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Germany risks crisis, says chief of BoschBy Richard Milne in Frankfurt

Published: April 28 2008 03:00 | Last updated: April 28 2008 03:00

Germany risks falling into crisis because of government indecision over economic reform and loud demands from trade unions for higher pay and less flexibility, Franz Fehrenbach, chief executive of Bosch, has warned.

Mr Fehrenbach told the Financial Times that the "very dangerous mixture" of electioneering by politicians, higher wage deals and a push for a minimum wage came at the worst possible time as "the risks for 2009 grow every day" for the continent's companies.

"This mixture, I fear, could lead us into the next crisis. And that at the same moment when we face all the other problems in the economy," he said.

The starkest warning over reform so far by a German chief executive reflects unease across its business community over how little the government is doing to help at a time when growth prospects are under threat.

Mr Fehrenbach viewed Berlin's decision to raise pension payments as particularly controversial (he spoke of "electoral presents") and comes as unions become increasingly vocal, not just about pay - several deals have been above inflation - but also on flexibility measures such as temporary workers. Another chief executive of a leading German company said: "Germany is facing a perfect storm."

Bosch, which had revenues of about €40bn last year and is the world's largest car-parts supplier, is already feeling, in the US and Japan, the effects of the credit crunch, Mr Fehrenbach said, but "the rest is practically not affected". He expected world growth to be 3 per cent this year, one point lower than last year.

He warned that the focus on the euro/dollar exchange rate overlooked the yen, a more important currency for much of industry because of competitors in Japan. "The weakness of the yen is much more important [than the dollar] - especially for the European automotive industry," he said.

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