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Amid Eurozone Crisis, How Germany Became Europe’s Richest Country

February 8, 2012 at 12:00 AM EST
As European debt crisis negotiations approach the 11th hour on yet another bailout for Greece, Margaret Warner reports on some of the people behind the economic success of Germany -- Europe's richest country.
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JUDY WOODRUFF: And to Europe’s debt crisis.

Negotiations are going down to the wire on yet another bailout for Greece, one that would require German help.

From Germany, Margaret Warner reports on some of the people who help make it Europe’s richest country.

MARGARET WARNER: The Restaurant Dionysos was packed on a recent night, heaping plates of Greek fare flying from kitchen to table. But at this eatery named for the God of wine, the drink of choice is German beer.

The Greek-born owner spent years building this showcase of his homeland’s cuisine for Frankfurt diners. But now the economic crisis in Greece and demands that Germany act as financial backstop to Europe has him wishing his old home behaved a little bit more like his new one.

CHRISTOS KEZETZIDIS, owner, Dionysos (through translator): In Greece, it’s a totally different world. I came here to work. In Germany, there’s just more order and they do more work.

MARGARET WARNER: That work ethic is forged at places like the Herrenknecht factory in Germany’s booming Black Forest region. Owner and founder Martin Herrenknecht grew up in a tiny village here, the son of an upholsterer.

MARTIN HERRENKNECHT, chairman, Herrenknecht, A.G.: My dream was always to have more people employed than my father. My father had 12 people.

MARGARET WARNER: More than 4,000 people work for him, from young apprentices learning to shape metal to master craftsmen constructing the subterranean ground-eaters built here, tunnel-boring machines that can cost tens of millions of dollars.

The secret to Germany’s success lies in small-to-medium-sized family firms like this one that manufacture some highly specialized and indispensable piece of equipment. The Germans like to say, we make the thing that goes inside the thing that goes inside the thing.

In Herrenknecht’s case, it’s a very big thing. Some weigh thousands of tons. Projects from the Beijing subway to New York’s Second Avenue line to a train bed under the Alps all exploit Herrenknecht’s indispensable feature cutting head that can readjust to any material on the spot.

The founder credits much of his success to the centuries-old mechanical aptitude and ingenuity of the workers of his region.

MARTIN HERRENKNECHT: Before, let’s say 300 years, we built cuckoo clocks and, today, we build tunnel-boring machine. So we changed from the . . .

MARGARET WARNER: From cuckoo clocks to tunnel . . .

MARTIN HERRENKNECHT: To tunnel-boring machine.

MARGARET WARNER: . . . to tunnel-boring machines. That’s quite an evolution.

(LAUGHTER)

MARGARET WARNER: Most of Herrenknecht’s $1.25 billion in sales are worldwide, helping make Germany an export powerhouse.

With just a quarter of America’s population and a quarter of its GDP, Germany exports more than the United States in total, notes Norbert Walter, the former chief economist of Deutsche Bank.

NORBERT WALTER, former chief cconomist, Deutsche Bank: We Germans have 1 percent of the labor force of the world, and we have 10 percent of the exports in the world. That gives you an idea of how successful and how oriented towards international markets we are.

MARGARET WARNER: The 10-year-old common European currency also helps. A third of Herrenknecht’s sales go to other Eurozone countries, and pricing his machines in euros, rather than what economists say would be a far stronger deutsche mark, makes them more competitive abroad.

MARTIN HERRENKNECHT: If we were to have 17 different currencies, can you imagine every morning, I should study what is now, let’s say, our relation to the Swiss — to the French francs, to the peso, to the lira? I couldn’t work like this.

MARGARET WARNER: We’ve come to Germany to find out why it’s doing so much better than its European partners. And part of the reason can be found here, in the southwest state of Baden-Wurttemberg. The castle behind me may date from the 1700s, but the economic model they’ve developed here is 21st century-plus.

Just outside the state capital, Stuttgart, is another one of Baden-Wurttemberg’s high performer, Trumpf. Customers from Harley-Davidson to Apple buy its laser-driven metal cutting machines, $2.7 billion worth last year.

The family-owned firm devotes 8 percent of revenues to R&D to keep its innovation edge. They invest even more in their 9,000-person work force, more than half here in Germany. Like most German industries, Trumpf hires them young, after the equivalent of 10th grade, for a rigorous three-year training and schooling program and a full-salary job afterward. Most stay far longer. And after college, paid for by the company, some go on to become managers.

