'Gigantic' German state investment in industry needed after Covid-19 pandemic: Merkel

Outgoing German Chancellor Angela Merkel said that some sectors in the country's economy may need further aid.
Outgoing German Chancellor Angela Merkel said that some sectors in the country's economy may need further aid.PHOTO: EPA-EFE

BERLIN (REUTERS) - The German state will have to invest "gigantic" sums in industry to remain competitive in high-tech sectors, as the Covid-19 pandemic recedes and the world transitions to clean energy, outgoing Chancellor Angela Merkel said on Tuesday (June 22).

Addressing a BDI industry association conference, Dr Merkel said that although German industry had come through the crisis relatively well compared with other European countries, some sectors may need further aid.

"We will have to spend gigantic sums," she told the conference, highlighting the high-tech sector and singling out artificial intelligence, quantum computing, batteries and microchips. Firms would have to invest themselves, she said, and indicated that some state aid would have to be continent-wide.

"There are many areas where we won't be able to get ahead without state money," said Dr Merkel, who is not running for a fifth term in a September election. "Without state aid, the expansion of microchip production in Europe will not be possible."

She also said, however, that after the rescue and stimulus programmes needed to mitigate the effect of the pandemic on Europe's biggest economy, public finances must be brought back into order in coming years.

The candidate of Dr Merkel's conservatives to succeed her as chancellor, Mr Armin Laschet, told the conference it was important for Germany to remain a big industrial country, even as it makes the transition to net zero greenhouse gas emissions.

"In 20 years, we still have a steel, chemical, glass, auto industry have and still be climate neutral," he said.

Red tape had to be cut after the pandemic to allow firms to be more dynamic, said Mr Laschet, a day after presenting the conservatives' election programme.

He reiterated that now was not the time to raise tax as such a move would dampen the economic recovery, but said there was also no scope for tax cuts.