German Industry Leader Recession Is an 'Existential Threat to Many Businesses'

In an interview with SPIEGEL, the new head of the Federation of German Industries discusses developments in the country's economy as a result of the global downturn and the government's multibillion euro stimulus package , which he says can help "jump-start" the system.


Employees at a Siemens plant in Erfurt, Germany, inspect a generator.
DPA

Employees at a Siemens plant in Erfurt, Germany, inspect a generator.

SPIEGEL: Mr. Keitel, would you hazard an economic prognosis for 2009?

Keitel: That would be reckless. The economy and the political world can only fly by visual flight rules at the moment ...

SPIEGEL: ... directly into the worst recession since World War II?

Keitel: Yes, that seems to be the tendency, although I don't want to be overly pessimistic. This is the kind of crisis we have never seen before, one that affects every country in the world and every sector. A completely new dimension for everyone.

SPIEGEL: It has already struck the German automobile industry in full force. Is climate protection just another problem for the industry, or is it an opportunity?

Keitel: In general, climate protection is a huge opportunity for the entire domestic industry, because our global leadership position in technology provides us with excellent export opportunities. Seen in that light ... we should not devote all of our energies in Germany to achieving the latest fine-tuned improvements, but should develop and sell mass-market products for the global market.

SPIEGEL: In light of the economic crisis, some politicians and business owners want to see the climate goals loosened, arguing that they are now no longer affordable.

Keitel: You won't get me to agree with that. The political goals have already been formulated and we will reach them, but perhaps just somewhat more slowly.

SPIEGEL: What are your members' biggest problems at the moment? Declining orders? Sudden cancellations? Credit problems with the banks?

Keitel: All of these effects are related. The scenarios for which business owners should prepare themselves today include initially theoretical declines of 20 percent in sales and five percentage points in profit margins. Such developments already pose an existential threat to many companies. This makes it all the more problematic that credit conditions have clearly deteriorated. Many types of loans simply no longer exist.

SPIEGEL: In other words, the often-cited credit crunch has already been around for a while.

Keitel: We shouldn't complain about it. Instead, we should discuss the problems openly with the banks, so that we can find our way out of the dilemma together.

SPIEGEL: But the German government has already approved a €480 billion ($658 billion) rescue plan, although very few financial institutions have taken advantage of it so far…

Keitel: … partly because the details of the conditions for these government bailouts may have to be changed.

SPIEGEL: Such as?

Keitel: It is my impression that extending the terms of the government loans from three to five years could already help the banks. Besides, the funds should also be disbursed more quickly than they have been until now.

SPIEGEL: Is the rescue package working if it doesn't even prevent the credit crunch?

Keitel: If you consider what politicians have achieved in such a short amount of time, I would say that the project is clearly the right thing to do.

SPIEGEL: How does one explain to taxpayers the idea that they are suddenly being asked to foot the bill for the bankers' greed and megalomania?

Keitel: First, we must explain the differences between direct aid and guarantees to taxpayers. In this context, some politicians are behaving in a populist and irresponsible way.

SPIEGEL: All the same, €80 billion ($110 billion) in equity capital is available ...

Keitel: ... which I don't want to downplay. But the banks are not getting all of this as assistance to the sector or out of sympathy, but to keep the financial system afloat. The banks must also live up to their responsibility. Ultimately, we are all talking about money that we don't have and that will have to be paid back at some point. Even if the government spent €100 billion, it could not save the community on its own. But it can provide the right stimuli to jump-start the system.

SPIEGEL: The German government hopes to revive the economy with another package of measures worth €50 billion ($69 billion). Is this the right approach?

Keitel: The scope is okay. But we must be careful not to allow the debt burden to become so large that our children and children's children will still be paying for it. The government should commit itself to reducing the new loans by 2013. To achieve a lasting effect, we must remove the burden from those whose work creates our prosperity. For this reason, I expressly welcome the Christian Democratic Union's plan to deliberately remove the burden from our society's top performers in advance of a tax reform.

SPIEGEL: Are you talking about the highest-paid senior executives of industrial corporations?

