„We are not happy about the performance in Berlin“
Mr. Bayaz, recently, it seems that the Greens are primarily looking after the wealthy when it comes to the climate transformation. Charging stations for homeowners were funded early on, but not for renters. The new regulations for electric company cars support the luxury car strategy of Mercedes, Porsche etc, rather than small cars. Does the environment come before social issues?
What matters is whether a policy makes sense for the business location. And what will help the automotive industry continue to be successful in future is also good for the state of Baden-Württemberg. The funding is a building block to accelerate the ramp-up of electromobility. But of course, you have to keep an eye on the entire market. We have to become more competitive, especially when it comes to low-priced electric cars. This is coming up short at the moment.
It appears that Mercedes no longer has any interest in low-priced cars like the A-Class?
I'm not a better manager than them. And Mercedes has already paid particular attention to the luxury segment, and has been very successful with it. Management must decide whether this is the same with electromobility. Some experts have doubts about this, and are in favour of a broader approach, especially when it comes to electric cars. But I also hear that there are a few models in the pipeline.
Danyal BayazI can no longer understand many of the coalition rituals.
The traffic light coalition government also has difficulty communicating its own policies. First, basic income (Bürgergeld) and pension reform, then a growth initiative that partially corrects this course. What advice do you give to your party friends in Berlin?
We in Baden-Württemberg are not happy about the performance in Berlin. I can no longer understand many of the coalition rituals. But I am very relieved about the recent budget agreement. If a democratic government were unable to present a budget proposal in these challenging times, the country would be in dire straits, and it would further unsettle people.
But the proposed budget cannot really advance the business location.
Is it a big hit? No. Is it the 2030 Agenda that we urgently need? No, it's not. But it is a step forward. The power plant strategy has been launched. There is more tax support for investments, and higher research allowances. The incentives to work, alongside Bürgergeld as well as in retirement age, have been improved. It is still too little, too timid on all levels – but still an important step.
Some of the malice and criticism directed at the Greens is due to climate policy. For example the Heating Law. Recently, a malfunction on the Paris electricity exchange revealed that the German electricity supply would be heading for blackouts without electricity imports. Has the government underestimated the complexity of climate transformation?
What surprises me in the debate is that we seem to still want self-sufficiency when it comes to electricity, while in all other economic areas we rely on the European internal market and international trade. It makes sense to buy electricity from abroad at a time when it is cheaper there. And for everyone who is now arguing in favour of nuclear power – we also have to get the uranium from abroad. And it's the same with gas.
Danyal BayazWhen it comes to electricity, it makes sense to produce as much electricity as possible yourself for reasons of sovereignty.
But ongoing production is secured there.
When it comes to electricity, it makes sense to produce as much electricity as possible yourself for reasons of sovereignty. However, we could have made much further progress in network expansion if former Bavarian Prime Minister Horst Seehofer hadn't insisted on underground cabling. This has slowed down network expansion. And many investments in energy infrastructure were neglected or even omitted by previous federal governments.
But back then, people were still looking at a different energy structure with nuclear power and coal-fired power plants.
Sure, but too little has been done to transform the energy supply so urgently needed. However, the complex interaction between grid expansion, the addition of renewables, backup gas power plants and electricity storage is complex, and this challenge has certainly been underestimated to some extent. In this respect, we do not need any further target agreements with regard to CO2 emissions or more exit decisions, but rather, we need to use the instruments that will effectively help us move forward. It's also about reliability. And here we should no longer get bogged down in micromanagement, as we did recently, but should rely more on market incentives in order to make the market mechanisms work better.
But companies also need more planning security. This is still missing.
I am a big supporter of CO2 pricing and CO2 certificate trading, because the decision as to which ton of CO2 needs to be saved is not made bureaucratically or politically but is governed by the market. But there is indeed a lack of trust and stability in government pricing rules. The fact that the state suspended the CO2 price steps and granted a fuel discount after Russia's attack on Ukraine torpedoed any planning. But without stable framework conditions and social support with climate money, we will not make any significant progress overall in modernising our business location.
Why hasn't this happened already?
I will not try to come to terms with the past. It is crucial that we now draw the correct conclusions.
Danyal BayazI wouldn't romanticise financial markets, but I wouldn't demonise them either.
But does the federal government actually have enough financial resources for the necessary framework conditions? It will probably not work without recourse to the financial markets, which many in your party see as a playground for speculators rather than as a tool for transformation.
I wouldn't romanticise financial markets, but I wouldn't demonise them either. For me, they are part of the solution and not part of the problem. After all, we urgently need them for economic modernisation. In this respect, my appeal to my party is – let us also be a stock exchange and capital markets party! We don't have a shortage of capital, but rather, we have to direct it where it is needed. And the markets can deliver that.
How can politics promote this?
Our energy group EnBW, in which we hold a stake, has sold a stake in the electricity network operator so that private investors can now also invest their capital there. With the entry into generational capital for private pension provision, there will also be the possibility in the future of directing the money saved there into climate transformation. We are also investing our pension reserves locally within the state, amounting to 17 billion euros, and in line with sustainability and the 1.5 degree target.
