German economy minister faces backlash as companies sound alarm on energy prices

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German Economy Minister Robert Habeck faced a backlash on Wednesday for saying he could imagine parts of the economy stopping production due to rising energy prices that German firms say are threatening their existence.

Asked whether he expected a wave of insolvencies at the end of this winter due to companies' rising energy bills, Habeck said “No, I don’t. I can imagine that certain industries will simply stop producing for the time being.”

The answer, in an interview with ARD broadcaster on Tuesday evening, sparked criticism of the minister in charge of Europe’s biggest economy, with mass-selling Bild newspaper saying Habeck “has no idea about the economy.”

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Friedrich Merz, the conservative opposition leader, also took the opportunity to criticize Habeck, Germany’s second most popular politician, saying he and his ruling coalition were not taking energy and economy questions seriously.

“One could see how helpless Mr. Habeck you are with these questions last night on German television,” Merz told the lower house of parliament.

Habeck’s comments come as economists and industry groups warn that rising energy prices are a growing risk for Germany’s medium and small-sized businesses, which form the backbone of the economy.

After benefiting from cheap Russian gas for decades, German industry is facing a crunch as Russia cuts supplies, pushing energy suppliers to purchase gas at spiking market prices and pass those costs on to consumers.

Rising energy costs and supply chain bottlenecks contributed to a 26 percent rise in insolvency proceedings in Germany in August, IWH economic institute said on Tuesday, adding that more insolvencies were expected in the autumn.

In a survey by Germany's BDI industry association of 593 companies, which took place from mid-August to early September, more than a third said their existence was under threat due to rising prices, up from 23 percent in February.

Some 58 percent saw skyrocketing costs as a major challenge and almost 25 percent were considering or in the process of relocating part of their business. One in 10 companies had curtailed or interrupted production due to the price jumps.

The Bavarian vbw industry group on Wednesday said its energy price index had more than doubled in a year by July 2022.

“For more and more industries, energy prices are becoming an existential problem,” said vbw head Bertram Brossardt.

Berlin on Sunday announced a 65-billion-euro ($64.33 billion) aid package to help citizens and companies cope with rising prices but BDI head Siegfried Russwurm said the package was not enough, calling on the government to co-finance electricity network charges.

“Politicians must now take action to prevent bankruptcies and further economic and social upheaval,” Russwurm said.

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