Keitel: I am talking about the millions of skilled workers and qualified employees, who the government deprives of much of their increased earnings in the form of taxes and fees. After the parliamentary elections, the acute relief must be followed by significant reforms. Even the knowledge that this will happen would be helpful now.

SPIEGEL: Are you saying that no more acute measures are needed?

The skyline of Frankfurt, Germany's financial capital: "The banks must also live up to their responsibility."
DPA

The skyline of Frankfurt, Germany's financial capital: "The banks must also live up to their responsibility."

Keitel: No. The planned investment programs are clearly the right approach. However, cities and towns must also show some flexibility. I doubt that the municipalities are spending all that money earmarked for new roads, schools and sewage systems quickly enough.

SPIEGEL: There are also doubts as to whether the domestic construction industry can even handle the sudden sharp rise in demand.

Keitel: Many small to mid-sized companies have only enough orders to keep them busy for two months. They would be extremely grateful for more investment. The companies will undoubtedly handle the additional orders ...

SPIEGEL: ... but primarily with Eastern European personnel.

Keitel: After years of decline, the German construction industry cannot develop new capacities on the spur of the moment. But foreign workers will also spend their money here and will buy German products. And my third point is that we must help companies so that they can send as few people as possible into unemployment.

SPIEGEL: How can that be achieved?

Keitel: By the government helping to pay for the retraining of people whose hours are now being cut back, for example. That would boost the labor market, while at the same time pushing urgently needed training programs.

SPIEGEL: Are you satisfied with what CDU Chancellor Angela Merkel and SPD Finance Minister Peer Steinbrück have done so far?

Keitel: I am familiar with the criticism, but I also see how quickly the government has acted so far in this unprecedented situation. And I, as an engineer, have a certain amount of sympathy for the analytical care with which the problems were approached in Berlin. In my view, the emphasis is on politics, not parties. In this super-election year, the BDI will comment clearly on whether Berlin is on the right track.

SPIEGEL: Your organization has lost much of the public's attention in the recent past. Will that change under your leadership?

Keitel: I have a different opinion in that regard. But not all debates have to be hammered out in public. The important thing is that we bundle the expertise collected within the BDI and continue to promote the interests of German industry, which creates real value.

SPIEGEL: In other words, the internal divisions within the federation have come to an end?

Keitel: I know that there will always be differences of opinion in and beneath an umbrella organization like ours. But given the gravity of the situation, we cannot allow ourselves to get bogged down with the details. This sort of thing only helps cheap populists, who then tend to question our social market economy ...

SPIEGEL: ... the image of which has already suffered greatly, and not just since the current crisis began. Just think of the scandals surrounding VW, Siemens, Lidl and Telekom.

Keitel: The same examples have been cited repeatedly for some time now. Fortunately, upstanding business owners and managers are in the overwhelming majority. Anyone who is in a position of leadership represents a part of the local elite -- and bears personal responsibility for our social market economy. What Catholic social teaching and the Protestant church have had to offer more recently in this regard is surprisingly relevant ...

SPIEGEL: ... and astonishingly critical of the economy, especially when you read books like the one by Munich Archbishop Reinhard Marx.

Keitel: I see eye-to-eye with the major denominations on many of the issues relating to the decline of values and trust. Yes, there is indeed a rapid decline in credibility. For a long time my own industry, construction, was certainly not among the most transparent, but it too has since undergone an astonishing change. Morality is not an abstract concept for Sunday sermons, but something incredibly pragmatic.

SPIEGEL: At Hochtief, you traveled to many developing countries. As a result, you know how corruption works.

Keitel: When you go on vacation, you also know where there is malaria, and you prepare for it. It's a similar thing with corruption. When I was sent out as a young man, I had no idea and was lucky to have had the right compass. Nowadays young managers receive excellent preparation and can call their company's ethics hotline at home at all times. It can happen that they are ordered to fly home immediately. And you will find that some countries have not appeared in Hochtief's order books in 10 years.

SPIEGEL: You were never infected by the malaria of corruption?

Keitel: No.

Interview conducted by Michael Sauga and Thomas Tuma.

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