BERLIN (Reuters) - Conservative Karl-Theodor zu Guttenberg is expected to replace Michael Glos as German Economy Minister on Monday.
Following are some of the challenges facing the new economy minister, whose responsibilities include economic, industry and energy policy:
- The 37-year old Guttenberg is set to take office at a time Europe’s largest economy faces its worst recession in post-war history. Merkel’s government expects the economy to contract by 2.25 percent this year.
German industrial orders and output in December posted their biggest annual decline since the country reunified in 1990 and exports have fallen away sharply since the banking crisis intensified with the collapse of Lehman Brothers in September.
GOVERNMENT AID IN ECONOMIC CRISIS
The global financial crisis has hit Germany’s broader economy, with unemployment registering its biggest rise in nearly 4 years in January and many companies suffering weak demand.
Merkel’s government has already passed two economic stimulus packages, with particular measures aimed at the car sector, but it is still facing calls for further help from companies.
The government is pondering whether and how to help carmaker Opel, the German unit of General Motors.
Guttenberg also faces a debate about whether the government should help German bearings maker Schaeffler, which grapples with billions of euros in debt amassed through its acquisition of a 49.9-percent voting stake in tire maker Continental.
CRISIS IN ELECTION YEAR
Guttenberg needs to tackle the effects of the financial crisis as the parties in the grand coalition government of Merkel’s conservatives and Social Democrats (SPD) are preparing for a general election in September.
In the government’s response to the crisis so far, SPD Finance Minister Peer Steinbrueck had taken on a more active role than Guttenberg’s predecessor Glos. Analysts say Guttenberg needs to strike a balance between being seen as a hands-on minister and preventing the election campaign being fought over the financial crisis; something that could weaken government prospects.
NUCLEAR - The future of nuclear power is likely to become a highly heated election issue. Merkel’s conservatives want to allow Germany’s 17 reactors longer running times than laid down in a nuclear exit program, still law, which envisages their closure by 2021.
They also want to reconsider the entire deal, which was struck by a previous SPD-Greens government, and possibly lobby for building a new generation of German reactors in line with international trends, a position that is set to spark fierce opposition from anti-nuclear and ecological groups.
RENEWABLES - Guttenberg must juggle tight budgets while needing to maintain the generous funding of renewable power to boost domestic industries such as wind or solar in their export drives and protect their jobs. The opposition, especially the Greens, is likely to seek fault with conservatives on this,
REGULATION -- The European Union is suspicious of the power of leading German utilities and insist their networks should be broken up into separate units.
Germany and France have resisted EU arguments as they want to boost national champions.
But the companies Germany was seeking to protect jumped the gun, with E.ON offering up its power grid and RWE its gas network voluntarily over cartel cases.
More regulation also puts more financial pressure on some 900 local utilities which, apart from energy, provide millions of voters with crucial services such as transport and leisure.
Reporting by Kerstin Gehmlich in Berlin and Vera Eckert in Frankfurt
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