Anticipation mounts for potential advancements in financial regulation and fiscal strategies
The German Chemicals Sector Looks to Politics for a Boost Amid Economic Struggles
Facing a tough economic climate, the German Chemicals Industry Association (VCI) is counting on a shift in government after February's early federal elections. According to VCI chief Markus Steilemann, the time is ripe for change. He's optimistic that a stable, reform-minded government could revitalize the economy. However, he insists that companies are equally ready to tackle challenges, so long as they receive favorable conditions.
A Technical Snag: Bureaucracy
Excessive bureaucracy and agonizingly slow approval processes top the VCI's list of Germany's primary business drawbacks. While energy prices remain an issue, they've dropped back to early 2021 levels, a relative improvement—though hardly ideal. Steilemann's main concern now lies in supply security and striking a balance between green transformation and economic prosperity. He's hopeful that the new administration will adopt a practical, cost-effective approach to grid expansion.
Corporate Tax Overhaul
Steilemann advocates for a sweeping corporate tax reform that would drastically lighten the burden. He advocates for scraping the solidarity surcharge and offering tax incentives for investment. The government should prioritize spending, ensuring continued support for infrastructure, security, and education. To increase transparency in government finances, Steilemann suggests adopting binding fiscal rules and a national balance sheet.
Profits Elsewhere
In light of protectionism and looming tariffs from incoming U.S. President Trump, the chemical sector hasn't yet gauged the impact on their industry. If regional markets thrive, the globally distributed industry could profit. Despite generating profits abroad, not in Germany and Europe, member companies are cutting domestic investment and opting to expand abroad, focusing on the U.S., Mexico, China, and Southeast Asia. Steilemann notes that investments follow demand and growth.
A VCI survey reveals a divided industry outlook: around 25% anticipate increased profits by 2025, another 26% expect stability, and 46% fear a decline.
Insightful Observations
The VCI actively pushes for energy policies that ensure a uniform power price zone, oppose divisive bidding zones, and advocate for balanced environmental and economic objectives. They're also involved in supporting hydrogen technology in the energy transition. While the VCI concentrates on maintaining economic stability through energy and climate policies, it's essential to note that a stable energy environment is part of their broader efforts to sustain economic resilience. For more detailed information on bureaucratic reforms, review the VCI's recent position papers or statements.
- The VCI suggests a corporate tax reform to lighten the burden, advocating for the scrapping of the solidarity surcharge and tax incentives for investment, as part of their strategy to boost the finance sector of the German chemicals industry.
- Facing excessive bureaucracy and slow approval processes among Germany's primary business drawbacks, the VCI calls for a practical, cost-effective approach to grid expansion from the new administration to ensure a balanced green transformation and economic prosperity.
