video transcript

The family firm of Schmidt and Haensch is proud to be part of the Mittelstand, the small and medium sized firm's at the heart of Germany's economic powerhouse, employing nearly four in five workers in the private sector. Based in Berlin with a workforce of 50, the company produces specialist measuring equipment for the chemical, pharmaeutical and food industries, almost all for export and half of it outside Europe. President Mathis Kuchejda is the fifth generation of his family to run the company, and says they've survived the downturn unscathed. So far. SOUNDBITE: MATHIS KUCHEJDA, PRESIDENT, SCHMIDT + HAENSCH, SAYING (ENGLISH): "The crisis is very much related to the banking crisis, the state deficit crisis, it's not related to the real economy. Fortunately it hasn't spread to the real economy yet. That's why I'm a little bit worried that the negative feeling about the euro crisis is eventually affecting the real economy." For this company, the strength of their emerging markets in Asia and Latin America is enough at the moment to offset the weakness in Europe. But Chancellor Angela Merkel, addressing business German leaders in Berlin this week, warned that Europe's biggest economy is not immune to the problems in its backyard. SOUNDBITE: ANGELA MERKEL, GERMAN CHANCELLOR, SAYING (German) "We need to strengthen domestic demand as much as possible in order to create a growth impetus in the euro zone." PIECE TO CAMERA: DAVID SINCOCK, REUTERS CORRESPONDENT, SAYING (ENGLISH): "With business confidence at its lowest in two and a half years, some of Germany biggest companies including retail giant Metro, Lufthansa and Deutsche Bank are slashing thousands of jobs. Others like Opel and ThyssenKrupp are returning to the short time working schemes introduced at the height of financial squeeze in 2009." Economists say there may be worse to come, despite Germany's unemployment rate of 6.8% in September remaining far below the euro zone average of 11.3%. Ferdinand Fichtner of the DIW Institute. SOUNDBITE: FERDINAND FICHTNER, DIW INSTITUTE, SAYING (ENGLISH): Despite the jobless total rising by another 9,000 last month, employers like Mathis Kuchejda say it's difficult to recruit. SOUNDBITE: MATHIS KUCHEJDA, PRESIDENT, SCHMIDT + HAENSCH, SAYING (ENGLISH): "We produce a hi-tech product so we need qualified and skilled people, electronic engineers, software engineers, and these are very hard to find. Sometimes we need to look for half a year more in order to find the right people." With many economists expecting negative growth in Germany in the third quarter of the year, and perhaps even recession in the second half, unemployment is likely to get worse before it gets better. David Sincock, Reuters