)