Financial Stumbling Block for Self-Starters | Business| Economy and finance news from a German perspective | DW | 17.03.2005
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Financial Stumbling Block for Self-Starters

In a move likely to further prevent Germans from looking at setting up their own businesses, the Ministry of Justice is considering upping the amount of start-up capital entrepreneurs need to get their ideas airborne.


Being one's own boss could cost a lot more in the future

Citing sources close to the government, the Thursday edition of the Berliner Zeitung reported plans to double the current 25,000 euros ($33,474) necessary to start up a new business.

But the source also said Berlin was looking at a second option of reducing the amount of start-up required to launch a life of business independence. A spokesperson for the Ministry of Justice confirmed that there are "two possibilities in discussion at the moment."

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The former plan has the greater potential for meeting with resistance and sparking debate. On the one hand there are the corporate law experts who are favor of relaxing the financial conditions for Germans considering going it alone, citing Great Britain and France as examples of countries where entrepreneurs don't need any of their own capital.

Traditional tough line

But that view is shunned by traditionalists, who believe that one way to reduce the annual number of liquidations in Germany is to make start-up conditions tougher than they are now. Their belief is that the more money business novices bring with them into their new working lives, the greater the likelihood they will succeed.

The German Chamber of Industry and Commerce (DIHK) is also in favour of raising the level of entry cash. But in reality, the current economic climate in Germany could make such measures a step in the wrong direction.

A report commissioned by the KfW bank group, and published this week, revealed that although last year witnessed an increase in the number of people setting up on their own as a way out of financially desperate times, the number of those seizing the opportunity to fill genuine holes in the market had dropped significantly.

Ich AG Peter Kees Ausstellung

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Thus, the increase can be largely attributed to those on government-funded self-starter programs. Sixteen percent of these state-backed business ventures for the unemployed, known as Ich AGs or "Me, Incorporated," were registered in 2004.

Back to work

Frank Wallau of Germany's Institute for Small and Medium-Sized Enterprises is a great believer the concept of self-employment as a way of helping the jobless back into the labor market.

"Ich AGs have become an instrument to get people working again, and that is a good thing," he said. "To what extent they are viable ideas which survive, however, remains to be seen."

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The Cologne-based research group which carried out the survey examined the current start-up climate in Germany, and compared it with that in thirty other countries. They found that in spite of the overall growth in the number of new companies, of all the countries included in the survey, Germans were the most pessimistic about staying afloat as their own boss.

Only 13 percent of those asked expressed a belief that they could succeed, compared with 38 and 34 percent in the Netherlands and the United States respectively.

No second chance

Frank Wallau believes the negative attitude towards self-employment is related to the lack of a second-chance culture in Germany.

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"In some countries, there's an attitude which allows you to fail once and try again, and then if you fail twice, it's a case of third time lucky. That is not the way it works here. If your business fails, it is very difficult to get a second chance," said Wallau.

But he believes there will be a shift "once people start to see restarters as an economic phenomenon and conditions improve."

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