FX.co ★ Ongoing slump in EU industry may be irreversible

Inflated energy prices have been taking their toll on the energy-intensive European industries. Sadly, the manufacturing sector has been shrinking in the EU economy as a share of total GDP. Martin Brudermüller, CEO of Germany-headquartered chemical giant BASF, acknowledged this trend in an interview with the pan-European media network Euractiv.

The chemical industry, cement and steel production fell prey to soaring energy prices. Large European factories, especially those located in Germany, have to adjust their output to this new reality.

Tobias Gehrke, a senior policy fellow at the European Council on Foreign Relations, is on the same page. He also confirmed dire straits in the European industry. “Deindustrialisation is a clear and present danger, especially for energy-intensive sectors vital to downstream ecosystems,” the economist told Euractiv earlier this year. The energy crisis, a shortage of qualified workforce, and industrial policies of the US and China are to blame for economic woes in the EU.

After the EU authorities had agreed on the boycott of Russian petroleum products, Geoffrey Pyatt, US Assistant Secretary of State for Energy Resources, noted that such a decision may prove irreversible. Indeed, the EU ditched the gas pipeline infrastructure built to accept Russian gas. Germany has already allocated huge investments for new LNG terminals and facilities to handle LNG supplies from the US.

Recently, ECB President Christine Lagarde suggested that Germany’s manufacturing-heavy economic model needed “to be revamped”. Echoing her remark, BASF CEO Brudermüller lamented that his country “will be less attractive for energy-intensive industries. We have to deal with that”.