Focus on Germany London Office July 2009 Save jobs or drive structural change forward? Ten theses on industrial policy in the economic crisis In the face of the most serious economic crisis for 80 years, calls for state sup­port for sectors of industry and individual companies are growing ever louder. The list of companies which have applied for state assistance is growing. Con­fronted by these developments, decision-makers are in a fundamental dilemma: Should they“save jobs or drive structural change forward?". The working group on“Modern Industrial Policy” of the Friedrich-Ebert-Stiftung, led by Germany’s former Finance Minister Hans Eichel, has produced a short position paper with precisely that title. The authors, Alfred Pfaller and Philipp Fink, recommend care­ful consideration of any decision involving the issue of state assistance. The central point which must be faced is whether the struggling company could still compete in the market, irrespective of its current liquidity problem. Alfred Pfaller and Philipp Fink* 1) The economic crisis represents an exter­nal shock for companies The current economic crisis is caused by two complexes, which are affecting companies like electric shocks: • the withdrawal of credit facilities, trig­gered by the bursting of the“bubble” which had formed in previous years on the American property and financial markets • a drastic, self-reinforcing reduction in global demand, stemming from * Dr. Alfred Pfaller works free-lance. Philipp Fink chairs the working group on modern industrial pol­icy of the Friedrich-Ebert-Stiftung. drastic losses in assets as a result of falling prices in the shares and prop­erty markets, the withdrawal of credit facilities and a general pessimism about the future. Companies are getting into difficulties be­cause on the one hand banks were restricting the amount of credit they were offering, or charging a good deal more for it, and on the other hand, because the collapse in global demand led to a drying up of orders, sales and revenues. Both of these problems can bankrupt companies. If the production capaci­ties are not then taken over by owners who are in a stronger financial position, the col­Friedrich-Ebert-Stiftung London Office 66 Great Russell Street London WC1B 3BN Phone+44(0)20 7025 0990 Fax+44(0)20 7242 9973 e-mail website info@feslondon.org.uk www.feslondon.org.uk