“We are at a time of great upheaval,” said Olaf Scholz on March 6th, standing in front of Schloss Meseberg, a castle in Brandenburg where his cabinet was holding a two-day pow-wow. This is not only because of Russia’s war against Ukraine, explained the German chancellor, but because of the transformation required by the environmental crisis. He promised to turn Germany at high speed into a gleaming, climate-neutral economy. But can he pull all these changes off?
This “new German speed” has become Mr Scholz’s mantra. “We already had massive weaknesses before the crisis,” says Clemens Fuest, head of Ifo, a Munich-based economic policy think-tank. The invasion of Ukraine exposed Germany’s dependence on cheap Russian energy, its inability to defend itself militarily and the pitfalls of close economic ties with autocracies—those with China potentially as risky than with Russia. Last year the middle kingdom was Germany’s top trading partner for the seventh consecutive year, with combined exports and imports of more than €298bn ($320bn), up around 21% from 2021. Germany relies on China for the import of rare earths that are indispensable in batteries and semiconductors, as well as other critical minerals. BASF, a chemicals giant, is investing €10bn in a new factory in southern China. Volkswagen, Europe’s biggest carmaker, relies on China for 40%, by volume, of its sales.
