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German Mittelstand Companies Expect Worse to Come in Euro Crisis

Germany’s small and medium-sized companies, the backbone of Europe’s biggest economy, are bracing for the debt crisis to worsen, a survey showed.

Seventy-nine percent of Germany’s “Mittelstand” companies anticipate greater turbulence in the economy as policy makers fail to stem the debt crisis, the August poll commissioned by Ernst & Young LLP showed. While an equal portion said they’re better able than competitors to weather a worsening crisis, 93 percent said they’ve made no preparations in case states exit the euro or the currency collapse.

“Germany’s Mittelstand companies are right now fighting their own corners with success -- the picture darkens a few months down the line,” said Peter Englisch, who leads Ernst & Young’s Mittelstand unit, in presenting the survey to reporters in Berlin today. “Clearly, the companies think they have no influence to prevent the breakup of the euro.”

The survey of 700 companies with annual sales of as much as 100 million euros ($126 million) highlights the competitiveness of Germany’s “hidden champions” in exploiting global niche markets from software to car parts and specialist chemicals while the outlook for the wider economy dims. Ninety-two percent of those surveyed described their business situation in August as quite good or good.

More Negative

Whereas 69 percent of respondents in Ernst & Young’s January survey of the Mittelstand said they expected the economic outlook to remain stable or worsen, the figure jumped to 89 percent in August. The German government expects the economy to grow 0.7 percent this year following 3 percent growth in 2011.

“It’s frightening how rapid the general picture is clouding in this country as seen through the eyes of the Mittelstand,” said Englisch. “Their ability to decouple their own outlook from that of the wider economy is -- looking a couple of months down the road -- evaporating.”

The biannual poll was completed on Aug. 12 and surveyed companies in branches including services, trade and industry. Small and mediums-sized companies account for 95 percent of all Germany’s companies, 61 percent of the country’s workers and about 40 percent of all annual sales, according to the Bonn-based IfM research institute.

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