Like many countries, the German government has pumped massive amounts of money into the economy. In the previous economic crisis of 2008, policies like state support for furloughed workers helped Germany emerge as one of the global winners. Will the same be true in this crisis?
The German government has been widely praised for swift assistance measures for businesses in the early phase of the pandemic. These measures – which range from direct subsidies to assistance with payrolls to state guarantees for low-interest loans – have helped many firms remain solvent as sources of income are suspended. But it’s too early to say what the final upshot will be.
As things stand now (in May), how would you try to convince a foreign company to invest in Germany?
I would stress three things. The crisis has not destroyed Germany’s knowhow and economic structure, which are its main advantages over other countries and main reasons for foreign companies to invest here.
Moreover, the corona crisis shows how important it is for businesses to have broad foundations, and being a part of Europe’s largest market is a good way of doing precisely that. Additionally, the German government’s response shows that companies that do decide to set up shop in Germany can count on rational, swift and effective state leadership and assistance when times get tough.
What effect has the crisis had on your own efforts to attract foreign investment to Germany?
Interest across the various sectors is currently down between 15 and 20 percent. But from our conversations with investors and exchanges with other investment promotion agencies, we’re seeing that most investors have merely deferred projects, not cancelled them. That’s what we expected, but it’s still good news.
Experts think that global supply chains could be permanently altered by the corona crisis. In particular, the world’s industrial nations could try to shorten chains to suppliers. Is this a positive scenario for potential investors in Germany?
Here, we need to differentiate. Some expert groups like the IfM in Germany have come out strongly against any attempts to renationalize added-value and supply chains. That makes sense insofar as it’s questionable whether things can be produced profitably in one’s one country alone or whether it’s more competitive to divide value chains up into segments.
We can expect governments be taking a look at fundamental products and services critical to the functioning of the system and then deciding if they should influence the market in these areas. Ideally, in Europe, this would happen at the European level.
Finally, is there any particular area in Germany that you predict will emerge stronger from the corona crisis?
It’s hard to imagine that the medtech sector wouldn’t be strengthened by the current crisis. The world is looking to Germany right now for solutions to these enormous challenges, and Germany’s reputation for technical excellence and knowhow in this area has been reinforced. It’s no accident that American television stations are eager to interview the German Health Minister Jens Spahn to gain insights into the “German secret” in dealing with corona.
Beyond that, however, any businesses that focus on digitalization will likely stand to gain since the crisis has underscored the need for solutions that work remotely, without the need for face-to-face contact.