Ger­mans fear bu­reau­cratic strain on eco­nomic en­gine

Merkel gov­ern­ment adds reg­u­la­tions

The Washington Times Weekly - - Geopolitics - BY MIHRET YO­HANNES

BER­LIN | Dressed in blue over­alls, an up­beat An­gela Merkel chat­ted eas­ily with staff dur­ing a re­cent visit to the Siemens “dig­i­tal fac­tory” in south­ern Ger­many. Here, ro­bots ac­count for 75 per­cent of the pro­duc­tion chain, while hu­mans shoul­der the rest.

Ab­sorb­ing the Ger­man tech gi­ant’s ad­vance to­ward dig­i­tal­iz­ing out­put, the Ger­man chan­cel­lor wore the Siemens logo on her left lapel with an air of un­mis­tak­able pride.

Mrs. Merkel’s op­ti­mism is not mis­placed. The fac­tory epit­o­mizes boom­ing Ger­man busi­ness prospects and a buoy­ant econ­omy, re­sus­ci­tated from slug­gish growth in the fi­nal three months of 2014.

La­beled the “sick man of Europe” a decade ago, Ger­many has emerged to be­come the Con­ti­nent’s eco­nomic en­gine, and its mo­tor is hum­ming along smoothly. Un­em­ploy­ment in March fell be­low 3 mil­lion — a record low since re­uni­fi­ca­tion in 1990 — growth is steady, con­sumer spend­ing is up, oil is cheap, a fall­ing euro boosts ex­ports, and busi­ness con­fi­dence is high.

Even so, all is not well with the Con­ti­nent’s big­gest and most in­flu­en­tial eco­nomic power. Grum­blings are in­creas­ing among Ger­man busi­ness lead­ers who fear that the long-term out­look ex­poses se­ri­ous threats to the coun­try’s in­ter­na­tional com­pet­i­tive­ness. Skep­tics say the econ­omy is thriv­ing — for now — de­spite over­reg­u­la­tion from a gov­ern­ment that is con­sis­tently in­tro­duc­ing rules and hin­der­ing the abil­ity to sus­tain growth, much less in­crease it.

“We have a gen­eral ten­dency in Ger­many to reg­u­late more and more again and im­pose more tasks on firms,” said Kiel Uni­ver­sity eco­nomics pro­fes­sor Kai Carstensen, adding that bu­reau­cracy is a long-stand­ing Ger­man tra­di­tion that threat­ens to stran­gle the eco­nomic re­vival in its in­fancy.

“What we are cur­rently do­ing is cut­ting down ca­pac­ity be­cause we are re­duc­ing the abil­ity of com­pa­nies to op­er­ate,” he said.

Over the past year, leg­is­la­tors have been con­sid­er­ing a raft of mea­sures that add even more lay­ers of bu­reau­cracy to busi­ness op­er­a­tions. The Ger­man Cham­bers of Com­merce and In­dus­try, which rep­re­sents 3 mil­lion en­trepreneurs and busi­ness own­ers, has iden­ti­fied 35 pro­pos­als ap­proved by the gov­ern­ing coali­tion Mrs. Merkel leads that would dampen the busi­ness land­scape and dis­cour­age in­no­va­tion, ef­fi­ciency and in­vest­ment.

One no­table ex­am­ple is the “anti-stress law,” which pro­poses a ban on read­ing work email dur­ing non­work hours. The bill sym­bol­izes to many the ex­tent to which Ger­man pol­i­tics has fallen out of step with the mod­ern pace of busi­ness and the way the In­ter­net has changed work­place cul­ture, in­dus­try lead­ers say.

An­other bill would in­sti­tute an 18-month limit on tem­po­rary work con­tracts. A sur­vey of 1,000 temp work­ers showed that about 80 per­cent feared they would lose their jobs as a re­sult, and the Cham­bers of Com­merce and In­dus­try slammed the mea­sure as an “un­rea­son­able in­ter­fer­ence” that would re­duce com­pa­nies’ flex­i­bil­ity to man­age their pay­rolls in good times and bad.

