The federal government has to save money. At the same time, the largest listed companies have received billions in subsidies in recent years, according to a new study. There are several reasons for the increase.
Germany’s largest stock exchange companies have made three-digit billion-euro profits in recent years – and at the same time received high state subsidies. In 2023 alone, at least 10.7 billion euros flowed to the 40 DAX companies – almost twice as much as the previous year with 6 billion. This is shown by an analysis by the Flossbach von Storch Research Institute, a think tank of the Cologne-based asset manager of the same name with over 70 billion euros in customer money under management.
While the subsidies amounted to around two billion euros annually up to 2018, the amount rose sharply in the following years. In total, around 35 billion euros of state money went to the largest listed companies between 2016 and 2023.
“The extent to which profitable corporations are provided with public funds has increased dramatically over the past few years,” wrote analyst Philipp Immenkötter. The total amount is estimated conservatively, because companies have leeway, which they describe as subsidies in their business reports. The figures are remarkable, as the federal government is simultaneously struggling to make savings in its budget.
For the study, information provided by the DAX companies in their annual reports was evaluated. In autumn 2021, the number of DAX members rose from 30 to 40 as part of a reform, so the current 40 DAX members were traced back to 2016 to avoid distortions.
Eon and Volkswagen received the most money
There are arguments in favor of subsidies, writes Immenkötter. This could support companies and preserve jobs in crises such as the corona pandemic. Nevertheless, the question arises “whether there is an economic need to support or promote the DAX companies to this extent with taxpayers’ money.” According to the study, the net profit of the DAX companies in 2023 will total 117 billion euros.
The energy company Eon has received the most subsidies since 2016, with more than 9.3 billion euros. The majority of this is due to the Electricity Price Brake Act and the Natural Gas Heat Price Brake Act and replaces payments from customers or reduces purchase prices, it said. Eon also received various state investment grants. Volkswagen followed with 6.4 billion. The carmaker received tax breaks and funding for research into drive and digital technology, among other things. BMW came in third with 2.3 billion euros, including grants for the construction of sites.
Crises and climate change as drivers of subsidies
It was said that 11 of the DAX companies each received more than one billion euros in subsidies between 2016 and 2023. The average (median) was around 200 million euros. Indirect subsidies, such as the environmental bonus for private households when purchasing electric cars, were not included in the study – but they are an indirect subsidy of the automotive industry.
The reason for the increase in subsidies lies mainly in the decisions of the traffic light government and the grand coalition, wrote Immenkötter. This includes the plan to transform the economy and support it during the corona pandemic and the war in Ukraine. The money came from, among other things, the Climate and Transformation Fund and the Economic Stabilization Fund.
Will the economy become dependent on government money?
However, there is a fear that a large proportion of the funds will replace private funds. In addition, subsidies lead to corporations investing in business areas where it is unclear whether they will be profitable in the long term. “Possible consequences of the subsidy policy are a waste of resources, distortion of competition and a dependency of the economy on state funds.”
Source: Stern
