by Fausta Chiesa
Since 2019, Germany has lost over 9% of manufacturing, France 5% and Italy 3.5% due mainly to the cost of energy. But in eastern and some northern countries, production is growing
Industrial crisis? Yes, but not for everyone in Europe. If today the European Union as a whole continues to produce more than it did before the arrival of the pandemic (+1.8% in the year between September 2023 and August 2024), the traction – analyzes ISPI in a dedicated report to the EU industry – is moving from Western Europe towards Central-Eastern Europe. Between 2019 and today, Germany has lost over 9% of industrial production, France 5% and Italy 3.5% due, among other things, to the cost of energy and the new role of China as a competitor. But manufacturing is booming in Poland (+23%), Greece (+21%), Ireland (above 10%), Belgium (+13%) and other countries in Central-Eastern and Central-Northern Europe .
The cost of energy
What is happening to Western Europe? The main culprit in explaining the acceleration of the crisis – ISPI analyzes – is the cost of energy. «Although the peak of prices reached in 2022 is now far away, today’s “new normal” is gas prices still four times higher than those paid by Americans, with repercussions also on electricity prices». Added to the higher energy costs is the long period of high interest rates maintained by central banks to bring inflation back under control. But this is not enough to explain the loss of production in France, which has the lowest energy costs of all in Europe thanks to nuclear power. What else is holding back European manufacturing?
The new relations with China
«Another suspect – adds Ispi – is certainly Beijing. If at the beginning of the century for many European producers China mainly represented a huge new growth market, today it has also become one of their main competitors. Beijing “climbs” global value chains, taking market shares away from European producers. A clear example of this trend is the automotive sector.” And speaking of relations with China – ISPI further analyzes – the very interdependence between Chinese and European industries forces caution when discussing how to stem unfair competition from China. So, when in October European governments approved the imposition of duties on electric cars produced in China, Europe was divided: France and Italy voted in favor, while Germany and Hungary voted against.
Fiscal stimuli
A third factor is the absence of significant fiscal stimuli in favor of the industry. « Among the major European players, Italy and France cannot afford them due to their very high levels of public debt. But even in Germany, where public debt is low and even decreasing, ideological reticence means that fiscal stimuli remain severely limited. The only country with room to carry out expansionary fiscal maneuvers is also the one that is in the worst shape today from an industrial point of view: Germany. Berlin is so restrictive on the use of its public finances which in the last three years has “given up” 95 billion in extra debt, which it could have used to stimulate the economy while fully respecting the EU limit of a maximum deficit of 3% in relation to national GDP”.
The industrial stress index, which in addition to capturing today’s context anticipates future dynamics, highlights a worsening of the situation for European industry, also thanks to the “rationing” of investments due to the high interest rates of recent years.
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November 9, 2024 (modified November 9, 2024 | 10:36 pm)
