Business Booster to Firms: Go East

A top German business leaders believes companies should move jobs to low-wage eastern European nations -- not exactly the recommendation one might expect, with Germany's unemployment rate hovering around 11 percent.

But Ludwig Georg Braun, president of the German Chamber of Commerce, said just that in an interview Monday with the Berlin newspaper Tagesspiegel. In the end, he said, such moves would help the German economy.

No time to wait

"I recommend companies not wait for better government policies, but to take action now for themselves. They should use the opportunities out there -- for instance in Europe's eastward expansion," Braun told Berlin's Tagesspiegel newspaper.

On May 1, ten more countries are set to join the European Union, most of them relatively low-wage, former east-bloc nations. The deadline's approach has heightened debate over Germany's competitiveness in the global marketplace -- and increased fears of further job losses.

But rather than increasing the country's economic woes, moving manufacturing to low-wage countries is "a recipe for securing jobs and training positions at home," Braun said.

A number of politicians denounced Braun's comments. According to German government spokesman Bela Anda, Chancellor Gerhard Schröder even called them "unpatriotic" on Monday.

The new Secretary-General of Schröder's Social Democratic party, Klaus Uwe Benneter, also attacked Braun's position. "Whoever is part of leadership of the German economy and talks about Germany as a business location in such a way is being indecent and irresponsible," he said.

But in his interview, Braun said the German government has a "basically faulty understanding business" and had failed to create the level of trust need to convince citizens that painful economic reforms were need to get the world's third-largest economy back on its feet.

He also said the profits of German-based business are overwhelmingly earned by their overseas operations, although this isn't always apparent in the balance sheets.

Social system a drag?

Many argue that Germany's highly developed system of social benefits has acted as a drag on business expansion, hampering job creation and, as a result, spending. Braun said German politicians are to blame, for failing to adequately reform the social welfare system years ago.

In addition to regulatory difficulties, a lack of trained workers in the low-wage nations has kept yet more German businesses from moving their production abroad, Braun said.

But while he admitted that Germany has a surplus of trained workers, their mentality isn't necessarily business friendly.

'Entrepreneurial spirit' lacking

"In Germany, there is no real entrepreneurial spirit," he told Tagesspiegel. Germans are "too risk averse … And not only workers, but also businesses are risk averse."

"Its not only the politicians who are weak, companies are weak as well," he said.

Braun warned that manufacturing jobs in many areas -- especially those requiring on the job training -- will continue to leave Germany and go to the cheapest bidder. "That is globalization. We have to finally get that through our heads," he said. His suggestion: loosen union wage agreements to make Germany more competitive.