Small Businesses Mixed on EU Expansion | Business| Economy and finance news from a German perspective | DW | 10.10.2002
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Small Businesses Mixed on EU Expansion

The expected entry of 10 former Eastern bloc countries into the European Union in 2004 will bring both challenges and opportunities for Germany's small- and medium-size businesses.


German lorry drivers fear lower-paid competitors from new Eastern European EU members will put them out of work.

Germany's economic ties to the east are already tight-knit. Berlin's grand hotels send their linens to Poland for washing, where the services are performed at prices German competitors can't even come close to matching, let alone beating.

German firms have also built a considerable number of facilities in Central and Eastern Europe. They produce suits in Lithuania, car parts in the Czech Republic and costly environmental technology in Hungary, where labor laws are looser and workers considerably cheaper.

Now, with the planned eastward expansion of the European Union, such economic ties will become even easier.

New opportunities, fresh challenges

Analysts expect expansion to create new opportunities for small- and medium-sized businesses in Germany and other Western European countries. With heightened legal protections, easier movement of labor across national borders and, especially, drastically simplified customs regulations, eastward expansion will make it easier for smaller companies to invest in the east, from Budapest to Riga.

Expansion could also bring unexpected opportunities for smaller German firms. Werner Wolfgang Spitze, owner of Spitze Construction in Hamburg and head of a local organization of construction industry groups, says increased industrialization of the east alone will create money-making opportunities for Western businesses, since Eastern European companies must now need to be brought up to EU standards for the environment, hygiene and safety.

"The pressure of higher energy costs alone is going to lead to considerable investments in the area of energy-efficient new buildings and renovations (of existing buildings)," Spitze says. "Sewage plants (in the east) must all become cleaner, power plants more less polluting and slaughterhouses more hygienic. That could fill the order books of many German small business working in the environmental and health sectors," he says.

Small businesses dominate trade with east

A good deal of the trade volume between Germany and Central and Eastern European countries is already dominated by Germany's small- and medium-sized businesses.

During the first half of 2002, Germany's trade with the region totaled 54.4 billion euro ($53.9 billion), with small businesses comprising 40 billion euro of overall trade, estimates Ulrich Dietsch, managing director of Germany's private Eastern and Central European Association.

For many small- to medium-sized companies, however, the imminent eastwards expansion brings out a coldsweat.

Many manual laborers and construction companies fear that, in the future, they won’t be able to compete with their Eastern European competitors, who have lower overhead costs. Labour costs in EU applicant countries are far lower. On average, firms in Central and Eastern Europe pay their workers on average one-fifth of German salaries. Trucking is another area where Eastern Europeans make significantly less than their German counterparts.

"Many lorry drivers come from Eastern European countries," says Hans Stapelfield, managing director of the Hamburg-based haulage company Stapelfield. "They work two, three or maybe four months in the Hamburg area. They sleep in their lorries and then go back, taking their salaries with them. It’s not comparable with the living standard of German lorry drivers. It will lead to many jobs needing to be reconceived," he says.

Reconceiving jobs

"Reconceiving jobs" isn’t a euphemistic term. It simply means to make sure German workers are better trained and qualified. The hope is that through this, German workers will increase their productivity and thus become more competitive. German firms could also work in partnership with Eastern European firms, taking over more specialised and highly paid tasks while enabling the Eastern European workers to continue with more run-of-the-mill transport projects.

On the other hand, the term could also mean that German firms will eliminate expensive domestic employees and replace them with cheaper labor from Eastern Europe.

But some workers' associations are more optimistic. Jürgen Hogefoster, head of the Chamber of Craftsmen in Hamburg, sees great opportunities arising in the former Eastern bloc countries. Hogefoster says there will likely be a shortage of skilled craftsmen in Germany in the future and that immigration of workers from the future EU countries -- including Hungary, Poland and Lithuania -- could help fill the labor gap.

"I anticipate that through cooperation of the work force, the crusty labor market structures here can be broken up," Hogefoster says. "We urgently need a high degree of innovation in Germany in every sector, including the labor market. The EU eastward expansion will give us innovations that can only come through increased pressure."

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  • Date 10.10.2002
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