Scholz Vows to Revive Germany’s Economy at VW Event

On Friday, Chancellor Olaf Scholz presented his vision to rejuvenate Germany’s struggling economy during a campaign event at Volkswagen’s historic home base, which has been hit hard by the ongoing crisis.

In front of a crowd of supporters, Scholz defended his government’s economic record, which has been battered by an energy crisis, high inflation, and a manufacturing slump. He pledged to boost investments to get Europe’s largest economy back on track.

The embattled chancellor, facing a general election next month, spoke in Wolfsburg, home to Volkswagen’s historic headquarters. The company’s rapidly declining fortunes have come to symbolize the broader crisis affecting Europe’s traditional industrial powerhouse.

Reviving Germany’s beleaguered economy, which shrank for the second consecutive year in 2024, has become a key campaign issue ahead of the February 23 vote.

Scholz, from the centre-left SPD, acknowledged the economy faced “challenges,” particularly due to its “global interconnectedness.” However, he argued that this interconnectedness contributed to Germany’s economic strength, adding, “We have to defend it by investing here in Germany.”

“We need new growth that gives us the opportunity to have jobs throughout the country,” Scholz told the roughly 1,500 supporters who attended the event.

Scholz outlined his plans to bolster the economy, including greater investments in green industries, more renewable energy generation, and a reduction of red tape. He also called for an overhaul of Germany’s so-called debt brake, which limits government borrowing. Critics argue that this brake has prevented much-needed spending in various sectors in recent years.

Frequently criticized for his apparent lack of charisma, Scholz faces an uphill battle to win re-election. The three-party coalition he headed was riven by infighting and imploded spectacularly in November amid a row over the budget, paving the way for next month’s snap election.

His Social Democrats (SPD) are languishing far behind in opinion polls, with around 16 percent support. This compares to around 30 percent for the conservative opposition led by Friedrich Merz, who is widely expected to become the next chancellor. The far-right Alternative for Germany (AfD) is second, with about 20 percent support after a recent surge in popularity.

Scholz took aim at Merz’s CDU party, accusing it of wanting to introduce “tax cuts for the wealthy” rather than focusing on increased investments.

Volkswagen is battling high manufacturing costs at home and rising competition in China. Despite the chancellor’s upbeat message, the mood in Wolfsburg, a city of 128,000 people in Lower Saxony state, was bleak.

After three months of bitter negotiations, management and unions struck a deal last month that will see 35,000 VW jobs cut by 2030 as Europe’s largest carmaker seeks to drastically reduce costs. VW, hit hard by high manufacturing costs and fierce competition in key market China, ultimately pulled back from a threat to shutter factories in Germany for the first time in its 87-year history.

A pensioner who worked for 27 years at the automaker, lamented that the days when the group “brought us prosperity” were long gone. The current crisis at the automaker, whose 10 brands range from namesake VW to Porsche and Seat, was “a catastrophe,” the SPD activist told AFP as she attended Scholz’s event.

In his speech, Scholz insisted that his government had rescued jobs at the carmaker while calling to keep “moving forward” with ramping up production of electric vehicles. Sales of EVs have been slowing, hitting carmakers worldwide, while VW, in particular, has been criticized for a mismanaged shift to electric, with critics contending it has allowed Chinese competitors to gain ground.

A Wolfsburg resident who works for an auto supplier but did not attend Scholz’s speech, sounded disillusioned with politics in general. “The CDU was in power for 16 years with former chancellor Angela Merkel. What have we done in 16 years?” asked the 51-year-old. “No one really has a plan”; he added.