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German Growth Offers Lifeline for Euro

As the music booms from his new range of top-end speakers in the testing suite¹, Dieter Burmester allows himself a little dance.

From its headquarters in Berlin, the company that bears his name produces audio equipment that retails² for many thousands of dollars. It is found in luxury homes across the world and in Porsche and Bugatti cars.

Last quarter, the German economy showed modest growth amid an ongoing³ Eurozone crisis that continues to drag down the economies of southern Europe.

So what has been Burmester’s experience of the euro crisis? “What crisis? Is there a crisis? In so far as I know, industry is working very well at the moment, we know it from the car builders, we know it from big companies like Siemens or Bayer. And our own situation is also very nice, we have increased turnover⁴ this year,” he said.

Burmester is an example of a German Mittelstand or medium-sized company. It is fully⁵ owned by its founder⁶ and has only 50 employees; it does not survive on big loans; yet it competes with global giants. Burmester says Germany has the right ingredients.

“I believe to build up such a company is extremely difficult, but in Germany we have a nice situation. The infrastructure⁷, that we have suppliers, that we have well-educated employees, and very committed employees is a great situation," Burmester said.

The German economy grew by 0.3 percent in the past quarter. Other Eurozone countries managed stagnation⁸ at best, severe contraction⁹ at worst. Analyst¹⁰ Ferdinand Fichtner of the German Institute for Economic Research says Germany’s resilience is rooted in Mittelstand companies.

“They are the backbone¹¹ of the German economy. Roughly two-thirds of employment in Germany is in those SME enterprises and what is probably even more important, it’s around 80 percent of industrial trainees¹² that are employed in the Mittelstand,” Fichtner said.

A six-hour high speed train ride from Berlin is Stuttgart - home to Porsche and Mercedes. The German car-making industry has grown to become the biggest in Europe.

Inside the cars there are many parts supplied by Mittelstand companies, many of them highly innovative¹³ in their fields.

The address labels in Burmester’s warehouse¹⁴ indicate a growing source of income: Asia. German exports to countries outside the EU soared by 20 percent compared with a year earlier. Exports to fellow eurozone nations fell three-percent.

Economic analyst Ferdinand Fichtner says German exporters have benefited from a weak currency since joining the euro - and that is a good reason to save the currency.

“Looking forward, it would mean the falling apart of the monetary¹⁵ union will make it much harder for the German economy to export, both in terms of competitiveness of prices and in terms of its markets, which will fall apart if the monetary union falls apart,” Fichtner said.

Polls show around half of Germans want to return to the Deutschmark. Despite the euro crisis, that figure has remained largely unchanged in recent years.

If Germany avoids the recession that is engulfing¹⁶ the rest of the Eurozone, analysts¹⁷ say it will be thanks largely to the Mittelstand companies.