German businesses fear far right success will scare off much-needed workers

The far right’s landmark victory in a regional German election last weekend wasn’t just a slap in the face for the federal government in Berlin: It was a disaster for a business and financial establishment trying to stop Germany’s economic decline.
The far-right Alternative for Germany (AfD) won the popular vote in the state of Thuringia and claimed a strong second place in neighboring Saxony. The party ran on a fiercely anti-immigrant platform, energized by a mass stabbing in the western German town of Solingen in August, in which a 26-year-old Syrian refugee facing deportation killed three locals. Islamic State subsequently claimed responsibility for the attack.
The public uproar that followed sparked a new package of measures cracking down on illegal migration, while officials from all parties rushed to talk tougher on the issue. But that wasn’t enough to stop the AfD’s advance.
The risk is that politicians will now borrow more of the AfD’s ideas and rhetoric on immigration to stop losing more voters. However, while Germany’s politicians are free to shift their stance to secure reelection, business and finance have no magic remedies for the problems that it will cause. 
The Bundesbank, whose president Joachim Nagel has been a loud and passionate advocate for immigration, has repeatedly stressed the need for it to address an alarming decline in Germany’s workforce. The Bank reckons that by 2026, Germany will be losing more workers to retirement every year than it gains from immigration, even at the current high rate.
Marcel Fratzscher, president of the DIW think tank in Berlin, pointed out that the shift in rhetoric since Solingen shows severe cognitive dissonance.
“To claim that we are now overwhelmed and have to deport on a large scale and then at the same time say that we need immigration is a fundamental contradiction,” Fratzscher said. “No wonder people no longer believe politicians.”
The Bundesbank is supposed to be neutral, above the fray of party politics. But that hasn’t stopped Nagel from weighing in repeatedly about immigration — and about hostility toward immigrants. On top of the dry statistical analysis, he conspicuously took part in one of a series of demonstrations across Germany against right-wing extremism earlier this year.
Nagel — a member of Chancellor Olaf Scholz’s Social Democratic Party (SPD) — styled his actions as a constitutional issue, rather than a party political one, and he repeated that position on Tuesday in an interview with the Frankfurter Allgemeine Zeitung, saying he was “very much troubled” by the weekend’s election results.
“Democracy, freedom, openness for people from other countries — these are central values,” Nagel said. “If they are put in question, then we as the Bundesbank can’t ignore that: We have to position ourselves clearly.” The Bundesbank declined to comment further for this article on the evolving political debate.
Nagel has plenty of allies, especially in business circles. Its blue-chip names, led by Deutsche Bank, Siemens and BASF, supported a national campaign called “We stand for values” ahead of the European Parliament election this year, alarmed by signs that the rise of the far right will scare off both workers and investors. 
Deutsche Bank CEO Christian Sewing said at the time that “investors are looking at what is happening in Germany with increasing skepticism,” and that he was having to field questions about the stability of German democracy more and more often. 
A study of businesses and employers’ associations by the Cologne-based Institute for Economic Research last year suggested that this threat will get more and more serious with time. While only 28 percent of respondents said a strong AfD makes it more difficult to recruit foreign skilled workers in the short term, that share rose to over 60 percent when the question was applied to the long term.
“We have to assume that workers with a migrant background will be deterred by the AfD’s electoral success,” Clemens Fuest, president of the Ifo research institute, told POLITICO.
And, as the politicians know too well, it’s already hard enough to find willing staff. 
“Already today, you cannot imagine the restaurant and hotel sectors, nursing homes and hospitals without foreign workers,” the SPD’s Hannes Walter, deputy chairman of the Bundestag economic committee told POLITICO, pointing out that, at the end of last year, nearly one-in-six of those who pay into Germany’s social insurance systems were foreign nationals. 
Walter’s committee colleague, the pro-business Free Democratic Party’s Reinhard Houben, agrees that “there’s just no way around regulated migration” to address the lack of skilled labor. 
The problem is particularly acute in Germany’s eastern regions where the AfD performed so strongly at the weekend, according to analysts at Scope Ratings. They estimate that, modeling for slower immigration, Saxony’s working-age population would decline by around 0.5 percent a year through the end of this decade, while Thuringia’s would shrink by 1.1 percent a year, almost three times as fast as the national average.
The AfD, for its part, argues that the country needs to focus more on making life better for its own native talent. Its economic spokesman Leif-Erik Holm told POLITICO that 270,000 skilled workers leave Germany every year. This is a point that most of its opponents and the Bundesbank acknowledge — they just don’t frame it as an alternative to immigration.
“High immigration doesn’t automatically create economic growth,” Holm said. “We have had record immigration numbers for years, but our economy is still shrinking and the skills shortage across all professions hasn’t been reduced.” This, he argued, is “because a large part of that immigration ends up in the social system and not in the labor market.”
Part of Nagel’s, and the Bundesbank’s, problem is that the other, easily identifiable, alternatives to plugging the labor force gap are just not vote-winners. Lengthening the working week goes against a long-standing aspiration of the SPD, in particular (the opinion poll that says Germans would be happy to reduce immigration by working longer hours has yet to be published). Successive governments have dragged their feet over raising the retirement age, which is now set to rise gradually to 67 by 2031.
As a result, more and more companies are simply admitting defeat. Even the country’s national carmaking champion Volkswagen implicitly admitted earlier this week that it can’t square the circle of satisfying its customers and a German workforce that has gotten used to putting a scarcity premium on its labor. It’s now looking at shutting German plants for the first time in its history.
Deutsche Bank’s Sewing drove home the point at a conference in Brussels on Wednesday, saying that: “More growth in Germany will come only if we also change our attitude to work; if we are prepared to work differently, but overall to work more and harder.”
Sewing said that EU citizens work about 34 hours a week on average compared with about 28 in Germany.
“We won’t manage it with an average of 28 hours per week and a pension at 63,” he said.
Carlo Martuscelli and Elena Giordano contributed to this report.