MNI INTERVIEW: Covid Red Tape Could Jeopardise German Recovery

By Luke Heighton

     FRANKFURT (MNI) - Government efforts to counter the economic effects of the

coronavirus pandemic must not be allowed to permanently alter the relationship

between the state and private enterprise, the head of one of Germany's largest

SME business associations told MNI in an interview, as he voiced concern that

red tape might drag down growth.

     "A crisis is a time that transfers decision-making power to the

government," Ludwig Veltmann, CEO of the Mittelstandsverbund, told MNI. "The

danger is that if you are not careful it remains there, it becomes a sort of

automatism. The government has also become a shareholder in a number of big

companies, and so there will be something of a new economic culture."

     It was important business leaders felt able to be critical of government

policy even in times of difficulty, Veltmann said. Life was being made much

harder, he added, by the "very quick" growth of bureaucracy at regional, state,

federal and European level.

     Veltmann, whose organisation represents 230,000 Mittelstand enterprises,

expressed concern at the prospect of the eurozone's, and especially southern

Europe's economic recovery proceeding at different speeds, given that more than

70% of German exports are within Europe. "German exports to northern Italy are

greater than to Japan," he remarked, "so European engagement with every

country's recovery is very important."

     --GREEN DEAL

     Equally, he continued, "our belief in just in time and value chains needs

to be re-thought to make it more independent. We will not renationalise, but we

will work on a strategy of not just being dependent on China or the U.S.. My

personal view is that the healthcare sector needs to grow so that we are better

prepared for the next such crisis, so we need a new strategy there too."

     The European Green Deal, Veltmann said, which places policies designed to

mitigate the effects of climate change at the heart of Europe's economic future,

represents "a big opportunity" for Germany's Mittelstand, though he called for

greater clarity on such key areas as transport policy and energy.

     The public debate is "not clear," he explained. "Then there is the

international debate about carbon dioxide and, increasingly, nitric oxide,

especially after the diesel scandal in America, which then travelled to Germany.

It's a result of the competition between the American and German car industries,

nothing else.

     "If there is consensus, if there is a clear schedule, there won't be a

problem for the Mittelstand. The greatest risk of hidden costs will come via

insecurity, poor investments, and delay," Veltmann said.

     Germany's Mittelstand firms can drive the recovery, Veltmann said, but face

stiff competition from large-scale international platforms that are able to

circumvent Germany's strict data protection laws. "In the time since the

lockdown the behaviour of the customer has changed, and even those not so

familiar with e-commerce previously now are, because they are under pressure to

use it. Now even if the shops are open, people remain using this means of

cooperation and shopping, therefore the competition situation is still

difficult."

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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