GERMAN ECONOMICS MINISTER: SMALL IS GOOD

C O N F I D E N T I A L SECTION 01 OF 02 BERLIN 000085

SIPDIS

STATE FOR EUR/CE (HODGES, SCHROEDER)
COMMERCE FOR AGORSHENIN

E.O. 12958: DECL: 01/21/2110
TAGS: ECON EIND GM PGOV
SUBJECT: GERMAN ECONOMICS MINISTER: SMALL IS GOOD

Classified By: ECONOMIC MINISTER COUNSELOR ROBERT POLLARD. REASONS: 1.4
(B) AND (D)


1. (U) SUMMARY. Germany's new Minister for Economics and
Technology, Rainer Bruederle (Free Democratic Party - FDP),
is a strong proponent of the market economy with a policy
agenda focused on strengthening small and medium-sized
enterprises (SMEs) and competition. His principled stand
against federal assistance to GM/Opel has attracted strong
criticism from states where the carmaker has a presence.
Despite exploding federal and state deficits, Bruederle is
the chief advocate within the new German government of tax
cuts. His first major policy initiative is a new anti-trust
law to give Germany's federal cartel office the power to
break up companies whose market dominance hinders
competition. Bruederle plans his first visit to Washington on
February 1 and 2. END SUMMARY.


2. (SBU) Rainer Bruederle (64) has been Deputy Caucus Chief
and Economic Spokesman of the pro-business FDP in the
Bundestag since 1998. He served as the Rhineland Palatinate
(R-P) Economic Minister from 1987 to 1998, where he strongly
promoted wine-growers, trade, and small and midsize business.
Since 1983 he has been state chairman of the FDP in R-P and
a member of the National Executive Committee, and since 1995
Deputy National Chairman. Bruederle is still among the most
popular and respected politicians in R-P, despite his
departure to Berlin years ago, and is present at every R-P
FDP state convention. Bruederle is a trained economist and
has taught economics at various universities.


3. (SBU) Bruederle likes being called "Mister Mittelstand"
(Mr. SMEs),and high-ranking officials at the Economics
Ministry confirm that his main focus will be on strengthening
SMEs and creating a level playing field for them to compete
with big multinationals. Bruederle has moved sections of the
Economics Ministry that deal with issues important to SMEs
closer to his own office (bureaucracy reform, deregulation
policy, and regional projects) and announced steps to help
SMEs suffering from the looming credit crunch. The German
Mittelstand is vital: SMEs make up 99.7% of German companies
and employ 70.5% of all German workers, according to the
economic think tank IfM (The Institute for Mittelstand
Research) in Bonn.


4. (SBU) Bruederle has vocally opposed state aid for
Opel/GM, both as (opposition) FDP economic spokesperson under
the old government and as the current Economics Minister. He
has used the debate over state aid for Opel to emphasize his
general opposition to government help for big companies. He
is a strong advocate of free markets and fair competition.
His first major policy initiative, a stricter anti-trust law,
is a reflection of those beliefs. Bruederle plans legislation
allowing the federal cartel office to break up companies
whose market dominance hinders competition, even if they do
not abuse their market position. This law, while not aimed
at specific sectors, is most likely targeting Germany's
powerful energy companies. The new civil service State
Secretary in the Econ Ministry, Bernhard Heitzer, is the
former head of the federal cartel office. Bruederle
characterized Heitzer's appointment as a deliberate decision
to increase the importance of "free markets and fair
competition philosophy." Peter Hintze (CDU) remained one of
three Parliamentary State Secretaries and was joined by two
new nominees, Hans-Joachim Otto and Ernst Burgbacher (both
FDP). Bernd Pfaffenbach and Jochen Homann were retained in
their positions as Permanent State Secretaries.


5. (SBU) Tax cuts and tax reform are other policy areas high
on Bruederle's agenda. Bruederle defends the proposed German
government tax cuts as indispensable to get the country out
of its worst economic crisis in 60 years. The planned tax
relief includes cuts of approximately 8.5 billion euros in
2010, relaxing the tax burden on families with children, and
cutting sales taxes for hotels. The tax cuts have been
strongly criticized since Germany already faces enormous
debt. Bruederle believes that there is no conflict between
cutting taxes and consolidating the budget, and that tax
relief is needed to boost growth and employment. Bruederle
also promised additional tax cuts of 20 billion euros
beginning in 2011.


6. (SBU) On an initial courtesy call to Bruederle,
Ambassador Murphy found him to be pleasant, engaging and
fluent in English. He was very positive about the United
States and has long maintained a residence in Florida. He
expressed pride at having achieved a significant tax cut --
part of his party's agenda -- but noted it would be difficult

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to get taxes cut any further. He expressed concern about the
current economic situation in Greece, and noted that Germany
and France were the main contributors to growth in Europe and
hoped to keep the euro strong. Bruederle also mentioned his
upcoming visit to Washington February 1 and 2 and asked for
the Embassy's help in securing appointments with counterparts
at Commerce, Energy, USTR, Treasury and the White House's
National Economic Council.


7. (C) COMMENT. Bruederle is less charismatic than his
predecessor zu Guttenberg, an energetic 38-year old
aristocrat, but not as "pale" as former CSU economics
minister Michael Glos (2005-2009). He may be a "dinosaur,"
as some critics say, but he is a very strong-willed dinosaur
with more vision than Glos, and more experience than zu
Guttenberg. On the other hand, CDU contacts tell us that
they perceive him as a "weak link" in the cabinet line-up,
since he lacks zu Guttenberg's political gravitas. FDP
contacts tell us that Bruederle can be a "wild card" who from
time to time needs to be reined in. Bruederle's frequent,
off-the-cuff comments are a case in point. Last November, he
dismissed criticisms over the government's proposed
debt-financed tax cuts from Germany's Council of Economic
Advisors (the highly respected "Five Wise Men") with the quip
that "professors cannot replace the reasoning of political
leaders. That is why they are advisors and not
decision-makers." Bruederle has finally reached the pinnacle
of power after 11 years in opposition, but the jury is still
out on whether he can successfully manage an economic
turnaround in 2010. END COMMENT.
MURPHY