Customers with clout

Germany’s medium-sized companies’ political clout has led to banks coming up with innovative capital-raising solutions for them, says Brian Caplen.Refusing to lend to the Mittelstand in Germany is the fastest route to bad publicity and political outcry. These small and medium-sized enterprises account for three quarters of output in Germany, higher than in most other western European economies where large firms dominate. What’s more, they have a large political voice.The fact remains, however, that lending to the Mittelstand at low margins does not make economic sense for banks, even if it makes good politics.