The Economist - USA (2022-01-15)

54 Business The Economist January 15th 2022

BusinessinGermany

What the

Mittelstand wants

T

hebossesofGermany’s3.6mmedium­

sizedandsmallmanufacturingfirms

wouldhavelovedtoseelastyear’sgeneral

electionyielda pro­businessgovernment

of the centre­right Christian Democrats

andtheliberalFreeDemocrats(fdp). What

theMittelstandgotinsteadwasa pactbe­

tweentheSocialDemocrats(spd), thefdp

andtheGreens.Thatisstilltooleftiefor

manytastes.Butitcouldhavebeenworse.

PlentyofchiefexecutivesfearedthatOlaf

Scholz,thenewspdchancellor,wouldrow

backhispre­election vownotto forma

business­bashingcoalitionthatwouldin­

cludeDieLinke, a hard­leftparty.

Adisasteravertedmaybeonereason

whytheMittelstandisnotdespondentat

thestartofthenewyear.Anotheristhatbig

chunksofthecoalitiontreaty,whichruns

thelengthofa slimnovel,“gointheright

direction”, says Hans­Jürgen Völz, chief

economist of the bvmw, a Mittelstand

tradebody.Still,severalgripesremain.

One is taxation. During the election

campaignthespd, theGreensandDieLinke

mootedtheideaofre­introducinga wealth

taxandraisinginheritancetaxes.Sucha

movewouldhittheMittelstand’sfamily

firmshard.Itnowappearstobeofftheta­

blethanks to oppositionfromthe fdp,

whoseboss,ChristianLindner,isthenew

financeminister.Butso,too,isthepros­

pectofa corporate­taxcut,froma headline

rateof30%to25%,andtheabolitionofthe

personal“solidarity”tax(knownassoli),

theproceedsfromwhichflowtothefor­

merlycommunisteast.

TheMittelstand’ssecondpeeveisred

tape.“BureaucracyiscostingGermanbusi­

nessaround€50bn($57bn)a year,”saysMr

Völz.Overthelastdecadeparliamenthas

passedthreelegislativepackagesto ease

the bureaucratic burden on the Mittel­

stand. But little real progress has been

made.AccordingtoNikolasStihl,headof

thesupervisoryboardofStihl,theworld’s

leadingmakerofchainsaws,excessivebu­

reaucracyhelpsexplainwhyGermanyis 30

yearslatewithbiginfrastructureprojects

suchasthefeederroadforthe55kmrail­

waytunnelthatisbeingdugbeneaththe

BrennerPasslinkingAustriaandItaly.“We

don’tknowanymorehowtoimplement

bigprojects,”sighsMrStihl.

Besidestheselongstandinggripesthe

Mittelstandhastwomorepressingones.

Asinmanycountries,Germanfirmsstrug­

gletofindqualifiedworkers—oranywork­

ers. Bosses want Mr Scholz to push the eu

to  extend  the  “blue  card”,  a  work  permit

that  helps  university­educated  migrants

take up job offers in the bloc, to blue­collar

workers.  A  separate  Chancenkarte(oppor­

tunitycard)promisedinthecoalitiontrea­

tywouldenablemigrantstolookforwork

in Germany providedthey fulfilcriteria

suchasa workingknowledgeofGerman. 

Themostburningproblemformanu­

facturersisthesoaringcostofenergy.Ma­

nyalsofretaboutGermany’sdependence

onRussiangas.“Evenworsethanthe70%

increaseofourcompany’senergycosts  is

theworryaboutsecurityofsupply,”says

FerdinandMunk,ownerandbossofGünz­

burger Steigtechnik, a makerofladders

andrescuekitinBavaria.Heworriesthat

“thegastapscouldbeturnedoffatany

time.”SofarMrScholzhasnotsignalled

howheplanstotackletheenergyproblem.

AtleasttheMittelstand’smoodisleav­

enedbyburstingorderbooks.Asdemand

forgoodsballoonedinthepandemic,Ger­

man firmsinthemanufacturing supply

chainhavethrived.“Wehavethehighest

numberofordersinournearly100­year

history,”beamsAndreasMöller,a spokes­

manforTrumpf,a makerofmachinetools

inthesouthGermancityofDitzingen.  A

covid­era gardening boom helped lift

Stihl’ssalesfrom€3.9bnin 2019 to€4.6bn

in2020—andthefirmispoisedtoreport

recordrevenuesin2021,too.

Morethanhalfofthefirmspolled  by

thebvmwina recentsurveyreportedthat

they were in good or very good shape.

Nearly45%saidtheywouldhiremorestaff

thisyear.Over70%willmaintainorin­

creaseinvestments.Ifshortagesofwork­

ersorenergypreventthesepocketpower­

housesfromfulfillingorders,MrScholz

maylosemuchoftheremaininggoodwill

thattheMittelstandstillharbours.n

B ERLIN

Heartland manufacturers size up the

new government

If only it were so easy with red tape

Theoilindustry

The new

great game

C

alls forthe  oil  business  to  decarbo­

nise  are  growing  louder  just  about

everywhere,  and  not  merely  from  govern­

ments  and  environmentalists.  Moody’s,  a

rating  agency,  reckons  that  half  of  the

$1.8trn of global energy debt that it evalu­

ates is held by asset managers and insurers

that  face  increasing  pressure  on  environ­

mental,  social  and  governance  (esg)

fronts, notably the climate. An annual sur­

vey of 250 big institutional investors pub­

lished  on  January  6th  by  the  Boston  Con­

sulting Group (bcg) found that more than

four in five think it is important for compa­

nies  to  establish  targets  for  long­term

emissions  reductions.  Nearly  as  many

“feel increased pressure” to apply green fil­

ters to their investments. 

At the same time, the International En­

ergy  Agency,  a  global  forecaster,  expects

worldwide oil consumption to return to its

pre­pandemic  level  of  100m  barrels  a  day

(b/d)  in  2022.  Even  if  it  rose  by  no  more

than 1% per year after that, the natural rate

of reservoir depletion means that 12m­17m

b/d  of  new  supply  must  be  added  in  the

next  five  years  to  meet  demand,  reckons

Alastair  Syme  of  Citigroup,  a  bank.  Inves­

tors  recognise  this.  As  economies  re­

opened last year after the worst ravages of

the pandemic and the oil price recovered—

this  week  it  is  flirting  with  a  seven­year

high  of  $85  a  barrel—energy  became  the

best  performing  sector  in  the  s&p500  in­

dex of large American firms, ahead of tech­

nology and finance. It left environmentally

friendly  stock  picks  in  the  dust  (see  chart

on next page). 

This tension was on display last month

at the World Petroleum Congress in Hous­

ton,  a  triennial  celebration  of  hydrocar­

bons  attended  by  more  than  1,000  energy

ministers, oil bosses and other industry lu­

minaries. Houston’s mayor, Sylvester Tur­

ner,  kicked  off  the  proceedings  by  declar­

ing that “asthe energy capital of the world,

we  have  a  moral  obligation  to  reduce  car­

bon  emissions.”  Shortly  afterwards  Amin

Nasser,  chief  executive  of  Saudi  Aramco,

the  world’s  oil  colossus,  warned  of  infla­

tion and social chaos unless countries ac­

cept that “oil and gas will play an essential

role during the transition.” Between visits

to booths where oil companies from Aram­

co  to  ExxonMobil,  an  American  super­

major,  competed  to  appear  lower­carbon

than rivals, attendees could be seen wring­

ing their hands about falling capital spend­

H OUSTON

Why American oil companies

are different