Fear­ing the wage po­lice

What es­pe­cially in­spires fury among the busi­ness com­mu­nity is a min­i­mum wage re­quire­ment that went into ef­fect Jan. 1. It is viewed as the most cum­ber­some of re­cent mea­sures for busi­ness. For the vast ma­jor­ity, how­ever, the bur­den is not be­cause they can’t af­ford the $9.25 hourly min­i­mum.

East Ger­man book­keeper Dag­mar Bu­bath, who works at her hus­band’s small con­struc­tion com­pany on the out­skirts of Ber­lin, sup­ports the min­i­mum wage in prin­ci­ple. She said the cou­ple’s small firm em­ploys 11 full-timers and abides by the hourly min­i­mum wage in Ger­man con­struc­tion — in place since 1997 and, for some sec­tors of the econ­omy, even ear­lier.

Yet the “new, won­der­ful, bu­reau­cratic min­i­mum wage,” Mrs. Bu­bath said sar­cas­ti­cally, has wreaked ad­min­is­tra­tive and lo­gis­ti­cal havoc on the com­pany.

Un­der the law, ex­act records of hours worked by each em­ployee must be logged ev­ery seven days by ev­ery Ger­man com­pany and kept on file for two years.

Unan­nounced in­spec­tions by uni­formed cus­toms of­fi­cials — dubbed the “wage po­lice” in Ger­man me­dia — are car­ried out to en­sure com­pli­ance.

“My hus­band has to wait here ev­ery morn­ing to see when the men ar­rive at work,” Mrs. Bu­bath said. “We know what time they leave from here, but some­times they go home straight from the build­ing site. Of­fi­cials would have to fol­low them all day to check. Only then would it be ver­i­fi­able.

“It is all rel­a­tively fresh, so there’s ob­vi­ously huge out­rage across the whole in­dus­try [over th­ese re­quire­ments]. Ev­ery­one is rant­ing and rav­ing about it,” she said. “What do they hope to achieve? Politi­cians must end this non­sense.”

Although only 12 per­cent of Ger­man com­pa­nies paid less than the $9.25 min­i­mum wage last year, ev­ery Ger­man busi­ness is sub­ject to the new rules.

As a re­sult, busi­ness lead­ers are call­ing on Mrs. Merkel and eco­nomic of­fi­cials in Ber­lin to take strong pol­icy ac­tion along the lines of the dereg­u­la­tory la­bor and so­cial re­forms cred­ited with trans­form­ing Ger­many into an eco­nomic jug­ger­naut in less than a decade un­der Chan­cel­lor Ger­hard Schroeder.

Agenda 2010, which started in 2003, cut wel­fare and eased the abil­ity of em­ploy­ers to shed staff more eas­ily in a down­turn to loosen the rigid la­bor mar­ket.

Econ­omy Min­is­ter Sig­mar Gabriel said he in­tends to in­tro­duce mea­sures to cut bu­reau­cracy — a “bu­reau­cratic break” — as of July 1 for the Mit­tel­stand, Ger­many’s small and mid­sized com­pa­nies that are seen as the in­dis­pens­able back­bone of the coun­try’s econ­omy, em­ploy­ing roughly 15.5 mil­lion peo­ple. The mea­sures are de­signed to save th­ese busi­nesses $818 mil­lion.

The busi­ness com­mu­nity, how­ever, is skep­ti­cal about any mean­ing­ful re­duc­tion in red tape. A sur­vey shows that busi­ness lead­ers feel po­lit­i­cally alien­ated un­der the Merkel-led gov­ern­ing coali­tion, with­out a cham­pion in ei­ther of Ger­many’s two main par­ties: the Chris­tian Democrats and the So­cial Democrats.

Ingo Kramer, pres­i­dent of the Con­fed­er­a­tion of Ger­man Em­ploy­ers’ As­so­ci­a­tions, lam­basted the coali­tion last month, say­ing, “The grand coali­tion so far has pri­mar­ily bur­dened Ger­man busi­nesses.”

This dis­con­nect has spurred high busi­ness risk ap­praisals, un­prece­dented since the “acute phase” of the euro debt cri­sis in 2011 and 2012, said the Cham­bers of Com­merce and In­dus­try, re­fer­ring to a sur­vey this year of about 27,000 en­ter­prises.

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