The Volkswagen factory in Dresden, Germany, is one of the potential casualties of ongoing … [+] deindustrialization due to the country’s economic conditions. The company now says it won’t close, but it is looking at “alternative options” for its future. (Photo credit: JEAN-CHRISTOPHE VERHAEGEN/AFP via Getty Images)

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A consortium of German manufacturing SMEs has mobilized in attempt to prod the nation‘s policymakers to do a major course correction. The Initiative Zukunft Wirtschaft Deutschland e.V. (Initiative for the Future Economy of Germany), was formed in 2023 and is led by Andrea Thoma-Böck, its founder and president. IZW is a nonpartisan nationwide foundation calling for improvements to the country’s economic policies, focused especially on the needs of small to medium-sized enterprises and family-owned businesses.

Thoma-Böck is managing partner at Thoma Metallveredelung GmbH, which employs about 130 people in Heimertingen, putting her on the front lines of the SME challenges. The company specializes in galvanic metal coatings and is a pioneer in environmentally friendly galvanizing technology.

SMEs like hers form the backbone of Germany’s industrial base. As Michael von Liechtenstein, founder and chairman of Geopolitical Intelligence Services AG, said recently in his own interview with Thoma-Böck for the European Center of Austrian Economics Foundation, “Midsized companies in Germany contribute over 60 percent of total increased value and provide 55 percent of jobs, making them a vital driver of innovation and productivity.“ The continuing torrent of gloomy economic news, which makes competing globally ever more difficult, puts these companies under increasing strain.

BERLIN, GERMANY – DECEMBER 16: German Chancellor Olaf Scholz reacts during the debate to face a vote … [+] of confidence at the Bundestag on December 16, 2024 in Berlin, Germany. Scholz requested the vote be held following the collapse of the three-party federal coalition in November. (Photo by Carsten Koall/Getty Images)

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Deindustrialization in Germany, which I reported on a year ago, involves even the biggest players, and is accelerating as the economy continues to struggle. It is now forecasted to contract in 2025 for the third year in a row. Those difficulties contributed to the recent collapse of the governing coalition, with new elections set for next month. The decline of industry has been highlighted in recent months by the cutting of 11,000 jobs by leading steelmaker ThyssenKrupp and by Volkswagen‘s announcement of 35,000 job cuts by 2030 amid an investigation of “alternative options” for its factories in Dresden and Osnabrück.

For Thoma-Böck, enough is enough. “The current economic crisis has moved on from German industry to almost all areas of life in Germany,” she told me via email. “For industry and craft businesses, it is mainly high energy prices, availability of raw materials, lack of skilled workers, excessive bureaucracy and micromanagement by German and European regulatory authorities that are stifling companies. Normal entrepreneurial activity is hardly possible anymore.”

One of her biggest frustrations is the seeming inability of the country’s leaders to course-correct after years of dismal economic results. “Political convictions are placed above facts and therefore above reality,” she explained. “Actual consequences of political decisions are largely ignored and, where possible, only data that could still fit one’s own expectations are taken into account.”

She believes one of the main contributors to the problem is the lack of real-world experience among the country’s ruling class. “Hardly any of the leading politicians and ministers have ever worked in a private business under market conditions,” she said. “Some do not even have any professional training. It is now taking its toll that for years political positions were almost exclusively filled by party members, completely regardless of their professional qualifications. How can it be that an economics minister has virtually no economic experience or knowledge? Or that a foreign minister has no diplomatic background? The consequences are obvious and have plunged Germany into a deep structural crisis.”

Another difficulty is the complication of the country’s serving two masters, with both the national government and the EU contributing to the problems.

Andrea Thoma-Böck, founder and president of The Initiative Zukunft Wirtschaft Deutschland e.V.

Image courtesy Andrea Thoma-Böck

“European law takes precedence over national law,” said Thoma-Böck. “Legislative initiatives at the European level are usually launched by the Commission. For example, the Green Deal, which was unilaterally announced by the President of the European Commission, is a playground for ideology-based positions which could not be upheld if contrasted with reality… But, of course, there are also wrongdoings of purely German origin. The energy transition is the best example of where all neighbouring countries, Europe and the world as a whole only smile at us with pity or are now even openly opposed to us.”

When it comes to achievable and practical solutions, Thoma-Böck acknowledges that the list is long. “This much can be said,” she offered. “Tinkering with symptoms and escaping into unrelated battlefields must urgently give way to a targeted, competency-, knowledge- and fact-based sustainable policy. But the possibility of implementing technical innovations across the board will also depend on the availability of skilled workers. This in turn depends on demographics. At the same time, their additional training leads to shortages in other areas. However, there are some fundamental aspects where something has to change so that the situation as a whole can improve.”

Her list of priorities includes the following points:

The key selection criteria for decision-makers must be professional competence. Reality must come before ideology again.
The state must return to its position as a guarantor of suitable framework conditions. It should not be an entrepreneur, but rather create a framework enabling entrepreneurship, value creation and prosperity.
Like every company and every citizen, the government and its various administrations must handle finances more carefully. Before incurring new debt, it must be clarified whether there are any unnecessary expenses.
In general, bureaucracy must be reduced.

Thoma-Böck remains adamant that change must come regardless. “The economy is not an objective in itself, but without a proper economic base, nothing can be achieved at all,” she said. “Doing the same thing over and over again and hoping for new results every time is the definition of madness. Change requires the voices of entrepreneurs, who have been far too quiet for far too long. The lack of courage to show boundaries is partly responsible for this situation. We should learn a lesson from this. Therefore, speaking out and taking a stand is the order of the day in the future.”

This article was edited to ensure its non-partisan content.