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German Companies Need Grants, Not More Loans
DMB Head Says Merkel Could Run Again
Germany is set for at least five years of slow growth, the head of one of the country's largest business associations told MNI, calling for more grants but not loans for small- and medium-sized companies to help them through the Covid-19 crisis.
Uncertainty over the pandemic's duration and Germany's dependency on its European and global trade partners could prolong the time needed to return to normal, Marc Tenbieg of the Deutscher Mittelstands-Bund (DMB) said in an interview, in which he also highlighted the risk of a chaotic Brexit and anticipated that German Chancellor Angela Merkel could reverse her decision not to contest 2021's general election.
"She will not want to change the helmsman during an ongoing crisis," Tenbieg said, noting that the government will face an ongoing political challenge as jobs continue to be lost, despite the government's furlough scheme for employees working shortened hours.
"Ultimately the phase between furlough and unemployment is relatively short. The Kurzarbeit-scheme might slow down the negative effects, but in the end you still get increased unemployment."
GRANTS NOT LOANS
Even following massive government aid during the pandemic, companies need continued support, said the DMB chief, explaining that while loans from the government-backed KfW development bank may have kept businesses alive, many could not cope with more debt, and instead need grants and logistical support.
Some Mittelstand companies were already significantly leveraged going into the crisis, he noted, and now also face penalty interest rates on any large cash holdings at a time when the European Central Bank's benchmarks are in negative territory. Others have been forced to divert funds intended for investment in order to pay wages or rent.
The Covid crisis has been a "wake-up" call for the DMB's 21,000 members, many of whom now find themselves being forced to improve their management and customer relations, and to put more operations online. Tenbieg called for future pandemic support by federal and state authorities to include practical assistance for firms transitioning towards a digital future.
"You need a coach. You need networks," he said. "Support is not always monetary in nature."
Authorities should also be more targeted in deciding which firms receive grants, after "a lot of companies that should not have received funds did," during the first phase of the crisis. "Of the many billions paid out, not all of it has arrived where it's really needed."
On top of Covid, German companies are also braced for the end of the transition period following the UK's departure from the European Union.
"Just like the Netherlands or Belgium we are experiencing the direct effects of Brexit very intensely" he said. "Erecting borders, raising customs barriers - yes, there will be visible chaos. You can't do it in the next few months. The trucks will stand still in Dover, and then you will notice that the shelves are empty. I still have hope that there will be any kind of last-minute agreement over a long extension of the transition phase."
Tenbieg called the European Green Deal a "big opportunity" for Germany's export-oriented economy, and especially for companies involved in green energy. But plummeting global demand might necessitate a rethink of some of the programme's more ambitious goals.
"If we hadn't had the corona-crisis, the Green Deal would be a wonderful strategic direction for the future of the European Union," Tenbieg said. "To say we are truly the first green continent. However, the investments are immense. The burdens are immense, the bureaucracy is immense. So even without this crisis, the Green Deal would certainly be a challenge for many companies."