The economists have presented their economic forecast. It is the first joint appearance of the Economic Advisory Council after a public row.
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When the Economic Advisory Council met this Wednesday afternoon to present its economic forecast, the spring sun was shining in Berlin. The outlook for economic development, on the other hand, is rather bleak: weak overall economic demand continues to characterize Germany’s economy, according to the so-called economists. “Private households are currently still consuming cautiously, industry and the construction sector are only recording a small amount of new orders,” explained council member Martin Werding.
The five-member committee is therefore lowering its expectations: For this year, the Advisory Council is only predicting slight growth in gross domestic product (GDP) of 0.2 percent – instead of the expected 0.7 percent. “These are bad numbers,” said Werding. However, it is expected that the German economy will pick up speed over the course of the year. The German economy is expected to grow by 0.9 percent next year. The forecast therefore deviates slightly from the government’s forecast, which has moderately increased the growth expectation for Germany in 2024 to 0.3 percent and estimates GDP growth for 2025 at one percent.
The Economic Advisory Council also expects that inflation in Germany will slow down and that German inflation will continue to decline. After 2.4 percent this year, the inflation rate is expected to be 2.1 percent in 2025. “We assume that the ECB will lower key interest rates this summer. The resulting improved financing conditions for companies will stimulate private investment,” said Council member Ulrike Malmendier.
All against one, one against all
But in addition to the situation in the German economy, the mood in the Advisory Council for the Assessment of Overall Economic Development – the full name of the body – was on the agenda of the press conference. Because with the five wise men the house blessing has been going wrong for months. At the beginning of February, four council members publicly took a stand against their colleague Veronika Grimm because she wanted to join the supervisory board of Siemens Energy.
Achim Truger, Ulrike Malmendier, Monika Schnitzer and Martin Werding accused their colleague Grimm of conflicts of interest – one cannot advise the Advisory Council as an energy expert and at the same time act as a supervisory board member of an energy company. In the “Capital” interview, Veronika Grimm defended her plan to the end, and shortly afterwards joined the supervisory board of Siemens Energy. The presentation of the spring report was therefore eagerly awaited; it was the first joint appearance of the five wise men after the public power struggle.
Economics Grimm gives minority vote
In any case, the work on the spring report does not seem to have been entirely uncomplicated; energy expert Grimm gave a minority vote on it. In an economic policy chapter, the Council of Experts addresses the question of how freight transport in Germany can become more sustainable. To date, most of this has taken place via road and causes 98 percent of German greenhouse gas emissions in freight transport. Shifting transport to rail and water has not yet been possible.
The economists therefore recommend pushing forward the electrification of road freight transport. Battery-electric trucks are “most market-ready and are therefore likely to be the dominant low-emission drive technology for the time being,” says the report. The development of a charging infrastructure must therefore be the focus of government action.
Council member Grimm did not fully agree with these recommendations for action. In the corresponding minority vote, the energy expert instead advocates for a variety of technology options and advocates also promoting the use of hydrogen in road freight transport. The dissenter appears to have caused new trouble in the committee.
Siemens Energy: Part of the energy transformation
The crux of the matter is not so much the minority vote of the economists Grimm – it was only in 2022 that the Economic Council published a report without a minority vote for the first time in over 20 years, said the economist Achim Truger recently to Capital.
What is more critical is that the controversial topic of hydrogen is, of all things, a technology that the DAX company overseen by Veronika Grimm is also working on: Siemens-Energy produces production systems for the hydrogen economy. The so-called electrolysers split water into oxygen and hydrogen using electricity and special membranes. Grimm is also a member of the board of the Hydrogen Bavaria Center (H2.B), whose partners include companies such as Audi, BMW, Bosch, MAN and Siemens.
Grimm rejected on Wednesday that the conflict of interest that the other council members had warned about had arisen. There is just a disagreement about the content, agreed her colleague Truger. But those involved continued to discuss this difference of opinion publicly when they presented their report: Germany is a technology leader in fuel cells, said Grimm. This position should not be given up and the options space must be left as large as possible.
Schnitzer allows himself to be a blunder
However, the chairwoman of the Council of Experts, Monika Schnitzer, let Grimm take issue: “Openness to technology does not mean that the state has to finance everything that is possible. We point out how one could and should prioritize.” In the past, Schnitzer was Grimm’s loudest critic when she sought the supervisory board position at Siemens Energy. “Not everything that is legal is legitimate. You have to decide on a mandate,” Schnitzer told the “TableMedia” portal at the time“.
Schnitzer’s attempt to stifle further discussion failed with the journalists present. When asked how the council could focus on such a sensitive issue for the committee, Schnitzer responded taciturnly. This could not have been foreseen last summer when it was decided to tackle the issue of road freight transport. Grimm replies that it was clear back then that there would be “diverging opinions” on the matter.
It seems as if the conflict in the Council of Top Economists – both in terms of content and personality – will probably continue to smolder. Schnitzer announced a code of conduct for future work in the Advisory Council. However, the council chairwoman left it open when an agreement could be reached.
Note: This article first appeared on Capital.de.