Germany’s once proud and profitable solar industry is going down. In recent months disappointing earnings results, factory closings and bankruptcies have followed in quick succession. Thousands of people have lost their jobs, and more will follow.
The solar industry, once a beacon of hope for an eastern German economy that struggled for years to revive following reunification in 1990, is undergoing a brutal phase of consolidation. There is a massive surplus of global production capacity and the bad news for eastern Germany keeps getting worse. Last December, the Berlin company Solon, which employed hundreds in the Baltic Sea coast town of Greifswald, filed for bankruptcy. Aleo-Solar, based in Prenzlau north of Berlin, lost over €30 million (about $40 million) last year after turning a profit of €31.8 million in 2010, leading many to fear for their jobs there. . . .
Odersun [a German solar company headquartered in the eastern German town of Frankfurt an der Oder] declared bankruptcy in March and Conergy [another German solar company also located in Frankfurt an der Oder], while pledging to return to profit this year, has seen its share price lose 99.6 percent of its value in the last five years. Many doubt the company will survive. Worst of all, however, was the announcement earlier this month that First Solar [an American solar company] was closing both of its factories in Frankfurt an der Oder; 1,200 people will soon be jobless as a result.
Though Germany’s solar industry is declining across the country, the east has been particularly badly hit.
Despite some urban bright spots, including the cities of Dresden, Leipzig and Jena, the eastern German economy has been growing more slowly than that in the west for the last two years, raising fears that the post-reunification disparity between the two regions may be growing again instead of shrinking. Not a single company listed on the German blue chip stock exchange index DAX is based in eastern Germany.
Unfortunately, things do not look sunnier on the horizon. Angela Merkel’s government recently announced plans to cut subsidies for the solar industry. The subsidies contributed to a solar boom that has begun to cost Berlin a lot of money. Cutting the subsidies has obviously angered a lot of politicians, especially in the east, and it looks likely to make life tough for solar companies and the people who work for them.
Years ago, East Germany got hammered by the failures of hard socialism: a lousy economy, a huge secret police garrison state, a giant wall to keep you in, guard towers to shoot you if you tried to leave. Now it is discovering the limits of the (much nicer) soft socialism of subsidies, targeted investments, and green unicorn hunts.
The problem with hard socialism is that it doesn’t end even when you want it to; the problem with the soft kind is that it can’t last although you wish it would.