Eurozone needs capital investment to spur growth – Wacker CEO

MUNICH, Germany (ICIS)–The eurozone needs capital expenditure to update its “rotten infrastructure” to boost growth and increase companies’ competitiveness, the CEO of German chemical producer Wacker said on Thursday.

Rudolf Staudigl made his remarks following the company’s full-year results presentation earlier in the day after making a passionate defence of the free trade attached to a common market like the EU and defining the potential exit of the UK from the 28-country union as an “anachronism”.

“In my opinion that [eurozone’s weak economic performance] can only be overcome in two ways. On one hand, to be a little bit moderate [in non-capital expenditure] and on the other I’m really in favour of more infrastructure spending in the EU. In many cases our infrastructures are very rotten and this [upgrading] creates jobs and provides logistics for good business development,” said Staudigl.

However, Wacker’s CEO conceded the eurozone has large imbalances to fix in its public accounts and said even Germany’s debt-to-GDP ratio is too high. According to the latest figures by Eurostat, the EU’s statistical agency, Germany’s debt stood in 2015 at 75% of its GDP.

Some of the imbalances would come from the huge spending spree some countries within the eurozone incurred during the years of economic growth pre-2008, said Staudigl.

“The system seemed to work very well 10 or 15 years ago for everybody [in the eurozone]. However, one cannot spend more that he has in the pocket, and this this is true for individuals and companies.”

He praised a plan presented by the German government this week to upgrade the road and rail systems in the country with an estimated expenditure of €250bn over 10 years.

However, he dismissed what came to be called the ‘Plan Juncker’ after the president of the European Commission, Jean Claude Juncker. At the start of his term in office, the Commission’s president proposed a €300bn infrastructure spending plan to boost growth.

However, at a time in which the eurozone countries were trying to lower their debts and budget deficits, Juncker sought for private corporations and sponsors to finance it. The plan never came to be realised.

“I don’t know where that plan is [and] I haven’t heard a lot about this programme lately,” said the CEO.

While the European chemical trade group, Cefic, has been battling to lower the burden the EU’s greenhouse gases emissions trading system (ETS) imposes on energy-intensive industries without much success, Staudigl said despite high energy costs, chemicals can have a future in Europe as there are still many sectors with an untapped potential.

“There are European markets which have the potential to grow – applications for renewable energy storage, which is totally untouched. Silicon. Other industries which demand silicons, for example, are still growing at higher rates than the [European] GDP. Other sectors with potential are personal hygiene or the automobile industry,” he said.

“Currently, 20% of the cars’ weight is other kind of materials than steel. A lot of potential to increase that [percentage]. There are many markets to develop.”

Although Wacker’s CEO said in March 2015 Cefic should improve its lobbying activities in order to get a better deal from European regulation, this time round he said the trade group is “doing a good job” and argued one sole lobby group cannot overcome other forces which argue for harder regulation on chemicals.

Cefic appointed in December a new director general, effective on 1 May, and the trade group’s president, Jean-Pierre Clamadieu – also CEO of Belgium chemical major Solvay – conceded in January not enough had been done regarding the defence of chemicals in the EU and hoped the new director general would help overcome that.

“Cefic is one part of the puzzle to make sure regulations [affecting energy-intensive industries] put in place are reasonable. You can’t put too much load on Cefic to change the political system in Brussels. However, there is too much regulation. First of all, Reach [EU’s chemical registration and authorisation of chemicals] was a disaster in the original content,” said Staudigl.

“Very successful lobbying was done by Cefic and also [German chemical trade group] VCI and I think the improvements achieved for Reach were very significant – nowadays, it can be handled [by companies]. Nevertheless, it’s very difficult for small companies to cope with the requirements for small volumes of materials.”

By 2018, small chemical companies – those handling from 1 to 100 tonnes/year of material – will have to register their products within Reach. However, there has been complaints from chemical players that small companies lack the necessary finance and resources to cope with that requirement.

Interview article by Jonathan Lopez