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Categorized | Economy

German business attacks ‘complacent’ Berlin


Posted on August 31, 2014

The German flag flys outside the Reichst©AFP

Germany has become “overconfident” and “complacent”, with the government pursuing policies that put the country’s hard-won competitiveness at risk, some of Germany’s top business leaders warn.

Analysis – Germany: In a spin

DUISBURG, GERMANY - JANUARY 13: A worker, at the photographer's request, walks among finished rolls of galvanized steel at the ThyssenKrupp steelworks on January 13, 2010 in Duisburg, Germany. Recent economic data, including better-than-expected unemployment figures and a positive trend in manufacturing orders in the last quarter, are giving economists hope that the German economy is recovering faster than expected from the effects of the global financial crisis. ThyssenKrupp is Germany's biggest steel producer and is building new mills in Brazil and Alabama. (Photo Illustration by Sean Gallup/Getty Images)

With growth slowing, the problems facing the economy – from the Ukraine crisis to rising energy costs – will have an impact beyond its borders

Their criticisms of chancellor Angela Merkel’s government come as Europe’s largest economy is showing signs of slowing, raising concerns about its ability to continue driving growth in the stagnant eurozone.

Their remarks follow the introduction of policies fiercely opposed by corporate Germany such as the introduction of a minimum wage and a reduction in the retirement age to 63 for certain long-serving workers.

“I think the biggest threat right now is really a kind of overconfidence in Germany, and with that comes a little bit of complacency,” said Kurt Bock, the chief executive of BASF, the world’s biggest chemical maker by sales.

    He said: “In general the feeling . . . is that we’re doing well, we have money to spend, we have relatively low unemployment, so what’s the problem?

    “I think that is a big risk. You can see it in German government policies that we are not really growth-orientated or business-friendly, but rather much more orientated towards the distribution of wealth and serving the expectations of certain stakeholders.”

    Markus Kerber, managing director of the BDI, the German industry association, said: “Germany is now in a very good position. But in the next 10 years every economy in the developed world must change. …[In Germany] the reform agenda is not making the progress that it did in previous years.”

    The DIHK, the national chamber of commerce, has also railed against the recent policy moves.

    Germany continues to enjoy low levels of unemployment and an almost-balanced budget; even consumption, once languid, is growing.

    However, poor second-quarter GDP figures have underscored the vulnerability of the export-driven German economy to external shocks, such as from Russia and Ukraine. GDP dropped 0.2 per cent in the three months to June, compared to the previous quarter.

    Germany’s lacklustre performance threatens to make the European Central Bank’s battle against low inflation even harder and could make quantitative easing more likely.

    Mr Kerber urged the government to “switch back from public consumption to public investment”, for example by focusing future spending increases more on infrastructure and less on pensions. He argued that the Merkel government was reaping the rewards of the tough policies enacted in the early 2000s by her Social Democrat predecessor, Gerhard Schröder.

    Stefan Heidbreder, managing director at the Stiftung Familienunternehmen, a foundation for family-owned businesses, said: “Germany is still in a good position, compared to other countries. That is thanks to its companies and less to do with the policies of the government . . . The experience of our neighbour, France, shows that doling out lots of money for social benefits and intervening to limit freedom to conduct business are the wrong course.”

    A leading German investment banker was more blunt, describing recent government policies as a “disaster”. “Germany risks forgetting everything it has worked hard to achieve in order to just please the electorate. That’s my key concern right now,” the banker said.

    Mr Bock said the new government coalition’s energy reforms had failed to tackle the underlying weaknesses in policy which has left industry facing uncompetitive costs.