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Last Updated: Wednesday, 23 August 2006, 22:57 GMT 23:57 UK
The family firms that drive Germany
Tristana Moore
Berlin correspondent, BBC News

Bakers at the "Braune" bakery
Baker Werner Gniosdorz is keeping up the Mittelstand tradition

It's lunch-time, and the bakery is full. There's a constant stream of customers, who wander in and out of the shop.

"Most of our customers have been coming here for years," says Werner Gniosdorz.

"We have a wide range of products, including different kinds of bread, buns and cakes. Our customers trust us because we have an established reputation.

"Family firms are very important in Germany, and they represent a considerable part of the economy."


Mr Gniosdorz runs a small, successful company, which was founded in 1853. For more than 150 years the "Braune" bakery has been run as a family-owned company.

He inherited the company from his father in the summer of 1989, just before the fall of the Berlin Wall, and since then the firm has expanded. It now employs more than 20 people.

Mr Gniosdorz says he used to be upbeat about the German economy, but he now feels that Chancellor Angela Merkel's coalition government has done little to support small and medium-size companies.

Inside the "Braune" bakery
Mittelstand companies provide 70% of the country's jobs

"I don't think the government cares," he says. "When a big company closes, then politicians wake up, and they make a big fuss about how many jobs are lost.

"But when a hundred small or medium-size firms shut down, no-one seems to care."

Mr Gniosdorz says one of the biggest challenges facing his company is dealing with bureaucracy.

"Despite the government's promises, red tape is a huge obstacle," he says.

"There are so many regulations and they hamper our business."

But when it comes to trying to secure a bank loan, that is relatively easy, says Mr Gniosdorz.

"We don't need to get any kind of credit, but even if we did, I don't think it would be difficult," he says.

The economy's backbone

According to many experts, Germany's Mittelstand, comprising small and medium-sized companies, still form the backbone of the economy, as they have done since the World War II.

"There's no doubt that Mittelstand companies play a very important role in the German economy," says Professor Frank Wallau, from the Bonn-based Institute for Mittelstand Research.

It isn't just about earning money. We also have a history of social responsibility
Werner Gniosdorz
Berlin baker

"Mittelstand companies provide 70% of the country's jobs, and 80% of apprentices work in these firms so they also provide vocational training.

"Most small to medium-sized companies are family-run, and they seem to be flourishing. Members of a family manage and own the company and so they have a stake in the business."

'Niche markets'

According to figures compiled by the Institute for Mittelstand Research, there are some 3.4 million small and medium-sized companies in Germany, with up to 20 million employees.

Some of the companies are very small, but the most successful tend to be highly specialised and they often command a niche market.

Families who have worked hard for their living and provide employment should be admired
Leven Brown, Edinburgh

Many companies had high hopes that Mrs Merkel's coalition government would introduce tough economic reforms.

But those hopes have so far been dashed.

Markus Straube runs a decorating company in Berlin.

The business was set up by his grandfather and it is now run by the third generation of the family.

"Chancellor Merkel promised to cut non-wage labour costs during last year's election campaign, but once she was elected Chancellor, nothing changed," he says.

"I feel completely frustrated.

"We end up getting fewer orders because our work becomes more expensive for customers. It's difficult for us to compete with foreign companies, for example firms in Poland, who offer the same services and don't have such high costs."

Emotional bonds

Family firms in Germany pride themselves on being flexible and dynamic.

Yet some firms feel that their interests are often neglected by governments.

"Politicians only care about larger companies, because the bigger firms have powerful lobbies, which we don't have," Mr Straube says.

Many families who own firms say they are not always concerned about profits or financial considerations. Emotional involvement is also important.

"It isn't just about earning money. We also have a history of social responsibility, "says Werner Gniosdorz, the baker.

"We provide jobs and we're important for the local economy. But we're not just employers, we also have links with customers and therefore also with society as a whole.

"We advise people, if they have financial problems, or they have other issues which they want to discuss.

"You can't just measure that in terms of revenue. It's an invaluable service. Even here in my company, we all sit down around the table each lunchtime and we discuss everything."

It seems that old traditions in Germany die hard.

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