Europe’s deindustrialization is behind the energy savings achieved this fall. Also some good news

Atlantico: How much European deindustrialization is expected behind this fall’s energy savings? How long has it started?

Michael Ruimy: Due to the large consumption of Russian products (50% for gas, 25% for oil), Europe is experiencing an unprecedented energy crisis, more serious and more systemic than the oil accidents of the 1970s. The current situation, exacerbated by the scarcity of many materials, results in part from the energy choices that have begun, especially in recent years: from nuclear power (Germany, Belgium, Switzerland), overdependence of Germany and Central Europe on Russia. gas or even the option of postponing France’s nuclear power plant renewal program for a decade.

If the current period is difficult for companies, the issue of energy – and their competitiveness – will be more acute next winter. The lack of Russian gas, which would result in a shortfall of more than 10% of total energy in Europe, would probably cause industrial power cuts. Many SMEs (French ETIs, German Mittelstand, etc.) will find it difficult to cope with inflation, rising interest rates and rising energy prices, which according to some studies will add up to 20% additional costs in total. European industry.

In this context, Joe Biden’s anti-inflation IRA (Inflation Reduction Act) plan comes at the worst possible time. In order to restart “Made in America” ​​products in key sectors (electric cars, batteries, renewable energies), the White House allocates about 400 billion euros in subsidies to companies that set up factories on American soil from January 2023. , is also attractive with low energy costs. A deadly spiral with irreversible consequences for the industrial groups of the “Old Continent” must not be set in motion.

How big can the phenomenon be?

It is necessary to understand the importance of the energy crisis for the industry. Without energy, there is no industry, and when energy prices are high in one region, factories move elsewhere. This means closing factories, providing skilled jobs, higher wages from services, increased productivity, innovation and the survival of areas far from metropolitan areas.

Without real energy and industrial policies in Europe, the displacement of production and the bankruptcy of companies in energy-intensive sectors will increase. First, it involves achieving Europe’s energy independence as soon as possible. Second, it should be translated into the protection of our strategic industries through a support mechanism for the price of purchased energy, but also, if necessary, by rapprochement with the United States in certain sectors such as energy or data. Indeed, in today’s increasingly digital world, no company can survive without constant, secure access to its data in a sustainable economic environment. The high-energy cloud will probably no longer be able to be deployed in Europe, as envisaged by the European Commission. Perhaps we should review the terms of the agreement with the United States over the next few years to ensure our industries have access to the cloud, benefiting from both American energy pricing and GDPR guarantees.

Such is the case in Europe, which could experience a major industrial shock. Europe will have to make simple and quick decisions because the wall of reality is now in front of us.

How sustainable is the European industry, at least for now?

The increase in international tensions has shown the need for the European Union to reduce its dependence on the most important foreign supplies, which could dry up, especially in the event of a geopolitical crisis.

This shock is devastating for Europe’s industrial sovereignty, as it affects energy, a key element in the successful decarbonisation of the economy. In addition, fierce competition between states to protect their own industries will be added (see Germany’s €200 billion aid plan for businesses and consumers without coordination with other Member States).

Faced with this situation, the European Union has made significant efforts to strengthen its strategic autonomy and increase the stability of its industry by trying to find a new energy pricing system. It must do so in a coordinated and rapid manner, risking a resumption of deindustrialization.

All in all, how good is the news for European industry? Do certain indicators allow us not to be completely pessimistic?

The weight of industry in the European economy has been steadily declining for decades. While many countries have suffered the consequences of migration to low-cost countries over the past few decades, multinational companies have also had to take into account the ongoing geopolitical tensions.

More recently, successive crises have cast a harsh and brutal light on the fragmentation of the European industrial structure. It revealed that Europe was unable to meet the urgent needs to protect its population. Leaders recognized the importance of having a strong industry and the importance of being autonomous and sovereign in certain critical sectors (healthcare, materials, raw materials, digital, electronic components).

This is a big step. As long as this awareness was not there, it was difficult to envisage dealing with this re-industrialization. Because of this delay, this process will take time.