Apprentice Simon Richter is 19.

SIMON RICHTER, Trumpf: I applied for being — training because, yeah, I like the mechanical work, and not only the theoretical stuff at school. It’s so always the same at school, and you don’t know what do you need math for in your life later.

MARGARET WARNER: So do you think you have a good future ahead of you?

SIMON RICHTER: Yes, I have.

MARGARET WARNER: Trumpf keeps the apprentice program going even in hard times, as when the 2008 global financial crisis melted down the company’s sales.

NICOLA LEIBINGER-KAMMULLER, CEO, Trumpf: It just hit us. Really went from one hour to the next, we didn’t have any orders. At the same time, all over the world, no order. That was really cruel.

MARGARET WARNER: CEO Nicola Leibinger-Kammuller watched as sales plummeted 40 percent in two years, and she had to drastically cut production. For most firms, that would have meant layoffs, but not here.

NICOLA LEIBINGER-KAMMULLER: It’s just a terrible thought having to lay off people, because we like our employees and we need them. And they are well-trained, and they’re loyal. And they have been working for us for decades, some of them, or many of them have. And it’s just a terrible thought to have to send them away.

MARGARET WARNER: Instead, Trumpf turned to a new German program called Kurzarbeit, or short work, cutting its employees’ work hours and pay. The government made up part of the difference. And they got extra training on their off-days.

Judith Schonemeyer and Sebastian Frederick say they didn’t mind reduced wages. At least they kept up their skills.

JUDITH SCHONEMEYER, Trumpf (through translator): We noticed that the financial figures were declining. Right from the beginning, it was clear. For me, it was one or two days a week I didn’t work. We accept less money, so that once the situation improves, we won’t have to start over again.

SEBASTIAN FREDERICK, Trumpf (through translator): It gave us a secure feeling, especially the people with families, that they have job security, that the company stands behind them and that you get to keep your job. So everybody was happy to do without the 5 percent or extra hours.

PETER LEIBINGER, vice chairman, Trumpf: The desire for security and safety is the most, so to speak, the strongest driver in German culture.

MARGARET WARNER: Nicola’s brother, Peter Leibinger, vice chairman of Trumpf, said the short work program, readily accepted by the German workers, positioned industry to restart quickly after the downturn, and it paid off big-time for Trumpf.

PETER LEIBINGER: If we hadn’t had this opportunity to use Kurzarbeit, we wouldn’t have had the upswing that we saw, meaning 50 percent growth within one year for a company that makes a very difficult and complicated product and has to deliver that into the world. This wouldn’t have been possible without us having our work force on board.

MARGARET WARNER: The Leibingers’ financial caution also helped them weather the global credit crisis. Trumpf carries no major debt, they say, and in good times, they bank the extra profits to reinvest later.

NICOLA LEIBINGER-KAMMULLER: No yachting, no, no horses, no racing cars and stuff like that. And that’s why usually we have enough money to reinvest with our money for research and development and buildings and acquisitions and so on and so forth.

MARGARET WARNER: But even Trumpf is feeling a chill wind now from other E.U. countries, who account for half its sales. Since the euro crisis hit big last summer, there’s been a slowdown in orders from customers in Italy and Spain and even France.

PETER LEIBINGER: They said, we’d like to invest, we could use the extra capacity, but we’re just so unsure about the future, we’re going to wait for awhile.

MARGARET WARNER: Martin Herrenknecht, with his European customer base, is torn over what to do about the crisis. This self-made man is frustrated that Germany is being asked to bail out less prudent and hardworking neighbors.

MARTIN HERRENKNECHT: It’s nonsense. They should control it in a better way. And it cannot be that we get retirement with 67 and the Greeks with 50.

MARGARET WARNER: But then there’s economic reality.

Do you think that Germany is going to have to help support some of these countries?

MARTIN HERRENKNECHT: I would say that’s quite clear.

MARGARET WARNER: That tension, how to shore up the euro zone on which Germany depends, without endangering its own hard-won prosperity is one the Germans haven’t yet resolved.

GWEN IFILL: In her next report, Margaret looks at the roiling debate in Germany over whether and when to shore up its indebted neighbors.