VZCZCXRO4981
RR RUEHAG RUEHLZ
DE RUEHDF #0047/01 3481122
ZNR UUUUU ZZH
R 141122Z DEC 06
FM AMCONSUL DUSSELDORF
TO RUEHC/SECSTATE WASHDC 0047
INFO RUCNFRG/FRG COLLECTIVE
RUEHDF/AMCONSUL DUSSELDORF 0059

UNCLAS SECTION 01 OF 02 DUSSELDORF 000047 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ELAB BEXP GM
SUBJECT: GERMAN BUSINESS COMMUNITY DISAPPOINTMENT WITH FEDERAL 
GOVERNMENT 
 
 
DUSSELDORF 00000047  001.2 OF 002 
 
 
Sensitive but Unclassified -- Contains Proprietary Information. 
Not for Internet Distribution 
 
¶1.  (SBU) Summary:  German business leaders are expressing 
disappointment with the lack of economic reforms under the 
Merkel government.  Some executives go so far as to say that the 
previous SPD-led government was more active in pushing reforms 
and paid greater attention to business' concerns.  They argue 
that if Germany continues to avoid difficult but necessary 
economic decisions, it will no longer be competitive against 
dynamic, emerging market economies, in particular China and 
India.  The business community appears to be far ahead of the 
government in considering how Germany can compete in a global 
economic environment.  End Summary. 
 
Business Complaining The Government Too Slow On Reforms 
--------------------------------------------- ------------------ 
 
¶2.  (SBU) At a meeting in its Cologne headquarters in November, 
a senior Ford Motor Company executive provided Minister 
Counselor for Economic Affairs and D|sseldorf Pol/Econoff  an 
overview of the firm's relationship with the German government. 
He observed that Ford Europe is "simply not getting what it 
needs and wants."  Numerous AmCham North Rhine-Westphalia (NRW) 
leaders have echoed these comments to CG over the last several 
months, expressing strong disappointment with the support they 
get from Berlin, even while saying they understand how difficult 
it is for the CDU to force through a pro-business agenda in the 
Grand Coalition. 
 
¶3.  (SBU) Mission Germany has heard similar complaints over the 
lack of economic reforms from other parts of Germany.  The Ford 
executive's opinions are widespread in the business community, 
where support for the CDU has traditionally been strong. 
"Chancellor Schroeder did more for industry than Chancellor 
Merkel has," he declared, by reducing such costs for employers 
as unemployment and health insurance.  Germany is also doing too 
little to tackle unemployment:  "the recent decrease in 
unemployment to below 10% (9.8%) is not/not a victory," he 
stated.  Others in the NRW business community also argue that 
the former SPD-led Berlin government worked more closely with 
them than has Chancellor Merkel, in terms of communication, 
consultation, and addressing individual concerns. 
 
Fears of Losing Competitiveness 
--------------------------------- 
 
¶4.  (SBU) Germany needs to change to be competitive against 
emerging economies such as India and China, the Ford executive 
stated.  Germany will be more expensive, but even with higher 
costs it can compete if it is a world leader in innovation, 
whether in terms of products, technologies, or production 
techniques.  At the moment, he stated, "it has no sense of 
urgency to adjust and make itself more competitive."  The 
society needs to be more innovative and is still too slow at 
positioning itself for the future, especially in education. 
Top-quality engineers once kept Ford in Germany; that is no 
longer the case.  Weaknesses in the education system have become 
a real obstacle; Ford is unable to fill apprentice positions 
because it cannot find enough individuals with basic skills such 
as reading and writing.  He, like other German observers, noted 
the move of pharmaceutical research and development out of 
Germany -- largely to the U.S. 
 
Allianz in Munich - A Similar View 
----------------------------------- 
 
¶5.  (SBU) In a meeting with CG Munich, Michael Diekmann, 
Chairman of the Board of Management (CEO) of Allianz SE, 
expressed little faith that the Merkel-led Grand Coalition would 
succeed in making any tough decisions in areas such as tax 
reform.  He said the CDU/CSU members of the coalition were 
afraid of losing power in state elections in the coming years. 
Diekmann's reasoning was that in eight years, the number of 
Germans receiving public assistance such as social security and 
unemployment will exceed those who are employed -- these 
recipients of assistance vote, and they will not vote to cut 
their benefits.  The only way any party will be able to retain 
power in Germany will be to water down reforms and keep up 
entitlements.  Diekmann, like other German business leaders, 
does not consider the CSU particularly business-friendly, saying 
M-P Stoiber is essentially a socialist, who is "pro-business" 
only to the extent that he does not want firms to leave Bavaria. 
 
 
A Mixed Perspective from Leipzig 
----------------------------------- 
 
¶6.  (SBU) The overall assessment of the performance of the 
CDU-SPD government among business contacts in Saxony, 
 
DUSSELDORF 00000047  002.2 OF 002 
 
 
Saxony-Anhalt and Thuringia is mixed.  Some complain about the 
slow path in handling reform projects, others stress positive 
developments, such as lower social fringe benefits and new 
regulations in the corporate tax system -- important factors 
especially for small-and medium sized businesses.  While many 
contacts in these new Laender say the federal government has not 
met their expectations, they often acknowledge that their 
expectations had been much too high. 
 
¶7.  (SBU) Wolfgang Heinze, Vice President of European operations 
at U.S. firm Southwall Worldwide and chairman of the Federation 
of Employers in Saxony, talked about a recent meeting of the 
Federation of Employers and Federation of German Industry 
leaders in Berlin with Chancellor Merkel and other senior 
Federal officials.  He observed that while German business 
people were very optimistic when Merkel's Grand Coalition was 
formed last fall, optimism has since given way to frustration. 
Within the Federations the majority of members complain about 
the lack of a consistent reform strategy.  They are encouraging 
Chancellor Merkel to push through urgent reforms, especially to 
reduce social welfare costs for employers. 
 
¶8.  (U) Only about 20% of managers are generally satisfied with 
the Grand Coalition after one year, according to the results of 
a recent Allensbach survey published November 20.  Some business 
leaders, however, who attended a Berlin consultation with the 
Chancellor in mid-November put a more positive spin on the Grand 
Coalition, while saying it needs to do more in terms of tackling 
the structural reforms Germany has needed since the 1980s. 
These defenders commonly say that while the Merkel government 
may have been slow in making needed reforms, there is a sense of 
a consistent overall strategy. 
 
¶9.  (SBU) Comment: The German business community traditionally 
has a reputation for conservatism and opposing change.  Yet many 
business leaders are ahead of the politicians in strategizing 
about Germany's position in the global economy.  They look at 
rising competitors in China, India, and other emerging economies 
and want to be positioned to meet those challenges.  Many feel 
that the Merkel government may have to tread too narrow a path 
between CDU and SPD interests and therefore lacks the ability to 
take bolder economic measures. 
 
¶10.  (U) This message was coordinated with Embassy Berlin, with 
input from Hamburg, Leipzig, Munich, and Frankfurt. 
BOYSE