As German leadership contends with a political public relations nightmare amid reports that the Merkel government was complicit if not helpful regarding the U.S. National Security Agency’s widely reported spying tactics – which have caused the French to ask for EU-U.S. trade talks to be halted as more information is sought – news, overshadowed as it may be, on the business and credit fronts also appears less than stellar.
Statistics for May indicate German business’ exporting levels dropped by nearly 2.5%, marking the biggest dip in three-and-a-half-years. Some experts point out a silver lining in that the increase in imports means German consumer demand is high. However, the subsequent and troubling question revolves around how long such consumer behavior will last if domestic businesses begin to struggle to sell products abroad as the EU and China each face slowing growth rates and, as a result, supplying creditors start getting paid in a timely fashion less frequently.
Meanwhile, one industry that certainly doesn’t need anything resembling contagion from greater EU debt problems worsening or even a slight dip in demand is that of solar power products manufacturing. Germany has been one of the foremost countries in championing solar power and companies producing components that make it possible. However, similar to the situation in the United States, supply on the part of manufacturers is out of line with demand in an industry known worldwide for deep slowdowns during times of overall weak economic growth at home or with major trade partners. In addition, as Germany tightens its fiscal belt because of problems of EU partners, mostly to the southeast, officials announced plans to drastically cut subsidies to solar energy producers for the power they generate within five years.
Between these issues and the reality that Asian producers are selling products and services at much cheaper prices amid allegations of deeper and often illegal levels of subsidy from governments there, it certainly places German solar energy components manufacturers in an “Industries to Watch” category. It’s a topic on which creditors dealing with any customers that are in the solar industry or largely dependent on a customer in it, need to be paying close attention.
-Brian Shappell, CBA, CICP, NACM staff writer