By Christoph Steitz
FRANKFURT (Reuters) -German industry, reeling from high costs and fierce Asian competition, urged Berlin on Thursday to hold snap elections as soon as possible after the ruling coalition broke up, warning Europe’s top economy had no time to waste to get back on track.
The comments from the automotive, chemicals and energy sectors, which together form Germany’s industrial backbone, highlighted the need for fast reform as German companies are increasingly falling behind international competitors.
Some of Germany’s top blue-chips, including top lender Deutsche Bank and insurer Munich Re, came out in support of quick elections to reduce uncertainty and ensure Germany remains attractive to investors.
On Wednesday evening, German Chancellor Olaf Scholz fired Finance Minister Christian Lindner after weeks of deadlock over budgets and other policy, dissolving the three-way “traffic light” coalition consisting of the Social Democrats (SPD), environmentalist Greens and neo-liberal Free Democrats (FDP).
The move has thrown Europe’s economic powerhouse into a leadership vacuum at a time of industrial weakness, with several companies having warned for months that Germany needed a masterplan for its economy.
“Unfortunately, we have seen our Chancellor Olaf Scholz ignore our warnings too often and for too long,” said Matthias Zachert, CEO of chemicals group Lanxess.
“Under this chancellor, our country and the German economy have already lost far too much time.”
The coalition breakup also coincides with concerns over the likely impact of Donald Trump’s election to a second term in the White House on Germany’s export-dependent companies, with U.S. import tariffs being one of the scenarios that have weighed on investor sentiment.
Scholz, a Social Democrat, said he aimed to hold a vote of confidence in January, paving the way for elections in March, a timeline key industry representatives said raised the risk of prolonged uncertainty when the sector needs regulatory support.
RISK OF STANDSTILL
Siegfried Russwurm, who heads Germany’s main industry association BDI and serves as chairman of Thyssenkrupp, said continued uncertainty as to who will govern Germany and with what program was damaging its economy.
German exports and industrial output fell more than expected in September, underlining the weakness of two of the pillars of Germany’s economic model at the start of the fourth quarter.
“We cannot afford a months-long standstill and political deadlock,” said Wolfgang Grosse Entrup, who heads pharma and chemicals lobby group VCI, representing companies such as BASF, Covestro and Evonik.
His remarks were echoed by Hildegard Mueller, president of the powerful car lobby group VDA, which speaks on behalf of Germany’s major automakers Volkswagen, Porsche, Mercedes-Benz and BMW.
The situation in the car industry is particularly dire, with all automakers suffering under growing global trade tensions, particularly between top markets U.S. and China, while Asian rivals are entering the European market with cheaper products.
Volkswagen CEO Oliver Blume, currently locked in a major dispute with unions over potential pay cuts and plant closures, met with Scholz last week as part of an exchange with industry over how to support the troubled sector.
Scholz said on Wednesday he was planning a draft law on immediate support measures for the industrial sector before Christmas, raising the question how he intends to do that without a majority in parliament.
The disarray has also stoked fears over Germany’s appeal to investors, with Heidelberg Materials, the world’s second-biggest cement maker, saying political delays were bad for the investment decisions of German and European industry.
(Reporting by Christoph Steitz with additional reporting by Linda Pasquini in Gdansk; editing by Matthias Williams and Mark Heinrich)
