Commerzbank AG

The euro crisis has hit the Mittelstand (SMEs) real economy with worries about the development of sales markets and planning reliability. 72 per cent of the surveyed companies and as many as 75 per cent of the exporting companies state that the euro crisis not only lowers medium- and long-term planning reliability, but also has a negative impact on their own business activities. 63 per cent fear that the economy is weakening. These are the key results of the twelfth study by "Unternehmer-Perspektiven" ("Entrepreneur Outlook"), a SME initiative of Commerzbank, with the title "Good Debt - Bad Debt: Entrepreneurship in Difficult Times". In January 2012 TNS-Infratest surveyed the managing directors and owners of 4,000 medium-sized companies on the impact of the euro crisis and their attitude to debt. "German medium-sized companies are observing the consequences of the euro crisis with concern yet without any alarmism. The companies know that they have also profited tremendously from the euro in recent years," says Markus Beumer, a member of the Board of Managing Directors of Commerzbank AG and responsible for Mittelstand business. "That the euro crisis has had an impact in terms of economic psychology may be seen from the following example: In response to the question as to which consequences are feared when it comes to financing, nearly one third of the medium-sized entrepreneurs states worries about interest rates and the repayment of loans. And this although interest rates are currently lower than ever before," adds Beumer.

Reasons for excessive indebtedness are management errors and access to loans being too easy
As reasons for the financial emergency faced by the public sector and industry the surveyed companies stated management errors, excessive risk and a lack of financial know-how. On one particular point the companies are especially critical: 78 per cent of the respondents believe that one of the main causes of excessive indebtedness on the part of local authorities, federal states and sovereign nations is the fact that credit is too easy to obtain. Only 47 per cent of the respondents see this danger for the Mittelstand economy in contrast.

Lack of planning reliability becomes obstacle to investment
Debt and outside financing are regarded critically by the majority of entrepreneurs. 78 per cent agree with the statement "Debts increases risk for the company", whereas only 65 per cent share the view that investments are only possible through debt. A mere 24 per cent of the companies describe debt as the "driving force behind success". Even with investment financiers the proportion of those who initially consider the opportunities associated with borrowed capital is only marginally higher (31 per cent). Against this background the majority of respondents (54 per cent) replied to the question of constraints on investment with uncertain economic framework conditions. A lack of personnel and difficulties securing loans are stated much less frequently (38 and 17 per cent, respectively). Markus Beumer on this: "A credit institute such as ours has, together with its customers, to ask the question of how one can define a responsible attitude to debt so that the necessary investment in growth is not neglected as a result of risk aversion being too great." In line with the motto "Cash is King" 76 per cent of the companies use profits and reserves for financing, 75 per cent the cash flow. Medium- and long-term loans with a term of at least two years are utilised by 59 per cent of the respondents, 60 per cent use short-term loans to meet their funding needs. Alternative forms of financing such as factoring and risk capital are used by a comparatively small number of companies (less than 10 per cent).

Basel III only helps banks and the Mittelstand to a limited extent
In the view of the Mittelstand, banks are in a much more stable position than in the 2008/2009 financial crisis. Here in Germany there is much less worry about rising financing costs, greater difficulty accessing loans, the consequences of the implementation of Basel III, and the instability of banking partners compared to the developments on the markets and in the world of politics. "The differentiated view of the Mittelstand shows it is apparent that the reason for the current crisis is not so much regarded as errors in the financial industry but rather the high level of sovereign debt in Europe," says Markus Beumer.

The initiative "Entrepreneur Outlook" and the studies
"Entrepreneur Outlook" is an initiative of Commerzbank. Its objective is that of establishing a forum and platform for issues affecting medium-sized companies in Germany. The basis is formed by representative surveys of 4,000 medium-sized companies in Germany. The study results are discussed with representatives of industry, federations, politics, and academia - also on public podia - so as to create mutual understanding and develop sustainable approaches to the challenges facing the Mittelstand.

The complete study, as well as further information on the initiative, is to be found under www.unternehmerperspektiven.de. Please note the new website of the management of Mittelstandsbank at http://www.msb-management.commerzbank.de.

Press contact:
Martin Halusa: +49(0)170 8528638
Bernd Reh: +49(0)170 9143734

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About Commerzbank
Commerzbank is a leading bank for private and corporate customers in Germany. With the segments Private Customers, Mittelstandsbank, Corporates & Markets, Central & Eastern Europe as well as Asset Based Finance, the Bank offers its customers an attractive product portfolio, and is a strong partner for the export-oriented SME sector in Germany and worldwide. With a future total of some 1,200 branches, Commerzbank has one of the densest networks of branches among German private banks. It has around 60 sites in 52 countries and serves almost 15 million private clients as well as 1 million business and corporate clients worldwide. In 2011, it posted gross revenues of almost €10 billion with 58,160 employees.