The Core of Europe

BERLIN |

BERLIN (Own report) - In view of the growing rivalry with China, business officials and foreign policy makers in Germany are warning against the performance of EU critical forces in the European elections in May. "Alone, no individual European country" could "play a major role" in the global competition, says Eric Schweitzer, President of the German Chambers of Industry and Commerce (DIHK). German companies need the EU's single market, the "core of Europe," as an economic foundation, to assert themselves on a global level against companies from the People's Republic of China and the USA. Should EU critical "populists" - regardless of their political orientation - obtain more influence in the European Parliament, "the future of the German economy" would also be at risk, according to DIHK Chief Executive Martin Wansleben. Dieter Kempf, President of the Federation of German Industries (BDI) is pleading for business representatives to commit themselves "audibly in favor of an open Europe." At the same time, German businesses are openly demanding that their interests be imposed within the EU - a main reason for the growth of influence of "populists" in other EU member countries.

 

Billions in Profits

The EU's single market - recently described as the "core of Europe" by the President of the German Chambers of Industry and Commerce (DIHK), Eric Schweitzer - is still of prime importance to German industry.[1] With "more than 21 million enterprises and 500 million consumers" it is "the world's largest common market," according to the Federation of German Industries (BDI).[2] Due to the absence of tariffs and other trade barriers, nearly 60 percent of German companies' exports are being sold on that market. The Bertelsmann Foundation estimates that "from 1992 to 2012, European integration" helped to "increase the real GDP on the average by 37 billion euros annually."[3] Germany is still the EU's largest net contributor. However, Elmar Brok, the parting CDU MEP, presents a positive summary: "Over the past few years, we have paid a net average of twelve billion euros into the EU's coffers," while generating "a single market surplus of 180 billion euros" annually.[4]

Billions in Losses

The EU still remains the main investment focus for German companies, with 40 percent of their foreign direct investments being within the single market. The abolition of border controls, due to the single market and the Schengen Agreement, permits optimal diversification of supply chains, including particularly the cost-effective outsourcing of labor-intensive production to low-wage countries in Eastern Europe, thereby avoiding costly transit routes to cheap-labor production sites outside Europe. What German companies economize can be seen in calculations made in 2016 by the Bertelsmann Foundation during debates over possible permanent restrictions in or the abolition of the Schengen Agreement. In a more positive scenario, German industry could expect a loss of at least €77 billion within ten years, in a negative scenario, up to around €235 billion. The EU, as a whole, would have to expect losses of €470 billion - in a more negative scenario, around €1,4 trillion within the first decade of the restrictions.[5]

Alone, No Longer Competitive

The EU's single market will become even more important, because the German national market, with its approx. 80 million consumers, "is much too limited in the era of digitalization," to compete with US American or Chinese enterprises, both having a much larger domestic market to build on, "for launching successful major business models," as was recently related at a "Economic Summit" of the German daily "Die Welt."[6] At about the same time, in a policy paper on the approach to take toward China, the BDI called on the EU to "further expand the European digital market," as quickly as possible "to stay abreast of the extensive and dynamic digital markets in China and the USA." Besides, in the key strategic field of artificial intelligence (AI), the EU nations can only be successful if they consolidate their forces in the development and dissemination of AI systems."[7] In light of the Chinese state's high investments in research and development of the most modern technologies, a massive increase in the EU's research budget is also indispensable, - a 100 percent increase "to €160 billion over the next seven year period" would be best, according to the BDI.[8] If it is left up to the national research budgets, it would be impossible to compete with the USA and particularly with China.

A "Fateful Year" for the German Economy

Because the German industry, without the common market, would not only be lacking the profitable foundation for its global outreach, but also the very prerequisite for competing with the USA and China in the key technologies of the future, German business circles are warning against possible electoral successes of so-called populists in the next European parliamentary elections. "Populists" serves as the catchall term for any critics and opponents of the EU in its current form, for which the common market, regardless of the reason is not perceived as the be all and end all of all things. 2019 could "go down in history books" as "a fateful year for Europe," says the European Peoples Party's (EPP) top candidate in the European parliamentary elections, Manfred Weber (CSU), during the "Economic Summit" of "Die Welt." Weber was quoted saying, it "is essential that a pro-partnership majority with a disposition for compromise" wins in the EU elections.[9] According to the DIHK Chief Executive, Martin Wansleben, the month of May will decide "the future of the German economy."[10] In view of the European elections, it is to be hoped "that the German economy can clearly formulate its interests in an EU that is functioning, more powerful and future oriented ... and engage itself for the European project," according to the evaluation of a recent poll on the attitude of German enterprises toward the EU, published by Berlin's German Institute for Economic Research (DIW) and the German Council on Foreign Relations (DGAP).[11]

German Contradictions

Although BDI President Dieter Kempf had declared at the end of last year, "the business community must make its voice heard in favor of an open Europe,"[12] the DIW/DGAP poll shows that also in German enterprises tangible doubts about the European project persist and contradictory opinions are widespread. For example, only a quarter of those enterprises polled find the ECB's low-key interest rates adequate - which have provided southern European countries, stricken by the euro crisis, a certain leeway. At the same time, more than two thirds of the respondents fear that Italy's high debts could lead to a renewed escalation of the euro crisis.[13] Nearly half of the enterprises complain of "a lack of cohesion" and a rise in "nationalism" within the union. Forty-two percent openly express the opinion that the German government should "more clearly place the accent on German economic interests in the EU" and "if necessary, impose them against the EU partners." Precisely the open imposition of German interests within the EU - sometimes against massive resistance - galvanized EU critical forces of various political orientations in several other EU countries - most recently in Italy. Germany's leading business circles are stigmatizing their rise as that of "populists."

 

[1] Till Hoppe: Mittelstand fühlt sich von EU überreguliert, DIHK fordert Bürokratieabbau. handelsblatt.com 21.01.2019.

[2] Eine starke und souveräne EU. Für eine neue Rolle Europas in der Welt. BDI-Position Europapolitik. Berlin, September 2018.

[3] Sören Götz: "Dauerhafte Grenzkontrollen schaden der gesamten Wirtschaft in Europa". zeit.de 14.08.2018.

[4] Gabor Steingart: Das Morning Briefing. 28.01.2019.

[5] Sören Götz: "Dauerhafte Grenzkontrollen schaden der gesamten Wirtschaft in Europa". zeit.de 14.08.2018.

[6] Nikolaus Doll, Holger Zschäpitz: Sorge vor dem Abrutschen Europas wächst. welt.de 09.01.2019.

[7] Partner und systemischer Wettbewerber - Wie gehen wir mit Chinas staatlich gelenkter Volkswirtschaft um? BDI-Grundsatzpapier China. Berlin, Januar 2019.

[8] Eine starke und souveräne EU. Für eine neue Rolle Europas in der Welt. BDI-Position Europapolitik. Berlin, September 2018.

[9] Nikolaus Doll, Holger Zschäpitz: Sorge vor dem Abrutschen Europas wächst. welt.de 09.01.2019.

[10] Till Hoppe: Mittelstand fühlt sich von EU überreguliert, DIHK fordert Bürokratieabbau. handelsblatt.com 21.01.2019.

[11] Europa 2019. Die Sicht der deutschen Unternehmen. Repräsentative Studie, durchgeführt von forsa. Januar 2019.

[12] Das Jahr 2019: Eine Herausforderung für die EU. bdi.eu 27.11.2018.

[13] Europa 2019. Die Sicht der deutschen Unternehmen. Repräsentative Studie, durchgeführt von forsa. Januar 2019.