The impact of the green transition on competitiveness was one of the challenges discussed at the annual Day of German-Slovenian Business, organised by the German-Slovenian Chamber of Commerce and Industry at the IEDC - Bled School of Management on 16 April.

The event, themed Circular Economy: The Intersection of Innovation and Sustainable Development, heard the chamber's president Dagmar von Bohnstein speak of the worrying economic situation in Germany, also a concern for Slovenia, which generates a large share of its exports to Germany.

The German Ambassador to Slovenia, Natalie Kauther also emphasised the exceptional importance of economic cooperation between the two countries, expressing confidence that Germany and Slovenia would overcome the challenges together.

Melanie Vogelbach, head of the international economic policy department at the German Chamber of Commerce, described the business mood in Germany as quite gloomy at present, but said the good news was that the global economy was experiencing moderate growth.

Supply chains are more resilient than they were during the pandemic. However, rising protectionism and geopolitical risks are bringing a lot of uncertainty. The green transition, digitalization, and the shortage of skilled labour also pose major challenges.

Germany's GDP contracted by 0.3% last year, and while the country expects minimal growth this year, businesses are not as optimistic, projecting an additional 0.5% contraction. A comprehensive survey of German companies has shown their expectations are negative due to various risk factors.

High prices, more regulation

German companies are most concerned about energy and raw material prices, but increasingly about economic policy too, which is linked to business conditions and red tape, including environmental reporting.

There are indeed more and more regulations related to ensuring greater sustainability and the requirements of the Green Deal. There are a lot of new demands coming from both Berlin and Brussels, Vogelbach said.

Medeja Lončar, director-general of Siemens for Slovenia, Croatia, and Serbia, said that Slovenia is facing similar problems. "This is a common European problem that needs to be overcome," Lončar said.

The head of the Slovenian Chamber of Commerce and Industry Tibor Šimonka was also critical of the European regulatory framework. "It is a major obstacle to the competitiveness of the European economy and should be reset," he said.

"Through major technological changes, we see that Europe is not progressing as well as everyone would like," Economy Ministry State Secretary Matevž Frangež acknowledged. "We are no longer the largest global economy, but we still remain the largest global market."

The EU should not defend itself against China and other competition with restrictions, but with standards, which also entail obligations, burdens, and obstacles for businesses, Frangež argued.

Balance between protection and openness

Vogelbach warned that European markets are being flooded by those who do not play by the rules. That is why the German Chamber of Commerce expects foreign companies to adhere to the rules laid down, she stressed.

She added that export-oriented countries in Europe are feeling a significant increase in protectionism in the global economy. In her view, purely defensive mechanisms are not the solution; a balance must be found between protection and openness.

The business leaders also pointed out that energy is very expensive in Germany and Slovenia. At the same time, there are demands for a circular economy, but recycling alone consumes a lot of energy, which leads to poor competitiveness.

"We must be aware that the development model that Slovenia has had until now is no longer working because it is dependent on cheap energy," Frangež said, convinced that it will be necessary to adapt and develop new business models. He said cooperation will be essential to overcome the challenges.

On a positive note, Von Bohnstein pointed out that every crisis also brings opportunities. The green transition offers circular economy as one of its competitive advantages. Some companies, such as Siemens, have already recognised this and are embracing the opportunities that are emerging.

According to Von Bohnstein, Germany is a leader in climate technologies not only in Europe but also globally. "Let's develop solutions together with competitive advantages for the challenges of our time and offer them to the market," she urged.