CureVac, Lufthansa & Co .: How sensible are state investments?


Status: 01.07.2021 6:46 p.m.

The federal government has invested 300 million euros in the biotech company CureVac – and has bet on a lame horse. How sensible are state investments actually?

From Lothar Gries,
tagesschau.de

Federal Minister of Economics Peter Altmaier (CDU) described the federal government’s investment in the Tübingen biotech company CureVac for 300 million euros as “of great importance in terms of industrial policy”. The money should accelerate the development of a Covid vaccine and thus give Germany more independence. But it didn’t work out. The CureVac preparation is only 48 percent effective, significantly less than the competitor’s vaccines.

As a result, the company’s share price collapsed by half, and ten billion euros have vanished into thin air. Of course, this also affects the shares held by the federal government. The stake (around 16 percent) is still a long way from a loss-making business, but CureVac once again raises the question of the sense and nonsense of state stakes. After all, the competitor BioNTech was significantly faster and more successful in vaccine development without government aid.

Industrial policy decision

The Tübingen-based company did not lack the necessary capital to finance its research. On the contrary: When it went public in New York, CureVac was literally showered with money, at times worth over 20 billion euros. So the company didn’t need the 300 million from the state. In fact, the federal government’s move was an industrial policy decision after rumors surfaced that the US government was planning to invest in the company.

Even if this saved CureVac from being accessed by the Americans, the federal government’s involvement still triggered criticism. “The CureVac case shows once again that politicians are by no means better investors,” said the President of the Kiel Institute for the World Economy (IfW), Gabriel Felbermayr, to the Reuters news agency. The former head of economic management, Lars Feld, is also very critical. “With dreamlike certainty, the federal government has chosen the one of the two vaccine manufacturers who does not manage to bring an effective vaccine onto the market in time.” Feld told Reuters that the example shows that it is best for the state to stay away from industrial holdings and industrial policy offensives, or “better still: industrial policy fantasies”.

Participations in Lufthansa and TUI

In the Corona crisis, the federal government also got involved with two other companies: Lufthansa and the travel company TUI. In both cases, the aim was to save the companies that had got into an existential crisis due to the pandemic from bankruptcy – and thus to secure many thousands of jobs. It is not yet clear whether the move will be a success story or whether it will ultimately cost the taxpayer a lot of money. Lufthansa still owes the state around one billion euros. The plan is to collect fresh money with the help of a capital increase in order to be able to buy out the federal government.

But was it even necessary to get started? Would it really have been that bad if a foreign investor had participated in the crane line? Justus Haucap, founding director of the Düsseldorf Institute for Competition Economics (DICE) and long-time chairman of the Monopolies Commission, an advisory body to the federal government, recently asked. The state also saved the travel company TUI from collapsing with its entry. A risky step, as sluggish corona vaccination campaigns and ever new mutants of the virus are ruining a rapid recovery in many tourist regions. It therefore remains uncertain whether TUI will recover and whether the state will be able to sell its shares again without losses.

Was there an alternative to bailing out Commerzbank?

In addition, the example of Commerzbank shows that the state usually holds on to investments for too long. During the financial crisis, the federal government had to shell out a good five billion euros to acquire its block of shares in the Frankfurt bank. As of July 1st, it is worth just 1.1 billion euros. The state has not stopped the decline of the Frankfurt money house, which has been going on for many years, also because it has not participated in the strategic direction for many years. As a result, billions of euros in taxpayers’ money were burned. The price of the bank share would have to rise to 25 euros so that the federal government could sell its share without a loss. The paper is currently trading at six euros.

But it is also true that a collapse of Commerzbank in the 2009 financial crisis would have had devastating effects on the entire German economy and would have cost much more than the taxpayers’ money invested in the investment. In fact, an intervention by the state in a crisis situation could restore or secure trust, stabilize demand and alleviate the crisis, write the economist Klaus-Heiner Röhl from Institute of the German Economy in Berlin and Christian Rusche from the Institute of German Economy in Cologne. State intervention could also be justified if, as is currently the case, the trigger of the crisis is not an economic one.

In some cases, the state’s involvement can be understood. If such a step is taken from a purely industrial-political point of view, it usually causes criticism.



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