How the revival in the Mittelstand after the Corona crisis can succeed
In the past months of the pandemic, Mittelstand policy was primarily directed at mitigating the acute consequences for the self-employed and entrepreneurs to limit economic and social harm. IfM Bonn recommend: Empowering companies now to start longer-term business development
Professor Friederike Welter (IfM Bonn/University of Siegen), Hans-Jürgen Wolter and Michael Holz (both IfM Bonn) suggest that Mittelstand policy should now focus on the period after the Corona crisis, even if the acute problems of Mittelstand still predominate and an end to the pandemic is not in view. After all, it is important to support companies in sustainable modernisation efforts, which also helps to strengthen them for future crises. The authors state that strengthening competitiveness, innovation activities, and change management are of special importance.
„The economic stimulus and future package launched in the summer of 2020 is already partly geared towards sustainable economic development based on regeneration. The measures mentioned there, such as the extended depreciation options for digital assets, the social guarantee 2021 or the tax regulations on declining balance depreciation and the extension of the loss reduction, fundamentally support the improvement of competitiveness,“ states Prof. Dr Friederike Welter (IfM Bonn/University of Siegen).
Even if departures from a strictly “regulatory framework policy“ (Ordnungspolitik) were initially justifiable due to the pandemic crisis’s enormous consequences, the support of already struggling companies, for example, whose prospects were already problematic before the Corona pandemic, should now be critically questioned. Otherwise, economic policy would risk spending huge sums of money on companies that would leave the market, in the long run, either way. On the other hand, it could distort to the detriment of sustainable start-ups with fresh ideas.
„In principle, Mittelstand policy should in the future concentrate on the principles of the regulatory framework policy and create favourable framework conditions for Mittelstand businesses,“ suggests the IfM president. As an example, she mentions the reduction of bureaucratic obligations to use their resources for strategic (re)orientation. Given the impending shortage of skilled labour, further instruments might support Mittelstand companies in the training and further qualification of their own workforce.
„However, it is also important to create framework conditions that enable insolvent companies and self-employed persons to re-start quickly. In this regard, the self-administered protective shield procedure (Eigenverwaltetes Schutzschirmverfahren) and the restructuring procedure (Restrukturierungsverfahren) are helpful for larger insolvent Mittelstand businesses. Simultaneously, the law on shortening the residual debt discharge (Restschuldbefreiung) facilitates re-starts for smaller Mittelstand businesses and the self-employed. Also, it could be examined to what extent the residual debt discharge, which was recently shortened to three years, can be further reduced,“ explained Prof. Dr Friederike Welter.
The background paper „SME policy during and after the Covid 19 pandemic“ is available on the homepage of IfM Bonn (www.ifm-bonn.org).