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Business

German Companies Long for Government's Protective Embrace

As Germany's recession worsens, many of the country's business owners have jumped on the anti-free-trade bandwagon, according to a new study.

Employee works at a car factory

Many German companies favor protectionism

With Germany's small and medium-sized companies growing increasingly worried about their financial futures, many are looking to the German government for protection. A full 78 percent said they favor protectionist measures, according to a study released Sunday, Feb. 1.

These measures include tariffs and quotas for imports. Trade-restricting policies are used to protect domestic businesses and workers over foreign competition. Protectionism goes against the tenets free trade, which is where governments strive to keep trade regulations to a minimum.

Only one year ago, the support for protectionist measures was at a much lower 43 percent, according to the global accounting firm Ernst & Young, which conducted the study.

More than nine out of 10 also said that greater public investment "would noticeably strengthen the country's small and medium-sized companies," a contrast to 69 percent a year earlier.

Financial crisis making itself felt

Backlit person in frot of stock market curve

Half of German companies said they notice the effects of the financial crisis

About half of the 3,000 companies that participated in the study said the global financial crisis had hurt businesses, mainly by creating a decrease in demand. Exports remain a key sector of Germany's economy.

One in seven German companies polled in the study reported that they were also finding it more difficult to get credit from banks.

Germany, Europe's biggest economy, officially entered a recession at the end of 2008. The latest data shows that 8.3 Germans were unemployed in January, which is up from 7.4 percent one month earlier.

Chancellor Angela Merkel's government has put together a 50 billion euro ($65 billion) stimulus package to try and ward off a full-blown economic crisis. It's the second in recent months. The proposal includes infrastructure spending and tax cuts.

Merkel raises trade concerns

China's Prime Minister Wen Jiabao gestures

China's Wen Jiabao said he will fight protectionism

Merkel has spoken out strongly against protectionism -- at least when it comes to the US auto industry. Merkel said she was "very wary" of the billions of dollars in aid being planned for GM and Chrysler. That said, Germany has offered its own lifeline to car manufacturers with a plan to issue certificates valued at 2,500 euros for all new car buyers who scrap old vehicles.

The use of public funds "must not be allowed to last too long because they inevitably lead to some distortion and are quite frankly protectionism," she told her counterparts at the recent World Economic Forum in Davos.

Chinese Premier Wen Jiabao also spoke out against protectionism in Davos.

"Trade protectionism serves no purpose as it will only worsen and prolong the crisis," said Wen, whose country is set to overtake Germany as the world's biggest exporter.

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