DIW boss at Maischberger
Fratzscher sees a wave of bankruptcies rolling in
By Marko Schlichting
10/5/2022 3:37 am
The head of the German Institute for Economic Research, Marcel Fratzscher, paints a bleak picture for German companies. In the ARD talk show “Maischberger” he explains why he fears that many companies in Germany could close in the near future. He doesn’t just see energy-intensive industries at risk.
DIW President Marcel Fratzscher warns of a wave of bankruptcies in German companies. Germany is a country with very energy-intensive economic sectors. Many companies worked in the export sector. “Almost 45 percent of our economic output is exports,” says Fratzscher. Because of the high energy prices in Germany, they have to sell their products more expensively than their competitors in the USA, for example. At the same time, a lot of companies are still suffering from the losses from the Corona crisis. That is why Fratzscher fears that many companies, especially in energy-intensive sectors, will not be able to hold out. “There will be a lot of companies that will say in the end: It’s not enough for me.”
Fratzscher sees problems above all in the service sector. If people had to spend more money on energy and food, savings would be made elsewhere. “Then sales collapse and many companies run the risk of going bankrupt,” says Fratzscher.
“The ideal would be direct payments”
The commission set up by the federal government to design the gas price brake intends to present its results in mid-October. It is already becoming apparent that private households and companies will get 80 percent of the gas consumption from the past year at a discount based on the current prices. If the quota is used up, the costs will be significantly higher. That’s not a good solution, says Fratzscher. “But doing nothing would be even worse.” Therefore, direct payments would be the better alternative. “But the truth is that politicians have no tools to implement these direct payments. They cannot do it as precisely as necessary,” says Fratzscher.
“People on low incomes hit particularly hard”
According to Fratzscher, hard times will come not only to companies, but also to German citizens. For this year and next, he anticipates inflation of nine percent each. Because at the same time wages would only increase by around four or five percent, people would have to accept a loss of real income of four to five percent. “People with low incomes are particularly hard hit,” says Fratzscher.
The minimum wage, which increased on October 1st, could make up for some of this. Around six million people benefited from this and could now expect wage increases of up to 20 percent.
In addition to help for people with low incomes, Fratzscher calls for support in the energy transformation for the companies. Fratzscher: “We need a much faster expansion of renewable energies and a much faster changeover in technologies. Now the state and companies have to invest massively in the transformation.”