Why German Companies Leave Home

The business climate in Germany is deteriorating fast. The Social Democratic government of Chancellor Gerhard Schroder is proposing to lower taxes on large corporations, the most heavily taxed in Europe (top rate of 47%, compared to 30% for Britain). But it may be too little, too late. IG Metall just won a significant wage increase, a move that's likely to boost the cost of labor in most of the country. With inflation practically at zero and pricing power virtually nil, Germany Inc.'s profits are being squeezed. The result? Whether there are tax cuts or not, a growing number of German companies will continue to shift investment outside the country.

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