Job cuts to hit Germany following elections

Germany faces a potential wave of corporate restructurings, some of its top managers say, because companies have deferred job cuts to help ensure the re-election of a business-friendly government at next month’s federal elections.

Senior managers and institutional investors say there has been an implicit “pact” not to announce big job cuts ahead of the September 27 ballot.

“Germany is currently protected from change. But after the elections it’s normal that the messages will change,” Hakan Samuelsson, chief executive of Man, the German truck and engineering group, told the Financial Times.

The situation conjures up memories of the 2005 federal elections, where – just like this time – job security played a dominant role. One day after those elections, Siemens, Europe’s largest engineering group, cut thousands of jobs.

Business fears a left-leaning government would increase the burden on companies.

Henning Gebhardt, head of equities at DWS, the German institutional investor, said: “There has been a tacit agreement not to slash jobs, which will be dissolved after the elections.”

Economic data have raised hopes of Europe’s largest economy gaining momentum after a brutal downturn.

Germany’s purchasing managers’ index saw its biggest jump in 15 months in August, signalling unexpectedly brisk expansion.

Á study by IAB, a research organisation close to the German state, has claimed the country could avert drastic job cuts next year thanks to a scheme where the state pays a part of the wage bill for workers who are not made redundant.

“With a bit of luck, the world economy will pick up fast enough to come through the crisis without major job cuts,” Mr Gebhardt said, adding, however, that this was the less likely scenario.

Managers said that in industries such as engineering and cars, which form Germany’s economic backbone, overcapacity persisted

“You cannot solve this with short-time working schemes, as companies are suffering,” said Reinhold Würth, one of Germany’s best known entrepreneurs.

Mr Samuelsson said: “Germany is losing time when it comes to the necessary restructuring. The US is faster in adapting and has already switched from producing the Hummer to making iPods.”

Some chief executives voice frustration with the lack of reforms by Angela Merkel, chancellor, who has been constrained by her conservative party’s coalition with the Social Democrats in the past four years.

Even so, most favour what now looks like the most likely outcome of the polls: a coalition between Ms Merkel’s party and the liberal democrats.

Source: FT

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