International Finance
Economy

Emission scandal might be quick sand for Germany’s chief industry

The ministry has forecasted jeopardy to Europe’s largest economy

Germany’s car industry, which is the country’s biggest industry, holding around 800,000 jobs, has got entangled in fossil fuel emission scandal. The Finance Ministry has made the statement on August 21st that this emission scandal which has risked the German car manufacturers, has also posed as a threat to Europe’s largest economy.

The issue which came to the forefront two years ago with Volkswagen’s admittance of cheating US emission tests, has resurfaced. The ministry has highlighted the issue in its monthly report as a threat to the country along with the UK’s decision to leave the European Union and protectionist trade policies by the US government.

The ministry commented, “Risks linked to how Brexit will shape out and future US trade policies remain. In addition, the so-called diesel crisis should be classified as a new risk to the German economy even though its effects are not possible to quantify at the moment.”

With a fragile net foreign trade speed breaking the country’s growth, imports have got more prominence over exports. On the contrary, strong household and state spending have bolstered the country’s economy in the second quarter when growth was measured at 0.6%.

The ministry has opined that the diesel crisis can be a hiccup to the German growth outlook and added, “Given the importance of the automotive industry (the diesel crisis) must be classified in the medium term as a risk to the overall economic development.”

To refurbish and restore the automobile sector’s battered reputation, the German politicians and pioneers of the industry have nodded their approvals to fettle engine software on 5.3m diesel cars in order to cut pollution.

The antitrust regulators of EU are investigating some potential German car manufacturers like VW, Audi, Porsche, Mercedes and BMW regarding the control of diesel emissions. The ones against which the allegations will be proven, would be liable to hefty fines for flouting the emission tests.

Volkswagen, is one such car manufacturer, which was charged a $2.8bn criminal penalty by the United States in April. The company has also been charged an amount of $1.5bn in a civil case against the US government. In the process of buying back cars and filling other compensation, the company is spending a hefty amount of $11bn.

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