THE BOSSES of Germany’s 3.6m medium-sized and small manufacturing firms would have loved to see last year’s general election yield a pro-business government of the centre-right Christian Democrats and the liberal Free Democrats (FDP). What the Mittelstand got instead was a pact between the Social Democrats (SPD), the FDP and the Greens. This is still too leftie to many people’s taste. It could have been worse. Plenty of chief executives feared that Olaf Scholz, the new SPD chancellor, would row back his pre-election vow not to form a business-bashing coalition that would include Die Linke, a hard-left party.
A disaster averted may be one reason why the Mittelstand is not despondent at the start of the new year. Another is that big chunks of the coalition treaty, which runs the length of a slim novel, “go in the right direction”, says Hans-Jurgen Volz, chief economist of the BVMW, a Mittelstand trade body. Still, several gripes remain.
One is taxation. During the election campaign the SPD, the Greens and Die Linke mooted the idea of re-introducing a wealth tax and raising inheritance taxes. This would be a devastating move for the Mittelstand’s family businesses. It now appears to be off the table thanks to opposition from the FDP, whose boss, Christian Lindner, is the new finance minister. But so, too, is the prospect of a corporate-tax cut, from a headline rate of 30% to 25%, and the abolition of the personal “solidarity” tax (known as soli), the proceeds from which flow to the formerly communist east.
The Mittelstand’s second peeve is red tape. “Bureaucracy is costing German business around EUR50bn ($57bn) a year,” says Mr Volz. Three legislative packages have been passed by parliament in the past decade to reduce the burden of bureaucracy on the Mittelstand. However, little progress has been made. According to Nikolas Stihl, head of the supervisory board of Stihl, the world’s leading maker of chainsaws, excessive bureaucracy helps explain why Germany is 30 years late with big infrastructure projects such as the feeder road for the 55km railway tunnel that is being dug beneath the Brenner Pass linking Austria and Italy. Stihl says, “We don’t know how to implement large projects.”
Besides these longstanding gripes the Mittelstand has two more pressing ones. German companies struggle to find qualified workers, as in many other countries. Bosses want Mr Scholz to push the EU to extend the “blue card”, a work permit that helps university-educated migrants take up job offers in the bloc, to blue-collar workers. A separate Chancenkarte (opportunity card) promised in the coalition treaty would enable migrants to look for work in Germany provided they fulfil criteria such as a working knowledge of German.
The most burning problem for manufacturers is the soaring cost of energy. Many are also concerned about Germany’s dependence upon Russian gas. “Even worse than the 70% increase of our company’s energy costs is the worry about security of supply,” says Ferdinand Munk, owner and boss of Gunzburger Steigtechnik, a maker of ladders and rescue kit in Bavar