L'Europe, la Tech et la Guerre

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Für den in Frankreich geborenen Tech-Unternehmer Olivier Coste zeigt der Fall Volkswagen exemplarisch, wie hohe Restrukturierungskosten zur Innovationsbremse werden können.

„Deutschland ist von diesem Problem besonders betroffen, da die Kosten eines Scheiterns höher sind als irgendwo sonst in Europa und weil seine Industrie besonders anfällig für technologische Umbrüche ist“, erläutert der Entrepreneur, der früher unter anderem in leitenden Positionen für Alcatel, Siemens, Microsoft und Meta gearbeitet hat.

Coste schätzt, dass die Restrukturierungskosten, zu denen neben Abfindungen unter anderem auch laufende Betriebsverluste und Umschulungen zählen, in Westeuropa zehnmal höher sind als in den USA.

Dass er mit seiner Meinung nicht allein steht, zeigt der sogenannte „Draghi-Report“, in dem der ehemalige EZB-Chef Mario Draghi kürzlich Schwächen der europäischen Wettbewerbsfähigkeit aufgedeckt hat. „EU-Unternehmen haben im Vergleich zu ihren US-amerikanischen Konkurrenten mit höheren Umstrukturierungskosten zu kämpfen, was sie in hochinnovativen Sektoren, die durch die Dynamik „winner takes it all“ gekennzeichnet sind, in eine äußerst nachteilige Position bringt“, analysiert der Italiener in seinem Bericht.

Der Nachteil trifft nicht nur große Konzerne wie Volkswagen und SAP, die sich im Vergleich zu ihren amerikanischen Konkurrenten viel langsamer Marktveränderungen anpassen können, weil sie mit einer Vielzahl von Schutzvorschriften und höheren Kosten konfrontiert werden. Draghi spricht von einer „langsamen Agonie“ Europas.

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English translation (by OpenAI):

How Europe Falls Behind Due to Strict Protection Regulations

The restructuring costs in the event of failed business models are ten times higher here than in America. This also hampers innovation. Volkswagen is a cautionary example.

By Torsten Riecke - November 6, 2024 - 13:16

Strike Announcement: High Restructuring Costs for European Companies Burden More than Just Automaker Volkswagen. Photo: IMAGO/Bihlmayer Photography

VW’s plans to close up to three plants in Germany, cut thousands of jobs, and reduce wages have shocked the country. Labor representatives are threatening to strike, and Chancellor Olaf Scholz is holding company leadership accountable, aiming to prevent "mismanagement decisions" from affecting employees.

This scenario seems characteristically German, but what if the VW crisis tells us not only about Germany’s industrial landscape but also reveals a broader picture of how Germany and Europe are falling behind the United States in the global technology race?

For Olivier Coste, a tech entrepreneur born in France, the Volkswagen case exemplifies how high restructuring costs can act as a brake on innovation.

“Germany is particularly affected by this problem, as the costs of failure are higher here than anywhere else in Europe, and its industry is especially vulnerable to technological disruptions,” explains the entrepreneur, who has held senior positions at Alcatel, Siemens, Microsoft, and Meta.

Coste estimates that restructuring costs—which include severance payments, ongoing operational losses, and retraining—are ten times higher in Western Europe than in the United States.

Draghi Report Warns of Europe’s Slow Decline

Coste’s perspective is shared by the so-called “Draghi Report,” where former ECB President Mario Draghi recently highlighted weaknesses in European competitiveness. “EU companies face higher restructuring costs compared to their U.S. competitors, putting them at a severe disadvantage in highly innovative sectors characterized by a ‘winner-takes-all’ dynamic,” Draghi states in his report.

This disadvantage not only affects major corporations like Volkswagen and SAP, which, compared to their American counterparts, are slower to adapt to market changes due to a web of regulations and higher costs. Draghi describes Europe’s situation as a “slow agony.”

High restructuring costs in the event of failure also deter venture capitalists from investing in European tech startups.

“Innovative companies find it harder to attract the material resources needed to implement and market new ideas due to strict job protection laws,” the Organization for Economic Cooperation and Development (OECD) noted back in 2015, warning that the burden of these effects disproportionately impacts young companies that are more likely to experiment with radical innovations.

Given the tech industry experience that four out of five startups fail, these associated costs are an important factor for venture capitalists in their calculations.

Coste concludes that the internal rate of return (IRR) for venture capital funds in Europe could be up to four percent lower due to potential restructuring costs compared to similar investments in the United States. As a result, venture capital fund investments in America are roughly three times higher than in the EU and the UK combined.

More Flexible Job Protection

What can be done? It is neither likely nor desirable for Europe to abandon its social model and adopt a “hire and fire” culture like in America. Job security contributes to job satisfaction, which can drive higher productivity.

On the other hand, Europe cannot simply ignore the collateral damage of its current protection laws if it wants to avoid falling further behind in global competition, which could ultimately threaten its social model in the long run.

The French tech entrepreneur proposes that job protection be more differentiated by salary and education. High earners with excellent qualifications typically find new jobs faster than those without. He calls this concept “flexicurity.”

While the proposal seems sensible, it has some drawbacks. Although protections based on salary levels are not unusual today, differentiating job protection based on education raises not only legal questions but also the potential for negative incentives.

What’s crucial, however, is that Europeans analyze their competitive disadvantages openly and discuss necessary adjustments to protect their prosperity.

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