The Decline of Germany

[Tony]

http://www.businessweek.com/magazine/content/03_07/b3820009.htm

Drive down Berlin's Unter den Linden these days, and it's easy to imagine you're in the capital of a vibrant new Europe. The rebuilt, buffed-up avenue now rivals the Champs-Elysées as the Continent's most majestic thoroughfare. Daringly designed buildings are everywhere, the Berlin Wall a fading memory. The Brandenburg Gate is freshly cleaned and polished. Nearby, Chancellor Gerhard Schröder governs from a new, grandiose, nine-story residence and office complex that makes the White House look like a summer cottage. The refurbished Reichstag is a paean to the power and prosperity of unified Germany, the linchpin of the European Union.

That's how Germany's leaders want the world to view their country. But looks are deceiving. The showcase city of Berlin is in such a financial fix that it's firing teachers and closing swimming pools. Just four months after Schröder's reelection as Chancellor, his Social Democratic Party is so unpopular that it was clobbered in two key state elections on Feb. 2. Polls show Germans more pessimistic than they have been in decades.

The vaunted model of Rhineland capitalism, where the state and business work together, is in slow-motion collapse. Japan on the Rhine is a better way to describe what's going on. Germany has grown an average of 1.3% a year over the past decade--the lowest rate in Europe and not much better than Japan's rate of 1%. "In the '70s and '80s, Germany was the model of the world," says one leading executive. "Now we're being repeatedly referred to as the sick man of the world, the sick man of Europe."

As they enter a second decade of stagnation, Germans are beginning to wonder if the disease is chronic. What fooled many of them for a long time was that the real nature of the decline was often masked by short recoveries, global shocks, or outsize political promises that never materialized. There was usually a handy explanation for economic setbacks: a technology gap, a stock market bubble, or a slowdown somewhere else in the world. "The government always looks for reasons elsewhere," says Jürgen Donges, former chairman of Germany's five "wise men," the top council of economic advisers.



Can any Germans comment on this? I knew the German economy was slumping, but I didn’t know it was as bad as this story makes it out to be. Is this accurate?

[JAR]

Thanks for posting that. I didn't know things were going that bad in Germany. A German foreign exchange student my brother knew from school said that Spain was dragging down the worth of the Euro currency or whatever its called. He also said that he didn't like Turks because "they are just so savage."

[a_unique_person]

I don't know why they are picking on Germany. The whole of the Western economies are having problems in general, including the US.

http://money.cnn.com/2003/05/01/news/economy/jobs_walkup/index.htm



From bad to worse?

Economists expect April's jobs report to be weak. They may be too optimistic.
May 1, 2003: 1:26 PM EDT
By Mark Gongloff, CNN/Money Staff Writer



NEW YORK (CNN/Money) - Economists expect the April jobs report Friday to show that unemployment increased as tens of thousands of workers were cut from U.S. payrolls. The actual report, when it comes, could make that outlook seem overly optimistic.

Thursday, the ISM and jobless claims numbers were worse than economists expected. Will a trifecta of overoptimism be completed Friday? Analysts have been forecasting that unemployment rose to 5.9 percent last month from 5.8 percent in March, according to the latest Reuters poll, and that employers cut 53,000 jobs in April. But recent reports indicate things could be worse than that.



Japan in particular is in trouble, with the stock market back down to levels of 20 years ago, and huge amounts of non-performing loans still to be written off.

[ZeeGerman]

Originally posted by Tony
http://www.businessweek.com/magazine/content/03_07/b3820009.htm



Can any Germans comment on this? I knew the German economy was slumping, but I didn’t know it was as bad as this story makes it out to be. Is this accurate?

There are certainly several factors to regard but the still most important is imo the process of unification since 1989. There's the financial drain - $50 Billion each year transferred from west to east just to get the standard of living raised and to modernize infra structure and industry (the little bit that had a chance to become competitive), still counting. Just to get the dimension: Imagine the US had Cuba with an imaginary population of about 120 Million people (one third of the US population) as 51st state and tried to modernize the state up to US average.

But there are other factors as well. The most important being the quite comfortable social net Germans enjoy. The costs for these benefits make the factor labor way to expensive even if one considers the high productivity of our industry. Labor being too expensive yields more unemployment (the key problem really) which causes higher costs for the social net and so on.

