Siegfried Russwurm says government’s climate agenda is ‘more dogmatic than any other country I know’.

The leader of Germany’s main industry association has slammed the German government’s energy policies as “absolutely toxic”, in a sign of declining business confidence in chancellor Olaf Scholz’s stewardship of the economy.

Siegfried Russwurm, head of the BDI, told the Financial Times that Germany’s climate agenda was “more dogmatic than any other country I know”. The  Financial Times has the story.

The country’s decision to phase out nuclear energy and coal and switch to renewables was placing businesses in Europe’s largest economy at a disadvantage to those in other industrialised nations, he said.

“Nobody can say with any certainty today what our energy supply will look like in seven years’ time, and that’s why no one can say how high energy prices will be in Germany then,” he said. “For companies that have to make investment decisions, that is absolutely toxic.”

His comments come at a time of growing concern about the outlook for Germany, which was the world’s worst-performing major economy last year, according to the IMF. The country has been plagued by high interest rates, low export demand and high energy prices triggered by Russia’s invasion of Ukraine in 2022.

Germany’s gross domestic product shrank 0.3 per cent last year and exports fell 4.6 per cent in December, a sharper decline than economists had expected. The OECD said on Monday that Germany’s economy would expand by just 1.1 per cent in 2024, a much lower rate than the OECD average of 3 per cent.

Germany has also seen nationwide rail strikes and widespread protests by farmers angry at cuts to agricultural subsidies, while industrial action by Lufthansa ground crews on Wednesday was set to cause severe disruption to air travel. 

Meanwhile, the three parties in Scholz’s fractious coalition — Social Democrats, Greens and Free Democrats — argue openly over how to kick-start economic growth.

“Indicators of political uncertainty in Germany show that it is as high now as it was in the UK during Brexit,” said Clemens Fuest, head of the Ifo Institute, a leading think-tank. 

One reason, he said, was the bombshell ruling by Germany’s constitutional court in November that upset the government’s spending plans by striking down its use of off-budget funds. The judgment forced Scholz and his ministers to make huge savings in their 2024 budget, a revised version of which only passed on Friday last week. One of the measures is a sharp increase in transmission grid fees which it is feared will drive up businesses’ energy bills.

But there were other reasons for the febrile mood that were more deep-seated, Fuest added. “It has to do with the fact we have a government with no real economic strategy,” he said. “There is complete disagreement between the economy and finance ministries and that . . . presents risks to the economy, both in the short and long-term.”   

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