German Mittelstand to Be Europe’s Locomotive in 2013, DSGV Says

Germany’s small- and medium-sized companies, the so-called Mittelstand, will drive Europe’s economy this year and growth will be stronger than some economists predict, according to the country’s DSGV savings banks association.

“The German Mittelstand will be the economic locomotive in 2013 in Europe,” DSGV President Georg Fahrenschon said in a speech in Frankfurt today, referring to the companies that generate about half of Germany’s gross domestic product. Last year “was better than expected and 2013 will be better than feared,” he said. “We don’t see a bad fourth quarter causing sustained uncertainty.”

The German government forecasts economic growth will slow to 0.4 percent this year from 0.7 percent in 2012 as austerity policies in cash-strapped euro-region countries and cooling world trade damp exports. The European Central Bank predicts the 17-nation euro economy will contract 0.3 percent, with countries such as Spain and Italy mired in recessions.

Fahrenschon said he expects higher growth rates than some economists because European states have become more competitive and German companies plan to make investments.

The countries that share the euro must continue budget consolidation efforts to “stabilize” the currency, said Fahrenschon, a former finance minister in the state of Bavaria.

The ECB must also “begin to exit the low interest-rate phase in the foreseeable future” as the current situation reduces incentives for governments to cut spending and for consumers to save money for their future, he said.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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