Posted Sunday, July 18, 2004; 8:34 BST
And so the corporate outlook is beginning to brighten. A worldwide survey of 513 business executives by consultants Ernst & Young recently ranked Germany the third most attractive country in which to invest, behind China and the U.S. Deutsche Bank and Dresdner Bank reported healthy profits in the first three months of 2004, after heavy losses for the same period last year, a sign that German banks can succeed by cutting excess retail staff and pruning bad debt. Media companies like Axel Springer, publisher of Bild and Die Welt , are bouncing back from a crippling advertising drought. Companies are winning important labor concessions: Siemens just sealed deals with workers in two of its mobile-phone factories to increase the workweek from 35 to 40 hours — with no increase in pay. And Daimler-Chrysler is threatening to eliminate 6,000 Mercedes Benz factory jobs from a Stuttgart suburb and move production to northern Germany and South Africa if unions don't agree to €500 million in labor savings. At least 25,000 Mercedes workers walked off the job around Germany last week to protest the proposals. Such battles are bitterly divisive, but they may be necessary if Germany is to become competitive again. Longer hours without more pay would boost growth, while longer hours with more pay, as some unions will require, would encourage spending, which Germany desperately needs. The recovery can't really blossom until robust exports are matched by a boost in domestic consumption — but Germany's jobless rate, which dropped fractionally in June but still stood at 10.5%, has people too spooked to spend.
Germany's biggest problem is Zukunftsangst (fear of the future). Zukunftsangst has led to declining membership of political parties, an increase in stress-related illness, and consumers who cocoon at home rather than go out for a little retail therapy. It has more and more people "going to Balconia" — passing up a traditional holiday for staying home to water the geraniums, and it's a drag on the economy. How can Germany break out of its Zukunftsangst? Maybe it needs an F.D.R. — a leader who can persuade people that the only thing they have to fear is fear itself. But it will take more than inspiring rhetoric to make it happen. German industry is gradually being hollowed out by companies moving production further east, to the new E.U. member states and Asia, to avoid strict employment laws and high labor costs. In 1993, for example, Siemens employed 238,000 people in
Germany remains an export machine that keeps running and running.
— HOLGER SCHMIEDING, Bank of America economist
Germany and 153,000 overseas; 10 years later, this was reversed to 167,000 in Germany and 247,000 elsewhere. Some of Chancellor Gerhard Schröder's economic reforms are kicking in — an astounding 6.3 million people (in a population of 83 million) have signed up to work part-time in "mini-jobs" earning up to €400 a month tax-free — but he hasn't solved the big problems. And his reforms haven't helped his party's popularity; the Social Democrats have the lowest support since World War II. Renegade Social Democrats are so angry at Schröder's reforms that on July 4 they laid the cornerstone for a rival leftist party.
If Schröder can't inspire his people, the German media aren't helping either. Germany's deep funk is being analyzed and exacerbated by a rash of magazine covers with headlines like jobs goodbye and the big pension theft; ubiquitous jokes roast the country's leaders and prospects — How do you make a small fortune under Schröder? Start with a big fortune. The best-seller list is filled with gloomy tomes like Germany: Decline of a Superstar.
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