By JACK EWING

FRANKFURT - Glasbau Hahn could easily be mistaken for one of the auto repair shops or plumbing supply outlets that characterize a former factory district a few kilometers from Frankfurt’s banking quarter.

Yet the family-owned glassmaker, with 140 employees, typifies the small, highly focused companies that may propel Germany back to growth.

The paradox is that such companies are also making life difficult for Germany’s European Union partners.

Glasbau Hahn is a miniature multinational company, generating more than 60 percent of its sales abroad and dominating its narrow but lucrative niche: the global market for museum display cases. Even King Tut’s mummy lies in a climate-controlled vitrine made in Glasbau Hahn’s workshop .

As Glasbau Hahn and thousands of other small German exporters rebound from a dreadful 2009, they give the European Union a much-needed shot of growth. Unfortunately, some of their success comes at the expense of countries like Greece, Spain and Portugal.

The so-called peripheral countries have incurred crushing debts in part because they bought too many imports from Germany and elsewhere, without producing enough of their own export goods. Goods from Greece, Spain and Portugal were often no longer competitive because in the last decade those countries had let wages rise faster than productivity and had become too expensive.

At the same time Germany, a country of savers, exported more than it consumed, profiting from its spendthrift neighbors but not reciprocating by buying equal amounts of imports.

“These bubbles that have been growing on the periphery are a mirror image of that surplus that Germany produces,” said Erik Berglof, chief economist at the European Bank for Reconstruction and Development in London.

Germany’s trade surplus is by far the largest in Europe, reaching 135.8 billion euros ($184.9 billion) in 2009, according to Eurostat, the European Union’s statistics office. Germany’s surplus was more than triple that of the Netherlands, which was in second place.

The countries with the biggest trade deficits are also the ones with biggest economic problems: Britain, Spain, Greece and Portugal. Only France, which also ranks among the top five trade-deficit countries, has a relatively healthy economy.

Glasbau Hahn helps explain why Germany is so competitive. The company and those similar to it are sometimes called hidden champions. They learned long ago to compensate for slow domestic growth by expanding overseas. And to offset the high cost of labor in Germany, they concentrate on premium products that customers are willing to pay more for. “We’re never the cheapest,” said Till Hahn, elder statesman of the family that has owned and managed the company since 1836.

The company’s expertise and reputation has helped it beat competitors in Italy and Belgium, just as other German companies have beat their European rivals.

The problem that policy makers are wrestling with is how to correct the economic imbalances that German competitiveness creates.

It hardly makes sense for Germany to export less. “How do you tell German companies they shouldn’t be winners?” asked Tommaso Padoa- Schioppa, a former member of the European Central Bank’s executive board and now chairman for Europe at a consulting firm, the Promontory Financial Group.

Ultimately, the onus is on the weaker countries to address the mismatch between pay and productivity. Mr. Padoa-Schioppa said: “This gap has to be closed just as Germany did in the past decade.”


Greece announced measures to improve its economy, among the most troubled in Europe. Police blocked a demonstrator recently in Athens. / SIMELA PANTZARTZI/EUROPEAN PRESSPHOTO AGENCY