Interestingly enough, it's the social democratic government which right now tries to perform some major cuts to the net and to lower the costs of work. How far they will get with this is still open, Unions are VERY powerful in Germany and of course nobody likes to loose something he's feels entitled to.

Germany's industry relies heavily on exports and so the current economic situation around the world has its effects. Nevertheless, most problems are home made I guess.

That said, I wouldn't paint the picture too black. Germans tend to lament at the highest stage :) . I guess there are still many countries in the 1st world who were happy to have just Germany's problems.

Zee

[Shane Costello]

Originally posted by a_unique_person:
I don't know why they are picking on Germany. The whole of the Western economies are having problems in general, including the US.

Tell me, what's May like on Mars? Or Pluto, or Ork, or wherever it is you've been living for the past few years?

I digress. So is Germany being unfairly picked on? Why don't we ask a

German tycoon (www.no-euro.com/mediacentre/dossiers/display.asp?IDNP=1205)

Tycoon Roland Berger blasted: "Never in my professional career have I seen Germany in such a terrible state." He branded the country -and the wider eurozone -as over-regulated, decrepit, too expensive and with an uncompetitive market.


In an astonishing interview in German daily Die Welt, he said: "I would no longer recommend any investment in a new manufacturing factory in Germany."

Foreign firms are refusing to snap up ailing German companies even "for pocket money" because of the country's economic crisis, he added.

What does the EU (www.no-euro.com/mediacentre/dossiers/display.asp?IDNO=1183) have to say?

"THE EUROPEAN Commission slashed its 2003 growth forecast for the eurozone yesterday, warning that Germany faced another year of "entrenched stagnation" and would not bloom again until it carried out root-and-branch reform."

"Labour-market rigidities and red tape saddle the country with an economic speed limit of 1.5pc growth (compared with 2.25pc for the rest of the EU and 2.5pc for Britain), a problem "exacerbated" by the latest tax increases."

What about unemployment? (www.no-euro.com/mediacentre/dossiers/display.asp?IDNO=1205)

"Germany's ailing economy was dealt another blow on Thursday with new figures revealing that seasonally adjusted unemployment rose 28,000 to 4.197m in December, a fresh four-year high.

The number of Germans looking for work at the end of last year rose by 200,000 on an unadjusted basis to 4.22m, the strongest monthly increase since 1997.

The Nuremberg-based Federal Labour Office said on Thursday the average number of jobless was 4.06m, 220,000 higher than in 2001 and marking the highest annual increase for five years. The annual unemployment rate in 2001 was 9.8 per cent."

It's not getting better.

German unemployment is now at a five year high (www.guardian.co.uk/germany/article/0,2763,908609,00.html)

Originally posted by ZeeGerman
Just to get the dimension: Imagine the US had Cuba with an imaginary population of about 120 Million people (one third of the US population) as 51st state and tried to modernize the state up to US average.

That's presuming the American government would match the Germans in stupidity, and give the Cubans one dollar for every unit of belly button lint used as currency in Cuba.

That said, I wouldn't paint the picture too black. Germans tend to lament at the highest stage . I guess there are still many countries in the 1st world who were happy to have just Germany's problems.

You know, you're probably right. Living in a country with 5% unemployment thanks to an economic renaissance wrought by US direct investment, sometimes I envy the Germans their economic stagnation, double digit unemployment and probable demographic crisis. Like, that's just what we need!

[GrapeJ713]

It's the socialism. I remember hearing a story on NPR that for every worker that would make about $10 US per hour in Germany, it costs the company that hires that worker about $40 per hour in benefits costs, and like in other western european socialist democracies it is difficult to fire people for any good reason. The NPR story was interviewing a Polish truck driver that drove 150 miles each way to cart laundry to and from a German hotel into Poland so the hotel could get a decent price for labor.

[corplinx]

Dont knock socialism, it works well in low birth rate countries with selective rigid immigration and high median income.


Seriously though, German products arent what they used to be either. VW and Audi are making cars that are total and complete _lemons_. These cars make late 70s american cars look good reliability-wise.