What exactly does the Mittelstand require? The bosses of Germany’s 3.6 million medium-sized and small manufacturing businesses would have liked to see the Christian Democrats and the liberal Free Democrats form a pro-business government in last year’s general election, but that didn’t happen (FDP). The Mittelstand bought a deal between the SPD, the FDP, and the Greens as a replacement. That’s still too left-wing for many people. However, it could have been worse. People thought that the new SPD chancellor, Olaf Scholz, might backtrack on his promise not to form an antibusiness coalition with the party called Die Linke, which is very left. This is what they thought.
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There could be a reason why the Mittelstand isn’t down at the start of the new year. Hans-Jürgen Völz is the chief economist of the BVMW, a Mittelstand business group. He says that a lot of the coalition treaty, which is only a few pages long, goes in the right direction. However, there are still some things that bother me.
There are two ways to tax people. During the election campaign, the SPD, the Greens, and Die Linke talked about putting back a wealth tax and raising inheritance taxes. Such a move would be very hard on the Mittelstand’s home businesses. It now looks like it’s off the table because the FDP, which is run by Christian Lindner, is against it. It’s also possible that a lower corporate tax rate, from 30% to 25%, and the abolition of the non-public “solidarity” tax, which sends money to the east.
They hate pink tape, which is the Mittelstand’s second thing they don’t like. “Paper costs German businesses about €50 billion ($57 billion) a year,” says Mr. Völz. Over the last 10 years, parliament has given three legislative packages to the Mittelstand to help them with their paperwork. However, very little real progress has been made. The head of the supervisory board of Stihl, the world’s biggest chainsaw manufacturer, says that a lot of paperwork is to blame for Germany’s being 30 years behind on big projects like the feeder road for the 55-mile rail tunnel that’s being built under the Brenner Pass. Stihl: “We don’t know how to do big projects.”
Also, the Mittelstand has two more issues that need to be addressed right away. It’s not easy to find good employees in Germany, or even any staff at all. This is true in many countries. The EU needs to make the “blue card,” a piece of paper that helps university-educated migrants get jobs in the bloc, available to blue-collar workers as well. Bosses want Mr. Scholz to push the EU to do this. An “alternative card” promised in the coalition agreement would allow migrants to look for work in Germany if they meet certain requirements, such as having a working knowledge of German.
Probably the biggest problem for manufacturers is that the price of electricity keeps going up and up. Many people also worry about Germany’s dependence on Russian gas. It’s even worse than the 70% rise in our company’s electricity costs: the concern about the safety of the supply is even worse. Ferdinand Munk is the owner and manager of Günzburger Steigtechnik, a manufacturer of ladders and rescue gear in Bavaria, Germany. He fears that “the gas faucets could be turned off at any time.” At this point, Mr. Scholz hasn’t said how he plans to fix the problem with power yet.
In no way does the Mittelstand’s temper get better when their order books are full. As the pandemic spread, the demand for goods grew. German businesses in the manufacturing supply chain have been very successful. Andreas Möller, a spokesman for Trumpf, a company that makes machine tools in the south German city of Ditzingen, says the company has had the most orders in its nearly 100-year history. In 2019, Stihl’s gross sales jumped from €3.9bn to €4.6bn. In 2020, the company is expected to report revenue of €4.6bn, and it’s likely to report revenue in 2021, as well.
Asked about their business by the BVMW recently, more than half said they were in good or great shape. Almost 45 percent said they’d hire more people this year. Over 70% will keep or improve their investments. If there aren’t enough people or power to make these “pocket powerhouses” do their jobs, Mr. Scholz could lose a lot of the goodwill that the Mittelstand still has.
