Economy and Viessmann: Doubts about the green economic miracle

“The sale of Viessmann and the federal government's latest economic forecast fuel doubts about the story of the green economic boom. Ifo President Clemens Fuest even warns of a "growth killer".

Robert Habeck took his time before saying the word Viessmann for the first time on Wednesday. The Economics Minister came to the federal press conference to present the government's new economic forecast. The improved prospects - instead of 0.2, the government now expects growth of 0.4 percent - are "really remarkable", praised the Green politician. The industry has done well despite the rise in energy prices. The cabinet initiated the Skilled Immigration Act.

"Germany is attractive as a location," summed up the minister. And that is also evident in the Viessmann case, Habeck finally said. The company has an attractive product. In order to grow, Viessmann has now brought in a financially strong partner from America. "It will strengthen production capacities in Germany," Habeck said with conviction.

Since it became known that the heating manufacturer from northern Hesse is selling its air conditioning and heat pump division to the American company Carrier Global, there has been a lot of discussion in Berlin again.

The Hamburg port terminal in Tollerort, the robot manufacturer Kuka, the former Solar Valley – everything is sold out to the Chinese, at least that is the widespread perception.

On Tuesday, the FDP warned against driving companies out of the country with hastily passed laws. What the allusion referred to was clear: the amendment to the Building Energy Act, which should lead to the end of gas heating and the installation of heat pumps in the boiler rooms.

The project is intended to serve Germany as a location

A spokesman for Chancellor Olaf Scholz (SPD) countered this with a different interpretation on Wednesday: "Basically, this is good news," he said about the sale of the Viessmann division. This creates the conditions for the ramp-up of heat pumps in Germany. Habeck made a similar statement. The high purchase price - 12 billion euros - shows how attractive German technology is. But now it must be ensured that the project serves Germany as a location. "We will see as part of the investment review that this is redeemed."

The announcement from Berlin is clear: the profits that come with the conversion of the economy to climate neutrality should also remain in Germany. Despite the weak economic prospects, the chancellor had recently promised a new German economic miracle with growth rates similar to those of the 1960s. At that time, the gross domestic product grew by 4 percent. According to Scholz, the conversion of the economy towards climate neutrality is creating a new dynamic. However, leading researchers consider this to be wishful thinking.

"Rather sweat and tears than a big boom," says Ifo President Clemens Fuest on the medium-term prospects for the German economy. In contrast to the times of the economic miracle, no additional production capacities would be created in Germany as a result of the climate transformation, but at best an old capital stock would be replaced by a new one. "Prosperity does not increase as a result," says Fuest.

He even describes the energy efficiency law planned by the federal government, which envisages lower energy consumption for industry and the public sector, as a “growth killer”.

Growth boom not secured

Veronika Grimm, energy economist and member of the German Advisory Council, also believes that a growth boom in Germany is by no means certain. "You have to do something for that. In order for companies to grow in this country, they need predictability and not bans," said Grimm, alluding to the planned ban on installing new gas or oil heating systems. Both researchers complain that the federal government is not relying more on the price of CO2 to reduce greenhouse gas emissions.

This would give companies the necessary planning security. Grimm also sees another deficit in the Viessmann case: "Why didn't the company go public in the EU?" she asks. Orienting oneself to America is apparently simply more attractive. 

Ifo President Fuest said of Habeck's announcement that he wanted to check the sale: "You can check that, but you won't find any reason to ban it."

A tip in the direction of the FDP

According to the Foreign Trade Ordinance, the Ministry of Economics can examine takeovers or investments by non-EU investors regardless of the industry if a threshold of 25 percent of the shares is exceeded. This is the case with Viessmann. In order to prohibit a planned participation, however, there must be a threat to public safety or order, which in the case of a mass product such as the heat pump might be difficult to argue. It is not about German companies only producing for the German market or only investing in this country, stressed Habeck. He referred to the example of Siemens.

The Munich group buys in America. "You have to face the competition and want it too." In the end, he couldn't resist a tip in the direction of the FDP. The fact that "certain circles" in Germany wanted a free trade agreement like TTIP with America, but were against the sale of Viessmann to America, is "a cognitive task that I have not yet solved.""