Merkel predicts "gigantic" German state investment in industry after pandemic

© Reuters. German Chancellor Angela Merkel speaks during a news conference at the chancellery in Berlin, Germany, June 21, 2021. Odd Andersen/Pool via REUTERS/Files

BERLIN (Reuters) -The German state will have to invest "gigantic" sums in industry to remain competitive in hi-tech sectors, as the coronavirus pandemic recedes and the world transitions to clean energy, outgoing Chancellor Angela Merkel said on Tuesday.

Addressing a BDI industry association conference, Merkel said that although German industry had come through the crisis relatively well compared to other European countries, some sectors may need further aid.

"We will have to spend gigantic sums," Merkel told the conference, highlighting the high-tech sector and singling out artificial intelligence, quantum computing, batteries and microchips. Firms would have to invest themselves, she said, and indicated some state aid would have to be continent-wide.

"There are many areas where we won't be able to get ahead without state money," said Merkel, who is not running for a fifth term in a September election. "Without state aid, the expansion of microchip production in Europe will not be possible."

Merkel also said, however, that after the rescue and stimulus programmes needed to mitigate the effect of the pandemic on Europe's biggest economy, public finances must be brought back into order in coming years.

The candidate of Merkel's conservatives to succeed her as chancellor, Armin Laschet, told the conference it was important for Germany to remain a big industrial country, even as it makes the transition to net zero greenhouse gas emissions.

"In 20 years we still have a steel, chemical, glass, auto industry have and still be climate neutral," he said.

Red tape had to be cut after the pandemic to allow firms to be more dynamic, said Laschet, a day after presenting the conservatives' election programme.

He reiterated that now was not the time to raise tax as such a move would dampen the economic recovery, but said there was also no scope for tax cuts.