With economic growth tagged at 1.6 percent this year, Germany may not appear to be the place for a good investment. But the bad news hasn't dampened US corporate investors shopping for bargains.
Come on over, says German Finance Minister Hans Eichel
Given all the complaining in German business circles lately, it hardly seems likely foreign investors would want to dish out money in this country.
With unemployment steadily on the rise, the national budget deficit in stark violation of EU norms, economic growth squeezing by at less than two percent and employees on strike to keep 35-hour work weeks, there isn't much to encourage a positive future outlook for business.
But nobody seems to have shared the negative forecast with American private equity firms looking for a good money-making deal in Germany.
US corporate investors have a decidedly different view of the German economy than many of the business leaders here do.
Germans are all gloom and doom when they talk about the economy.
At a recent trans-Atlantic business conference in Stuttgart, US investors said they generally don’t find Germany to be as bad off as many Germans make it out to be. Instead, a healthy dose of American-flavored optimism was what they recommended to help get the patient back on its feet again.
Instituting an emotional turn-around
Government officials and economic analysts across the country never tire talking about the need for Germany to undergo structural economic change. But the President of the American Chamber of Commerce in Germany, Fred Irwin, said what the country really needs is an emotional turnaround.
"Everyone in the media talks about needing to reform taxes and needing to reform business laws here," he said. "But actually nothing is going to dramatically change here if Germans don’t decide that they’re willing to take a risk and that it’s necessary to change."
Irwin added that part of Germany's problems stem from a societal stubbornness to change, an affinity for keeping the status quo.
"It’s a conservative society, but all around it things are changing," he said, pointing to Germany's neighbors in Europe and markets oversees. "We have a global market, and so where other countries are changing, Germany is standing still, which is very unfortunate."
American bargain hunters
According to Irwin, while Germany is standing still, Americans are busy looking for a good bargain. Many have been successful and have purchased good chunks of the market as corporate restructuring and streamlining within some large German conglomerates is throws up the occasional investment opportunity for big American firms.
The US private equity firm Blackstone’s recent acquisition of the German chemicals company Celanese, is one example. And with attractive interest rates in Germany, Blackstone says it’s hungry for more takeovers.
The half-full glass
Why are American investors prepared to spend their money in Germany, but Germans apparently are not? Walter Raizner, the head of IBM Deutschland, the German subsidiary of the American computer giant, pointed to differences in the business culture between the United States and Germany.
Americans are still enthusiastic about the chance for economic recovery.
"First of all, the overall optimism in the United States, in the workforce, is much, much higher," he said. "I always describe it as how we look at the glass. In Germany, we always look at the glass as half-empty. And our American friends always look at the glass as being half-full. And I think this describes very nicely what the general mindset is, how you approach things in business but also in life."
Americans are also more pragmatic in implementing business decisions, Raizner added.
"Germans tend to discuss everything to the end," he said. "And even if you’ve made a decision you keep going on and discussing whether the decision was right or wrong or should we start all over again," he added, describing the slow momentum in German business negotiations.
In contrast, the Americans have a whole different attitude, according to Raizner.
"They say, let’s move along this pass," he said. "If it proves to be wrong, well, we can adjust our course and come to the objective anyhow."
Adding the spice of America
German corporate lawyer Roderich Thümmel, who works with companies on both sides of the Atlantic, agrees that Germany would be much better off economically if it had a dash of American business confidence.
A stock trader toasts with champagne at the stock market in Frankfurt, Dec. 30 as the DAX shows its highest level for the year at end of trading in 2003.
"We Germans should be more confident in what we can do," he stresses.
"We should become more active and we should take an active role in bringing things forward and that is what happens every day in many companies, but the perception in the general public, I think, is more negative than necessary."
More spending needed
The American Chamber of Commerce in Germany says Germans have to start spending money, rather than continuing to save it. And the Chamber’s president is following that advice and encouraging the company he works for, Citigroup, to invest more in Germany.
While most German banks are continuing to lay off staff in order to reduce costs, the US banking, insurance and investment corporation Citigroup is hiring people in Germany. Last year the company’s banking sector, Citibank, created more than 350 extra positions in order to expand its network of branches. Recently, Citibank announced that 200 more jobs will be created this year as part of a further expansion of services mainly in southern Germany.
An American-led recovery?
Does this mean American businesses could be leading an economic recovery in Germany? Fred Irwin doesn't want to go that far, but he does think American businesses can show Germans the path they need to take.
"We have in Germany a consensus mentality society," he said. "And as long as you have an economic boom, a consensus society is very positive because everybody profits from it. But when you’re having some difficulties, we need vision, we need leadership and we need execution."American businesses have the vision right now and they are the ones making things happen, Irwin believes. So while German Chancellor Gerhard Schröder continues to blame the country's economic woes on sluggish world economic conditions, and analysts bemoan investment conditions and economic confidence within Germany, American corporations are busy investing in what is still Europe’s biggest economy.