High energy prices are dampening production and hurting the region’s competitiveness, data shows
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Major European trade unions are raising the alarm due to the major downturn in the EU’s industrial sectors. The relentless surge in energy prices is dealing a severe blow to a cornerstone of the bloc’s economy and is prompting profound concerns among influential labor organizations. Despite a retreat in energy prices from their 2022 peak, the European Commission forecasts that both gas and electricity prices will remain elevated, posing long-term threats to the EU’s competitiveness.
The grim industrial production data and looming de-industrialization
A recently released Eurostat study presents disconcerting data: Industrial production in the EU dipped by 0.2% month-on-month in November, the third consecutive monthly decline. In year-on-year terms, the figure shows a 5.8% decline.
The production of capital goods, a key indicator of long-term investment, witnessed a substantial 0.8% drop across the EU in November. According to Ludovic Voet, confederal secretary of the European Trade Union Confederation, “these figures are a canary in a coal mine: the biggest hit is in long-term investments in buildings and equipment.”
Judith Kirton-Darling, deputy general secretary of industriALL Europe, launched a sharp critique of EU policies. She shared with Euractiv her view that stringent debt rules exacerbate the problem in industry and further impede development. Advocating for a more flexible fiscal policy, Kirton-Darling emphasizes the need to promote investments and create high-quality jobs.
Experts, including Tobias Gehrke from the European Council on Foreign Relations, perceive de-industrialization as a “clear and present danger.” These challenges are compounded by issues such as a shortage of qualified labor, inadequate infrastructure, and lenient industrial policies elsewhere in the globe. Ben McWilliams, an energy policy analyst at the Bruegel think tank, emphasizes that high energy prices are impacting Europe’s competitiveness. “The future of Europe’s industrial competitiveness will instead be determined by its ability to develop new sources of renewable energy and create a good investment environment for innovation and the technologies of tomorrow,” he says.
Companies seek compensation from EU for losses due to sanctions on Russia
Amid Europe’s industrial woes, a corresponding crisis is developing as major German corporations, including Wintershall Dea, Siemens Mobility, and Volkswagen Bank, pivot to seek compensation from the German government. These claims arise from substantial losses incurred in their Russian operations, a consequence of the sanctions placed on Moscow. Wintershall Dea’s proactive pursuit of compensation for its significant losses set a precedent for other firms grappling with similar adversities. Siemens Mobility and Volkswagen Bank, contending with the repercussions of the Russia sanctions, have now formally petitioned for redress. This convergence of corporate imperatives and geopolitical tremors underscores the intricate dynamics shaping European industries.
The compensation requests underscore the financial strain these businesses have encountered due to political developments. As of mid-November, a total of 16 applications had been submitted by eight companies, totaling €2.8 billion. Siemens and Volkswagen subsequently halted their business activities in Russia, reflecting the broader challenges faced by German companies in the region.
An appeal to European politicians
Both unions and experts align in their call for a reevaluation of policies to strengthen the EU’s industrial position. Instead of imposing austerity measures, they are being encouraged to actively promote resilient industries and social cohesion. European industry is facing a potentially “irreversible” decline, according to energy market experts. Despite a decrease in energy consumption, analysts argue that this is not indicative of a more energy-efficient future but rather a consequence of widespread de-industrialization. While energy prices have fallen from their record highs in 2022, the impact of this respite on Europe’s industrial activity has been minimal.
The lack of investment and the EU’s restrictive fiscal policy have placed the industry in a precarious situation. Current developments could lead to further division and disillusionment among European workers.
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