ITALY-GERMANY: SOLID TIES BUT RECESSION AND INFLATION PUT TRADE GROWTH AT RISK

Baroni (Confindustria): implement common industrial policies to support SMEs as key players in supply chains

Poma (AHK): Strengthen dialogue to achieve transition while maintaining leadership in European manufacturing

Bologna, 7 September 2023 - It was held this morning at BolognaFiere the event "ITALY-GERMANY: transitions, new supply chain geographies and opportunities for SMEs". organised by Small Industry Confindustria in collaboration with AHK Italien - German-Italian Chamber of Commerce e Managerial funds. The conference was held within the framework of FARETE the two-day networking event, promoted and organised by Confindustria Emilia.

In recent years the ongoing changes within supply chains and along global supply chains have been accelerated by the pandemic and the Russian-Ukrainian conflict. And in this new phase of the world economy, it has become central to investigate how the supply chain geographies and the purchasing and procurement policies of large manufacturing industries are changing. And with this in mind, the Piccola Industria di Confindustria (Small Industry of Confindustria) has initiated a discussion with the top procurement executives of large groups belonging to Italy's main exporting countries and operating in the most important export sectors for our SMEs. In a three-year perspective, which will also touch the United States and France, the first stageorganised today in cooperation with AHK Italien - Italian-German Chamber of Commerce , focused on the Italy's main trading partner, Germanyalso due to the very high level of integration of the economies of Europe's top two manufactures. The aim of the meeting is, in fact, to make people understand what opportunities open up for Italian SMEs through the voice of the purchasing managers of three large German companies belonging to as many crucial sectors of the Italy-Germany trade - automotive, machinery and chemical-pharmaceutical. These managers illustrated, in fact, in which directions they are moving to face the challenges of the double digital and green transition, in an economic context characterised by high rates and a geopolitical situation marked by increasing tensions.

The Italy-Germany exchange, has grown over the years: a mutual interdependence that has its core in the manufacturing sectorwhich is worth more than half of the total trade value. It showed a solid bond repeatedly exceeding previously set record levels, the latest in 2022, with EUR 168.5 billion (Source: AHK Italien processing of Istat data). A trend that continued to grow even during the pandemic and the war in Ukraine, demonstrating that it resulted neither from rebound effects nor solely from inflationary dynamics, but from a structural interdependence. Looking at the sectors, it emerges that more than half of the total value of trade, historically, is represented by manufacturing. Trade and manufacturing bear a large part of the German presence in our country. As much in exports as in imports, iron and steel, chemical-pharmaceuticals, machinery and means of transport represent the fulcrum of economic relations between Italy and Germany. These sectors, moreover, are those where the presence of Italian-German companies in the two countries is strongest, often fuelling significant induced activities even outside the strictly intended interchange.

Inflation and recession, however, highlight a partial drop in trade in some key sectors of interchange during 2023these are signals that indicate a new phase of stress for German-Italian chains, the third in a few years. A situation that jeopardises the growth of interchange and the entire production ecosystem that this feeds, especially for small companies. In the period from January to May 2023, pharmaceutical chemicals and steel saw their values drop (to EUR 11.81 billion from EUR 14.95 in 2022 in pharmaceutical chemicals and EUR 10.02 billion from EUR 11.3 in 2022 in steel). Against this backdrop, according to the April 2023 AHK Outlook, 48% of companies fear a drop in demand, 30% fears alterations to supply chains in the coming months. While for the 76% of companies, the economic relationship between Italy and Germany is a strategic asset to tackle the ecological and digital challenges we face, and the 56% believes that the relationship between the two countries should also be expanded through political dialogue.

"Value chains and their evolution have long been at the centre of Confindustria's reflections precisely because they represent an element of concern and a strategic challenge for companies in the coming months and years," emphasised the president of the Small Industry Federation of Confindustria Giovanni Baroni. On 22 September next, we will in fact present the first edition of the volume 'Supply chains between new globalisation and strategic autonomy' edited by the Centro Studi Confindustria. Safeguarding Italy-Germany relations means working to win this challenge and support a significant part of our production fabric: I am thinking in particular of SMEs, which often play a crucial role in supply chains. To do this, it is necessary to implement common industrial policies: the two economic systems are so interconnected that they represent a single ecosystem, and therefore integrating strategies and solutions, especially in the environmental and digital fields, can be crucial to help companies cope with a new phase of stress without giving up working on priorities that cannot be postponed, such as the ecological transition'.

'German-Italian trade is growing steadily and the two countries are strongly interconnected,' he pointed out. Paolo Poma, Vice President AHK Italien and Chief Financial Officer & Managing Director of Automobili Lamborghini SpA. "With the pandemic and the war in Ukraine, we have seen phenomena of re-entry of value chains, which create opportunities for small and medium-sized Italian companies. The current context, however, may jeopardise our ties, which is why dialogue, political but also economic, between our two countries is crucial at this stage, in order to innovate our production systems by making the transition and preserving our leading role in European manufacturing."

See attached data on Italy-Germany trade  

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