MNI INTERVIEW: EU Should Rethink Green Policy-Austria's Kocher
MNI (VIENNA) - The European Union must rethink its green policies if it is to staunch an exodus of energy-intensive industries over the coming years, Austrian Labour and Economy Minister Martin Kocher told MNI.
High energy costs relative to those in the U.S. are sapping Austria’s industrial base in key areas, Kocher said in an interview, adding that companies in Germany and elsewhere in Europe have also lost competitiveness.
“I fully understand and support the objective of having cheaper, greener energy in 10 or 15 years’ time, but if in the meantime all the energy-intensive industries leave and go to other places, that is not helpful at all. What we see at the moment is not so many companies that are considering leaving, but investment decisions are redirected towards the U.S. especially.”
While previous Austrian governments have supported Europe’s green agenda, the conservative People’s Party and hard-right Freedom Party have agreed to scrap climate-related measures to save money in ongoing coalition talks.
Even if the EU modifies its green policies, Kocher, who will succeed Robert Holzmann as governor of the Austrian National Bank on Sept 1, said he accepts that at least some highly energy-intensive industry, “will perhaps at some stage not be located in the European Union anymore.” (See MNI INTERVIEW:Structural Drags On German Growth-ifo's Wohlrabe)
But there are limits to what should be permitted, according to the minister.
“There will be production in Europe and there has to be production in Europe. There's a certain level of sovereignty that we want to have in certain areas,” he said.
"Of course, we have to make sure that we remain competitive in other areas that are not so energy intensive, whether it is development of startups, artificial intelligence, etc. where it’s clear the European Union does not have a strong competitive advantage, either, at the moment.” (See MNI INTERVIEW: German Car Makers Have 5 Yrs To Change-Suedekum)
CONFIDENCE BOOST NEEDED
Economies like Austria’s will need joint European action to boost confidence over the medium-to-long term and boost growth, Kocher said,
While a decline in Austrian corporate investment growth has been in line with sluggish GDP, Kocher said he was concerned by rising household savings rates despite recent strong wage gains.
“That, of course, is a sign of insecurity and the uncertainties that are present. That means you have to have signals, political signals, for the medium and long run, that give confidence to consumers and companies,” he said, pointing also to uncertainty over ongoing talks to form the next Austrian government.
“Wage growth has been strong, and if some of the insecurities and uncertainties that are present today are eliminated then I would expect to see pretty substantial growth - more substantial than many forecasts - although in global terms there remains a competitiveness issue,” he said.
“The kind of consumption-led recovery from recession seen in Austria over the last 80 years was to a degree always a consequence of external impulse for Austrian exports. I think that that will be quite the case again this time, if only because of the size of the country and the way Austrian industry is structured.”
With nominal wage gains outstripping both local inflation, running at 2% in December, and the eurozone average, government can play an important role in easing overall price pressures by cutting taxes and social security contributions on income, he said
An interruption to Russian gas supplies has not had a significant impact on spot prices in Austria, and is not yet seen having a major impact on inflation, Kocher said.