Danyal BayazThe financial markets are an extremely intelligent mechanism for showing where capital is particularly urgently needed at the moment and where it is profitable.
And is this getting through to your party?
I guess so. It's not about blindly trusting the markets but instead giving capital direction. The financial markets are a brilliant mechanism for showing where capital is particularly urgently needed at the moment and where it is profitable.
You approach the matter very pragmatically. Citizens also demand concrete solutions and not ideological cloud cuckoo lands. Do you sometimes encounter resistance here in party committees?
Every party maintains certain rituals and folklore at party conferences. This is a tension that has to be dealt with. Of course, parties can and must formulate ambitious goals. But realpolitik means making compromises every day. Small steps are more important to me than big utopias.
Was Federal Economics Minister Habeck too ideological when it came to the Heating Law because he underestimated the population's resistance?
That was a mistake, yes. You have to take into account the speed of change in society. But it speaks for him that he corrected that.
Danyal BayazI think sentences like the Chancellor’s „You never walk alone“ are dangerous.
This also applies to many other transformations we are currently undergoing. The labour market is changing. Here, there is a shortage of skilled workers, and there – for example, among car suppliers – there are layoffs. How do you bring all this together?
We have survived waves of automation and rationalisation before. But I sometimes have the impression that politicians are now expected to be much more aggressive, to take on all the unreasonable demands of people. If that doesn't happen, they immediately threaten political consequences. That’s why I think sentences like the Chancellor’s „You never walk alone“ are dangerous. It represents the status quo rather than change. What is crucial is that you show people a positive picture of the future and obviously do everything you can to achieve that. But it also honestly says that it won't work without technological and social changes.
Particularly during the transformation, Germany must be at the forefront of international research and development (R&D) in order to give people a certain level of security. However, we seem to be losing ground here – in artificial intelligence and electromobility.
There is one key figure that, for me, is central to the future viability of a region. The ratio of R&D expenditure to economic output (GDP). Here, Baden-Württemberg is the leader in Europe with 5.6%, ahead of Bavaria with 3.4% and the federal government with just under 3%. And that gives me a lot of optimism that we will get this modernisation done well.
Danyal BayazOf course, not every possible risk should be regulated away and bureaucratized from the outset.
But isn't it bothering you when many researchers criticize that Germany relies too much on regulation and bureaucracy instead of letting creative forces work?
Creativity, entrepreneurial work and the desire to work and advance must under no circumstances be curbed. But that does indeed appear to be the case, as the weak increases in productivity show. This is where the government must start. In addition, of course, not every possible risk should be regulated away and bureaucratized from the outset. We're not doing ourselves any favours.
That's easy to say. The current regulation – I refer here to the AI Act, the Supply Chain Regulation and the Taxonomy – goes in the opposite direction.
In fact, politicians have given many Sunday speeches about reducing bureaucracy. Prime Minister Winfried Kretschmann is talking about the blackberry bushes that need to be cut back. You hurt yourself, and it's a lot of small-scale work. But we have to get there. Otherwise, we will lose touch. We are working on this in Baden-Württemberg and are also drawing attention to such grievances elsewhere, for example, in Berlin. And the fact that the Federal Minister of Economics recently signalled that he would suspend the German supply chain law is also a good signal with the message: We understand!
But there is a lack of money everywhere to implement existential projects: The infrastructure is dilapidated in many places, digitalisation is lagging behind, the Bundeswehr is only partially well prepared to defend itself, climate transformation is not getting off the ground, and artificial intelligence is driving a wedge into society. Where to get it from without solving the debt brake?
Many of the areas needing work you mentioned already existed before the traffic light coalition. Think of the Bundeswehr, the dilapidated railway, the fatal dependence on Russian gas. We have a gigantic investment need that we can only meet if we decouple the projects from day-to-day politics and election cycles. I therefore find the suggestions from the German Economics Institute (IW) and the Institute for Macroeconomics and Econometrics, as well as the Federation of German Industries (BDI) interesting. Don't touch the debt brake, but create a special fund for central investment projects. After the historically strict ruling from Karlsruhe, which massively restricted our financial freedom of movement, I simply cannot see how we could otherwise manage the investment turnaround in a regular manner.
Danyal BayazWe need a big pact that demands something from each party.
But for that, you also need the opposition.
Yes, we need a significant pact that demands something from every party. Less bureaucracy, fundamental reforms in citizens' benefits and pensions, tax reform for companies, and the courage to set clear priorities for investments – and only then the special fund. Only then can we get through this.
How realistic do you think such a project is under the current political conditions?
I don't believe that this coalition will find the strength to do this again. But the next government –no matter how it is made up – will have no choice but to introduce Agenda 2030 to bring the country forward as an attractive investment location. The new geopolitics, the challenge of transformation, and the current financial situation, will virtually force a new realpolitik of public budgets.
