A leap worth taking: how Leipzig was saved from economic decline

The Guardian, September 16, 2012

In today’s eurozone crisis, it is little remarked upon that Germany has done financial bailouts before.

Nowhere is that more apparent than in Leipzig, one of the success stories of the former East Germany. Big companies such as Amazon and DHL, BMW and Porsche, have created thousands of jobs by moving operations to what is now an attractive business and cultural centre. New roads, rail links and a redeveloped airport have acted like magnets for investment. The population has increased by 10% to 530,000 over the past 10 years.

But Uwe Albrecht, the city’s deputy mayor, is under no illusions about who needs thanking for the sudden renaissance. “Without the financial boost from the transfers from the west, it would not have been possible,” he says, referring to approximately €1.3 tn (£1tn), which has flowed from west to east since reunification.

The enormous costs that the country has shouldered since the Berlin Wall fell in 1989 have pushed many to the limits of their generosity. Richer regions are complaining about constantly having to fork out for poorer states via the federal system of equalisation payments, and Bavaria has even filed a complaint with the constitutional court.

Read More: http://www.guardian.co.uk/world/2012/sep/16/leipzig-proves-value-bailouts-germany

Germany’s savers feel resentment and guilt over pressure to end euro crisis

Kate Connolly in Berlin, Ian Traynor in Brussels and Siobhán Dowling in Leipzig

The Guardian, September 16, 2012

Uwe Albrecht has what he calls a wonderful problem. In his office in Leipzig’s fortress-like town hall, the deputy mayor says the city’s population has grown so much in the past decade that he is having to build more kindergartens and schools.

“Ten years ago we were talking about closing schools,” he said.

Now Leipzig is one of the success stories of reunification. New roads, rail links and a redeveloped airport have sucked in investment and international companies. But none of it would have happened without a colossal 20-year bailout that has already cost the west €1.3tn. “Without the transfers from the west, it would not have been possible.”

With Europe slumped in an existential crisis, looking both desperately and fearfully to Germany to supply the leadership and the money to match its clout as the EU’s central power and biggest economy, it is often forgotten that Berlin is a past master at financial bailouts. Which is why it is also weary of them.

Read More: http://www.guardian.co.uk/world/2012/sep/16/germany-resentment-guilt-savers-euro-crisis

 

Euro zone holds breath for German court decision

GlobalPost, September 11, 2012

BERLIN, Germany — As euro zone officials struggle to find a way out of the debt crisis, the fate of European Union unity on top of its common currency may come down to a decision by this country’s highest court.

The constitutional court’s eight red-robed judges are set to rule on Wednesday on a cornerstone of the effort to save the euro, the plan for a $630 billion permanent bailout fund called the European Stability Mechanism, or ESM.

Although most analysts predict the court will give the rescue fund a green light, a negative ruling could provoke panic on the markets and ultimately force the euro zone’s break up.

To Hell with Hitler

GlobalPost, August 30, 2012

BERLIN, Germany — Patrick Radmacher sips tea in the leafy courtyard of central Berlin’s Humboldt University. The crisis gripping much of euro zone seems far away from this quiet corner of the German capital where the 24-year-old history student is taking a break from his work in the library.

Young Germans aren’t facing the kind of bleak future and unemployment confronting their counterparts in Greece and Spain. Nevertheless, he says the crisis worries him and his friends deeply. “It’s the largest issue facing this generation.”

That’s because prosperous Germany must shoulder the lion’s share of the burden if the euro is to be saved.

Bailouts for Greece and other stricken economies are highly unpopular among Germans, who so far have helped prevail on Chancellor Angela Merkel to refrain from backing the kind of agressive solution many economists are calling for.

Attitudes among the young are helping drive the general opinion. Older Germans have prized European integration for helping their country move beyond its Nazi past. They see integration as subsuming potentially dangerous nationalism into a wider identity and creating strong ties with neighboring countries.

But younger Germans see it differently. Many appear to take the European Union for granted or, increasingly, view it negatively. Their voices could become an important factor as the deepening euro crisis continues to slow Germany’s prodigious economic growth ahead of elections next year.

Why Germans fear inflation

GlobalPost, August 16, 2012

BERLIN, Germany — Peggy Schmidt is worried. The economy may be booming, she says, but “everything” is becoming more expensive. That’s affecting sales at the family-owned bakery in the small town of Angersmuende, 50 miles north of Berlin where she works as a sales assistant.

“Everything we buy has increased in price, so we have to raise our prices,” she says. “People can’t afford as much, so they buy less than they did a few years ago.”

Schmidt, who says her own wages haven’t kept pace with rising prices, worries about “how we’ll be able to afford things in the future.”

She’s not alone. Last year, the rising cost of living was the top worry among Germans asked in an annual poll to name their greatest fears. Sixty-three percent said they were most concerned about inflation, as most have since 2000 — apart from 2003 and 2009, when worries about the worsening economic situation topped the list.

