Sanctions against Russia burden German engineering industry

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German machine builders were struggling in August amidst a decline in orders. Especially the sanctions against Russia are creating major problems for the industry.

Sanctions against Russia burden German engineering industry

This article originally appeared at DWN, translated exclusively for South Front by Frank Jakob.

The German engineering companies are under continuing pressure as orders declined by seven percent on an adjusted basis in comparison to the previous month. July had last seen an increase in orders of 18 percent compared to the previous year. The foreign orders fell in August by around one percent. Trade with other countries of the Eurozone was somewhat able to mitigate the decline. However, domestic orders drastically shrank by 17 percent. The association of German engineering (VDMA) did not give an explicit reason for this decline.

The engineering industry is still greatly suffering from the sanctions imposed on Russia. After a decline of 17 percent in the year 2014, the current numbers (Mai 2015) are stating a decline of 30 percent. The weakening of the Ruble, the oil price and the bad economic situation in Russia are the main reasons for the drop in trade with Russia. If the trend continues the association is expecting a decline in machine exports of roughly € 4,5 billion for the year 2015.

The World Bank expects that Russia’s economy will shrink this year by around 3,8 percent and in the next year by 0,6 percent. Then in 2017 it will grow by 1,5 percent. Just last June the World Bank was still estimating the decline to be significantly lower and even predicted mild growth for the year 2016.

Additionally the Association of German Engineering (VDMA) sees the German infrastructure as obstructive for domestic and foreign trade, as it has emphasized multiple times before. “The members of the association complain about the years long worsening of the infrastructure and that it was necessary to take long detours for heavy load transports because of the repair measures on German highways”, said VDMA-CEO Thilo Brodtman. This is also the case for reaching trading centers when using alternative means of transportation like inland waterway crafts and trains.

A lot of ailing bridges could already not take the load of trucks with up to 44 tonnes. Long detours and delays are the result. Should the traffic situation worsen then 20 percent of the companies would consider moving abroad. “The daily kilometers long traffic jams show explicitly that time is running out and that there is a lot to be done for improving the infrastructure for traffic so that our economy does not take considerable damage”, said Brodtmann. It is a sign of weakness for the German Republic that engineering companies have to shut down in the worst case.

In addition to that there is the current scandal about the emissions of the automobile industry. Even though the German Sparkasse and the Giroverband do not see a greater risk, the VDMA is fearing that the scandal will put the whole industry in a bad light. Around one million workers are employed in the German engineering industry and struggle hard to defend the reputation of their employers, said VDMA-CEO Thilo Brodtmann: “There is no reason to put anyone under general accusation. It only harms the business location Germany immensely”.

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