Grinning and Bearing it in Germany

We recently reviewed German commentary on how the Dutch economy is going to the dogs. Fair is fair: An analysis of current German economic problems from the Danish newspaper Berlingske Tidende (The Titanic or Germany) goes far to suggest that German comments about the failure of the Dutch “polder model” were an instance of the fabled pot calling the kettle black. (Now, to keep the chain going, I need to find some on-line article – maybe from the French press? – revealing current Danish economic problems.)

Top German officials, especially Chancellor Schröder and Finance Minister Hans Eichel at least seem to be in good humor and at ease with themselves these days, reports Berlingske’s correspondent Michael Kuttner. So much for the good news; Kuttner then lists, in bang-bang-bang fashion, what’s going wrong these days with the country they are said to govern:

  • Economic stagnation for the third year in a row, with a figure of 4.5 million unemployed that seems very unlikely to come down any time soon. (Before the last general election in 2002, which he barely won by adopting an anti-George W. Bush stand, Schröder had stated that he deserved to lose re-election if he had failed to reduce unemployment below 4 million.)
  • A particularly bad situation in what used to be the DDR, despite the hundreds of billions of euros in subsidies that have been pumped into that region since reunification. There’s a notable drain of population from the eastern half of the country, because inhabitants simply find that they cannot stay put and still make a living.
  • While still the EU’s largest member, with the largest military among European NATO powers, Chancellor Schröder nonetheless finds himself with little to say, or influence, anymore at meetings of those organizations. The new candidate for EU Commission President, Jose Barroso, for instance, was by no means a choice supported by Germany.
  • Oh, and to add to all that, the weather has been terrible lately (and I can attest to that from next door: wind, rain, clouds, certainly no true summer as of yet), and the German national football (soccer) team crashed out unceremoniously in the first round of the Euro 2004 football championships.

In spite of all this, German leaders in the currently-governing red-green coalition still maintain that they can see light at the end of this tunnel. So Kuttner asks – and thence his article’s title – are they for real, or are they just the orchestra on the good ship Titanic?


Clues to the answer are to be found in the German government’s reform attempts so far. First of all, Gerhard Schröder waited five years after first being elected Bundeskanzler to start any meaningful reform, doing so only as of last year. It was then that unemployment benefits were cut so as to force the unemployed to go out and look for work, and the network of state-run employment offices was supposedly modernized and streamlined in order to help them to do so. In the health sector, visits to the doctor went from being free to costing at least €10, to make people start to think twice about paying a visit for just any old ailment, and some aspects of care (e.g. dental) were removed from being paid by public insurance entirely. And public pension payments were finally made taxable.

As Kuttner points out, such reforms do go far beyond what France and other southern European countries have so far been able to bring themselves to contemplate. But Germany doesn’t want to look to those countries to benchmark itself economically, but rather to other countries – northern European ones, including the UK and, yes, Holland and Denmark – that have been doing relatively well for some time. By that scale, the German reforms fall rather behind what these other countries have already accomplished in these fields.

But Kuttner finds that the real problem lies not in the ambition, or lack thereof, of the German reforms that have been implemented, but rather in the tooth-and-nail resistance that has been provoked even by the comparative little that has been passed so far. Old pensioners have had torchlit protest-marches in the streets against the pension reforms; even the mere €10 charge for a visit to a doctor has raised a hue and cry among both patients’ and doctors’ advocacy groups. And while it looks like German industry is slowly creeping back to the 40-hour work week (from the official 35-hour week, and with no increase in pay), this is possible at all only because employers can threaten to shut plants entirely and move them a short distance to Poland, or Slovakia, where labor costs will be much lower and working-hours longer.

From any sort of international benchmarking, Kuttner concludes, it’s clear that Germany, still the “sick man of Europe” economically-speaking, has a lot more reforming to do. He specifically criticizes what has been the unwillingness of governing German politicians to make clear that what they have proposed and passed so far is indeed only the beginning. And so the governing establishment, and the country, will have to brace itself for continued struggle to try to get further reform measures passed that need to be passed.


Until the next general elections are scheduled in 2006, that is. It’s a funny thing: Kuttner interprets that no one in the present government thinks he even has a chance of lasting there after those elections. Ironically, that means that present government has nothing to lose – it can carry on trying to pass the reforms it thinks the country needs without having to worry much about political considerations. (On the other hand, there seems to be the prospect of a revolt within the leading SPD party, or even a split-up. Perhaps I can cover this in a future weblog entry.) What’s more, while the main opposition party, the conservative CDU/CSU can take the cheap opportunity to jeer at the present government as it sets about doing all these unpopular things, they also are ultimately likely to vote for them – because they, too, know they are necessary for the country, and are all-the-more glad to go along when their opponents in the current government can take the blame for the pain caused.

So it’s all a bit strange, but maybe there is some hope in the near-term for Germany, along the lines of this argument. That’s at least one well-informed view from just across the northern border. Note, however, that this all has little to do with pure democracy: it’s the government stuffing bitter medicine, that the electorate don’t want, down their throats.

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