Germany feels effect of crisis as its major firms announce bad news

The Guardian, July 27, 2012

The idea that Germany could somehow emerge from the current economic crisis unscathed has proved illusory. Europe‘s industrial powerhouse is now feeling the effects of the economic crisis, particularly in its export-driven sector.

A slew of household names, including Siemens, BASF and Puma, has had bad news to announce this week.

On Thursday, engineering giant Siemens announced that orders were drying up, saying it would make it “more difficult” to reach annual targets that it had already cut in April.

Read More: http://www.guardian.co.uk/world/2012/jul/27/germany-eurozone-crisis-business-slowdown

Merkel is vulnerable after disastrous state election

GlobalPost, May 14, 2012

BERLIN – It is a paradox of German politics that Chancellor Angela Merkel remains overwhelming popular, while the parties that make up her governing coalition lurch from one defeat to the next in a string of regional votes.

That was made evident yet again on Sunday when her conservative Christian Democrats (CDU) suffered their worst ever result in Germany’s most populous state of North-Rhine Westphalia. The party only managed to get just over 26 percent of the vote in the snap election, shedding almost 9 points since securing 35 percent in the last vote there in 2010.

Her junior coalition partners the Free Democrats did manage an impressive comeback, securing a surprise 8 percent and managing to return to the state parliament thanks to its dynamic leader in the state, Christian Lindner. However, the disastrous performance by the CDU will allow the Social Democrats and Greens to form a stable coalition, after operating as a minority government for the past two years.

The SPD won 39 percent of the vote in what had been its traditional heartland, largely thanks to the huge popularity of its leading candidate, state governor Hannelore Kraft. The Greens only fell back slightly, down from 12 to 11 percent, a relief given the strong showing of the Pirates who stormed into their fourth regional parliament after securing almost 8 percent. The post-communist Left Party only attracted just over 2 percent, compared to over 5 percent in 2010, and thus failing to enter parliament.

North Rhine-Westphalia is often a strong indicator of the national mood. When former SPD Chancellor Gerhard Schroeder suffered a defeat there in a state vote in 2005 he called an immediate snap general election, which paved the way for Merkel’s rise to power.

Merkel holds the line on austerity

GlobalPost, May 7, 2012

BERLIN, Germany — At times during the French election campaign, one would have been forgiven for thinking that Francois Hollande’s opponent was named Angela Merkel, not Nicolas Sarkozy.

Such was the importance of Germany, and of the Berlin-dictated policy of austerity, in the debate.

“Germany does not speak for Europe,” were his fighting words during the campaign to unseat one half of the duo known as Merkozy.

And you could say he was provoked. After all, Merkel had very publicly supported his opponent.

Sarkozy had become her dependable sidekick on EU matters, much to the infuriation of many of the two big countries’ EU partners. The German leader regarded the French conservative as the best guarantee that Berlin’s policy of reform and austerity would be pursued in dealing with the euro crisis.

But the French electorate had other ideas.

They voted for Hollande, one of whose central campaign pledges was a refusal to sign up to the Merkel-designed fiscal compact, unless there are elements of growth included.

In his campaign, he seemed to emerge as the champion for an alternative to the Merkel doctrine, which narrowly focused on belt-tightening and structural reform.

His victory puts Merkel in an awkward spot. Not only is she now going to have to deal with a French leader she very obviously snubbed — she refused to meet him during the campaign.

She is also going to be faced with a leader in Paris who has very different ideas about the best way to tackle the euro crisis.

Greece election could throw Europe back into turmoil

GlobalPost, May 6, 2012

BERLIN — The fascination with the battle for the French presidency has overshadowed another crucial European election this Sunday. A weary and angry Greek people are going to the polls on May 6, in what is being described as the most important election in 40 years.

And the results are anything but predictable.

One thing seems certain though: The two big parties that have dominated Greek politics for four decades are in for a drubbing, something which is likely to make the already volatile political situation even more unstable after Sunday.

The question is whether, amid growing support for a plethora of smaller anti-austerity parties, they will muster enough seats to hammer together another coalition.

Otherwise, Greece could have difficulty fulfilling the terms of its bailout, ultimately risking its euro membership and even threatening the euro zone itself.

Could German strikes help the euro zone?

GlobalPost, May 4, 2012

BERLIN — Germany’s engineering sector has been hit by an industrial action this week. That’s a sign of just what an island of prosperity Germany has become within the ocean of troubles that is the euro zone.

While workers in many other countries fear for their jobs as their economies tumble into recession, here newly confident labor unions are demanding massive pay rises — and going on strike to get them.

On Wednesday around 30,000 workers in Germany’s vital manufacturing sector downed tools in a coordinated action that affected over 100 companies, including Daimler and Bosch. The strikes continued on Thursday with an estimated 115,000 workers staging a walk out in around 400 companies, including Porsche and Audi, as part of industrial action to secure a hefty 6.5 percent pay rise forGermany’s 3.6 million metalworkers.

Yet, while some workers in troubled countries may look with envy at their German comrades’ brazenness, in fact the action taking place from Berlin to Bavaria could end up being to the benefit of workers in Madrid, Athens or Lisbon.