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Monday, February 26, 2024

Germany Relaxes Building Standards to Support Construction Industry

The German government will put on indefinite hold plans to require more stringent building insulation standards, environment minister Robert Habeck told Reuters, to help prop up the ailing construction industry. The about-face from the German government comes ahead of a closely watched meeting between the building industry and government leaders with Chancellor Olaf Scholz on Monday to address a significant slump in the sector.

Amid a global property bust, the sharp rise in interest rates has prompted investors to rethink buying new properties and pulled back demand from the sector. Germany’s property market is particularly strained because many developers have overbuilt, causing prices to fall and prompting lenders to cut mortgage credit.

The about-face could ease the pressure on builders, but it will still mean that the government cannot meet its climate targets for 2022. To reach its goal, the country must cut emissions from industry, transport, and buildings by 177 million tonnes, or 38 percent below 1990 levels.

Government officials have been pushing for changes in tax breaks and speeding up approval processes for building projects to boost the sector. They are also working to de-risk the construction industry by encouraging more foreign investment and supporting exports.

However, a lack of financial resources has limited the government’s ability to make any changes. Declining tax income and discovering a significant deficit in the state’s social security fund have left little room for maneuver. And Christian Lindner’s insistence on returning to a debt brake, which restricts the budget to a fraction of GDP, is further cutting into the available space.

This is particularly acute for the economy ministry, which is responsible for many energy and climate change policies. Its chief, Economy Minister Sigmar Gabriel, has been forced to scale back his ambitions for becoming carbon neutral by 2045 after Russia’s invasion of Ukraine drove up gas prices and drew criticism that the plan was wildly over-optimistic.

One of the ministry’s key aides, Patrick Graichen, has been axed from his job after media reports that he violated ministry compliance rules by signing off on a project for an environmental group where his sister sits on the board. He is expected to lose his seat in the Schleswig-Holstein Landtag next week.

Riham Alkousaa is a Reuters energy and climate change correspondent based in Berlin. She has ten years of experience covering Europe’s green transition and the Syrian civil war. She is a graduate of Columbia University Journalism School. She was on two teams that won Reuters Journalist of the Year awards in 2022. She has written for several publications, including USA Today and Der Spiegel magazine. She has also won a White House Correspondents Association Scholarship. She is a native of Lebanon. She is fluent in Arabic, French and English. She has been with Reuters since 2022.

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