German Economy Minister Reiche seeks EU backing for industry subsidies

Germany’s new economy minister, Katherina Reiche, has called on Brussels to approve a plan to support German energy-intensive companies, arguing that the survival of the country’s heavy industry is vital for European sovereignty.

Speaking to the Financial Times (FT), Reiche expressed her hope that the European Commission would understand Germany’s need to subsidize the electricity costs of sectors such as chemicals and steel to end the country’s longest post-war recession.

Reiche emphasized that Berlin is determined to “do its homework” by implementing “structural reforms” and launching a €1 trillion investment plan for infrastructure and the defense industry. Pointing to previous missteps that led to over-reliance on Russia and China, she argued that other manufacturing industries also require protection.

“A lack of steel production in Germany means fostering new dependencies. Similarly, an absence of basic chemical production leads to new dependencies,” Reiche asserted.

Reiche also contended that growth in Germany is crucial for achieving renewed growth across Europe, noting that the Commission had been forced to lower its growth targets for the current year. Consequently, the German minister believes it is important to reinforce Germany as a “business hub.”

Conservative Chancellor Friedrich Merz’s new coalition has pledged to reduce electricity costs by at least five cents per kilowatt-hour by cutting taxes and grid fees, as part of a broader strategy to revive growth and support the nation’s car manufacturers and other industrial producers.

The government’s commitments also include introducing a special discounted electricity tariff for energy-intensive sectors such as steel, glass, cement, and chemicals.

This plan risks contravening EU state aid rules, which are designed to prevent member states from granting unfair advantages to their economies. However, these regulations were made more flexible following the war in Ukraine, allowing countries to support sectors adversely affected by record-high gas prices.

“State aid approval is necessary to protect energy-intensive sectors in Germany,” Reiche stated. She added that the current price compensation system, linked to indirect carbon dioxide costs, also needs to be “expanded.”

Arguing that growth is essential for the “health of democracy” on the continent, Reiche remarked, “We are also in a competition between systems, and Europe must and will demonstrate its capacity to react swiftly—to improve, protect our democratic processes, and defend our values.”

Reiche, who previously served in the Bundestag for 17 years as a CDU member and twice as a deputy minister during Angela Merkel’s chancellorship, has spent the last decade in the business sector. For the past five years, she was the managing director of Westenergie, a subsidiary of the German energy giant Eon.

She signaled a departure from the previous government’s stance on European energy cooperation. In Brussels, former Chancellor Olaf Scholz’s coalition had opposed French efforts to promote nuclear energy as part of the EU’s decarbonization initiatives.

Reiche stressed the importance of working constructively with Paris on such matters. “My approach is to focus less on the points that divide us and to try to find common ground,” she said, adding that nuclear fusion technology—which, unlike fission, does not produce long-lived radioactive waste—could be one such area of cooperation.

Regarding China, a critical market for German exporters, including major automotive manufacturers, yet increasingly viewed as an economic and geopolitical challenge to Europe, Reiche emphasized the need for a balanced approach.

While advocating for Germany to gradually reduce its dependence on Chinese products and raw materials, she also noted the necessity of maintaining “reasonable and good relations” with Beijing. “It is a huge market, an economic power, a military power… Our companies have made significant investments there. We derive substantial added value from investments in China,” she explained.

Reiche reacted strongly to recent calls from some German politicians, including several within her own party, to reactivate the Nord Stream gas pipelines between Russia and Germany.

“Russian gas again? For a regime that bombs Kyiv every day? That is absolutely unthinkable for me,” the German politician declared.

Germany, once Gazprom’s largest European customer, should instead intensify efforts to diversify its supply sources, she argued.

Reiche, who grew up in the German Democratic Republic (DDR), mentioned that the deep-seated sympathy for Russia in some parts of the region felt “alien” to her.

“My family, through generations including my grandfather and great-grandfather, owned a company that was repeatedly nationalized,” Reiche stated. “Consequently, my interactions concerning the former Soviet Union are not devoid of strain. I was very happy when the Wall came down.”

She said that Germany had “succumbed to a delusion” by believing Russian gas supplies were secure regardless of global events, adding, “We paid a bitter price for this naive attitude.”

The CDU politician argued that the right-wing Alternative for Germany party, which gained significant support in many eastern constituencies in February, was “exploiting the sense of uncertainty” prevalent there. She pointed out that these states had endured decades of political and economic upheaval under the Nazi regime, the German Democratic Republic, and through the reunification process, and recalled some of the prejudices West Germans held against their “eastern cousins.”