Federation of German Industries wants more German leadership in resolving the Euro crisis
Markus Kerber, magaging director of the Federation of German Industries (BDI), want to see German and European industries taking leadership to resolve the Euro crisis. As banks and governments are locked into their own problems, European industrial leaders should take the helm and try to stimulate growth with significant investments.
GERMAN BUSINESS NEWS: Germany plays a key role in the Euro crisis. Some say Germany is too weak to lead. Others say German industry is too strong for Europe. What should the Germans do?
MARKUS KERBER: When the Euro was introduced, Germany was Europe’s problem child. Back then, the Economist wrote: “The sick man of the Euro”! They criticized too high unit labor costs, too little openness, too high administrative sclerosis, and a labor market paralyzed by bureaucracy. They said that if Germany did not put through reforms, the Euro project were at risk. One decade later, you see that we have carried out these reforms. We have trade and current account surpluses. We have highly competitive industries. And this very competitiveness is now Europe’s main criticism of Germany. Now we are too competitive. All of a sudden we push too hard. There is a certain feeling of irritation in the German industries – now we are to be punished for top efficiency which we have achieved. What we want though, is a clear change of course in the other economies of the Euro area.
GERMAN BUSINESS NEWS: Would you say that Germany ought to take a somewhat stronger, more self-confident leading role?
MARKUS KERBER: Yes, in a way definitely so. But you should separate this issue from the question of nations. There are many factors that have made German industry that strong. In our companies there is an enormous internationalization. In the automotive industry for example we have profited from the fact that entire teams in purchasing or design came from other countries of Europe. In Germany, we have an almost unique integration of manufacturing and industry-oriented or application-oriented research institutes, like the Fraunhofer Institutes. Another essential is the system of dual education. This system has brought about a continuous qualification of labor in the last 20 years. Thereby it meets the ever new requirements that have arisen in industry for example through specialization. And finally, in all significant industrial enterprises we have a flexibility of production due to employee participation. Not only throughout the of 2008 crisis it has become apparent that the close relationship between employers and employees has played a decisive role in overcoming.
GERMAN BUSINESS NEWS: In other countries the relationship between capital and labor is far less relaxed than in Germany – when we look at the current turmoil in the streets of Spain, rioting in Greece, demonstrations in Portugal…
MARKUS KERBER: Europe has to fundamentally consider whether the German model “restraint for job security” is not more sustainable than the model “pay raise at any cost” followed in other countries. It seems to be the case that at least when it comes to job security, Germany is better off than many other countries which now face an abrupt decrease in employment.
GERMAN BUSINESS NEWS: The obstacles you have described are also part of a wider more fundamental conflict: state-run economy vs. private economy. Many governments have no incentive in reducing bureaucracy, because they believe that the economy is in the best hands with the state…
MARKUS KERBER: There is no doubt that nations and economies like the German, the Dutch, and the British have a very clearly different understanding of the role of the state and of the role of the private market. This also translates into different public expenditure quotas. Obviously in times of globalization, those countries and economies which have a more restrained state – not completely disappeared, but restrained! – are better off than those which are less open, which have inflexible labor markets and relatively strong und powerful governments as well as high administrative intrusions into private autonomy. And this is perhaps the fight that still has to be fought in the eurozone and in the EU for the next ten years.
GERMAN BUSINESS NEWS: Nevertheless there are ever more demands for state intervention. This is actually completely absurd.
MARKUS KERBER: I can understand the demands for state intervention in the public at large, because in my view the public at large interprets the wrongdoings of a few actors in the private sector as if the whole system were so. It is all the more important that the real economy and Europe’s industrial enterprises now show that they can actually bring about the turnaround. That they are now what they have always been: namely the pillars of employment, the pillars of innovation, and the ones responsible for a big part of jobs and the creation of value. I insist that Europe needs a new investment impulse in the private economy.
GERMAN BUSINESS NEWS: Who is to do that? The financial sector is trying to minimize risk by just stockpiling cash, and states are bankrupt and unable to act.
MARKUS KERBER:I see a solution in loose associations of prominent European enterprises and entrepreneurs. This cannot only be Germans. In Europe, there are many people in industry who are aware of their responsibility.
GERMAN BUSINESS NEWS: So you would say that industry can take the lead, here?
MARKUS KERBER: Yes. They should show excellence at a whole series of investment projects.