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German banks keep faith with the Mittelstand

The country’s SMEs have not suffered from the credit drought that has hit some other western economies. Things might get harder as the economy picks up, but lenders to the Mittelstand appear eager to stand by their customers. Philip Moore reports.

MUCH LIKE GERMANY’S economy, Bonn’s central station and its immediate surroundings have seen better days. So too has the small building squeezed between a travel agent and a bio-supermarket on Maximilianstrasse, a stone’s throw from the station. As well as housing a language school, these premises are the surprisingly modest headquarters of the Institut für Mittelstandsforschung (IFM). Funded chiefly by the federal and North Rhine-Westphalia governments, the IFM has since 1957 been the principal source of research on Germany’s celebrated Mittelstand, the mass of small and medium-sized companies frequently described as being the backbone of Europe’s largest economy.

There are about 3.7 million of these companies, according to Norbert Irsch, director of economic research at development bank KfW, which categorizes Mittelstand enterprises as those with a turnover of up to €500 million. Irsch says that this group of companies accounts for about 35% of all investment in the German economy and for 55% of all investment by the corporate sector. "Mittelstand companies invest heavily and account for a disproportionately high share of job creation in Germany," says Irsch.

Huge social costs

In December 2009, after 15 years at the University of Cologne, Johann Eekhoff succeeded Udo Koppelmann as the IFM’s president.

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