Thomas White Global Investing
Germany Stamp
May 11, 2012
A Postcard from Europe
Germany: Extending a helping hand to southern Europe

German growth machine

Germany’s export-oriented industries, badly in need of engineering talent, are benefiting from the educated workforce in southern European economies such as Spain and Portugal who are willing to migrate.

Depending on which side of the border you are on, you may call it a sign of increasing Euro-zone competitiveness or a case of brain drain. While much of southern Europe is reeling under soaring unemployment rates, Germany, the bulwark of the European Union, has rescued these troubled economies by providing jobs to those educated workers who are willing to migrate. Notwithstanding the charges, the exodus in the search of jobs actually works to the advantage of countries such as Spain, which are reducing entitlement payments and other welfare measures to tide over the recessionary conditions.

Though facilitation of free movement of labor was one of the professed aims of the European Union when it was founded, people from the east and south of Europe had never felt the need to move when their economies were in good shape. However, the Euro-zone crisis and the ensuing recession in many of these economies made many of them do a rethink. Still, a New York Times article points out that many of the southern Europeans who migrate to the German border towns in search of jobs find it difficult to adjust as the language and culture are different.

It is well-known that Germany’s export-oriented economy is powered by the Mittelstand, the country’s small and medium-sized family enterprises. Though the health care and hospitality sectors have plenty of jobs to offer, for obvious reasons, engineers are the most sought after in the country’s vibrant manufacturing sector. To put things in perspective, the number of immigrants to Germany stood at a whopping 240,000 last year, according to the NYT.

Still, until recently, the unemployed in countries such as Spain faced many challenges, both internal and external. The Economist points out that Europe’s linguistic diversity deterred potential job-seekers from moving across their country’s borders. Demographic reasons also factored in, as elderly workers with less working years left would hesitate to move. After the establishment of the EU in 2004, higher incomes tempted Eastern Europeans to migrate west to European economies such as Germany. However, with the creation of the Euro-zone, the salaries became more constant, and together with lavish unemployment benefits doled out by welfare states such as Spain, people were encouraged to stay back. That was then. The present day reality faced by the likes of Spain and Italy, which have been forced to adopt fiscal austerity measures, has compelled their citizens to seek livelihood beyond their countries’ borders.

The issue of immigration has already touched a nerve with the parties concerned: migrants, governments, as well employers. The economies of Germany and Spain are examples. While no one doubts that the process benefits both parties at the moment, there are concerns in Spain that the money spent on training people who will eventually move on to seek employment elsewhere is national expenditure gone to waste. Likewise, German worries center around the fact that these trained engineers and health care professionals may chose to go back home once economic conditions improve. Expenditure concerns ring in Germany also as they too have to spent quite a bit to train these foreign workers.

No one is sure how long the debate concerning laborers sans borders will go on. One thing though is sure. The migration across borders in search of employment, though prompted by dire economic conditions, is likely to have a long-lasting effect on the way people work and live across the European Union as well as the Euro-zone in the future. If that happens, Germany and Spain could justifiably stake their claim as the ones who set the ball rolling.

Image Credit: AbhijeetRane on Flickr under a Creative Commons License

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