"The idea of a bridge electricity price is not viable," writes Ifo President Clemens Fuest in an article for the October monthly report of the Federal Ministry of Finance, clearly speaking out against an industrial electricity price. It is to be expected that electricity costs in Germany will be permanently higher than in many other countries. This is due, on the one hand, to the fact that other countries have advantages in the generation of renewable energies and that storage facilities are expensive. Another reason is that Germany is pursuing a policy of scarcity by phasing out nuclear power and abandoning its own shale gas production.
Not accepting deindustrialisation with a shrug of the shoulders
"Policies for Germany as an industrial location should not cling to structures that are no longer competitive," Fuest added.
At the same time, he warned that it would be "reckless to shrug off deindustrialisation". Instead, the conditions for the growth of successful companies in all sectors had to be improved. Furthermore, it is important to create favourable framework conditions for the emergence of new companies and sectors with high value-added potential.
Clemens Fuest calls for far-reaching reforms
Fuest advocated reforms to strengthen labour supply. These should include changed crediting rules for the citizen's income, a reform of family taxation, better childcare and improved incentives for longer working lives.
"Reforms of schools and vocational education and training could increase labour productivity. In energy policy, the goal should be to use market signals, i.e. prices oriented to current shortages, and the expansion of infrastructure to achieve a more efficient use of the existing energy supply. Germany also has a great interest in further advancing the integration of the European energy market," Fuest explained in a press release.
Reducing bureaucracy, a faster expansion of the infrastructure for transport and data transmissions as well as more openness and fewer restrictions for digital business models are further building blocks, he said. "The challenges for the industrial and business location are great, and the danger of deindustrialisation must be taken quite seriously. The good news is that economic and fiscal policy certainly has the means to create conditions that allow these challenges to be met."
The complete monthly report of the Federal Ministry of Finance for October is available for free download.
Further information is available at www.ifo.de
