Posted on Tue, May. 15, 2012
last updated: May 15, 2012 04:44:57 PM
While the rest of Europe nervously peers at an insecure future, Germans are spending their evenings in long lines, hoping for a chance to buy or rent property before costs rise even more.
Since the euro crisis began, a Berlin housing boom has seen rents rise by 70 percent in posh districts, and 23 percent even in dicey areas. And this newly forming housing bubble is just one of many signs that the fortunes of Germany and the eurozone it leads have taken sharply divergent paths. As the euro crisis deepens, and more and more neighbors slip down the path toward economic perdition, it is increasingly obvious that the German economy is growing healthier.
Oddly, the Germans don’t have a word for it. Yet. But Germans are well aware that these divergent paths are connected. Schadenfreude might be the term, except that instead of finding joy in the misery of others, the Germans are finding cash money.
Ferdinand Fichtner, head of the department of forecasting and economic policy at the German Institute for Economic Research, said problems elsewhere force the European Central Bank to keep interest rates low. That, he said, is a boon to already booming German manufacturers.
“Businesses can invest and expand further,” he noted. “We will see more growth, more employment and higher wages, leading to better domestic sales as well.”
Germans have little sympathy for their struggling neighbors.
A recent leftist protest to support the “Greek worker” in Berlin was planned for Potsdamer Platz, the vast square that was once a no-man’s land, split by the Berlin Wall, but is now ringed by construction cranes, a symbol of Germany’s current prosperity. For the protest, the city blocked off a major intersection, anticipating a crowd of hundreds, if not thousands. But the protest attracted so little support that as it proceeded, police reopened the intersection, and the traffic, passing by on all sides, didn’t cause any problems.
How this German attitude of well-being will affect the outcome of Europe’s crisis is a major uncertainty. Greece is headed for new elections next month that many analysts believe are likely to further strengthen the hand of those who favor renegotiating last year’s debt bailout deal, which required the Greeks to impose tough austerity measures. German officials have said they are opposed to any change in the deal.
On Tuesday, however, Germany lost its closest economic ally when France swore in socialist Francois Hollande as president, replacing the conservative Nicolas Sarkozy. Hollande, who has said it’s clear Europe cannot cut its way to prosperity, immediately flew to Berlin to meet with German Chancellor Angela Merkel.
Last week, Merkel made it clear that she is disinclined to back a stimulus program. “Growth through structural reform is sensible, important and necessary,” she told Parliament. “Growth funded by debt will just lead us back to the beginning of the crisis. We can’t do that and we won’t do that.”
That makes the path unclear, with German economists offering a variety of suggestions, but leery of dictating the solution.
“We can’t tell the crisis countries what to do,” Fichtner said. “The structural change has to come from within them, or else it will be even harder to sell to the public. But we should provide expertise.”
Thomas Straubhaar, head of the Hamburg Institute of International Economics, even suggested that Greece could become a European protectorate.
“Not in legal, but in factual terms,” he said. “The country needs support in creating viable government structures. Now that the upper class has cashed in on the chances offered to them and transferred the funds abroad, the poorest of the poor have to face the bill.”
Joerg Hinze, senior economist at the Hamburg institute, said giving more money to Greece to meet debt payments is no long-term solution.
“There is no point in pouring more and more money into Greece,” he said. “What they need are not austerity measures, but dramatic fundamental reforms to reach the level of a developed Western European country.”
He noted that the Greece is 100th among countries in a ranking on the ease of doing business. Who’s 99th? War- and terror-torn Yemen.
“They can’t get kicked out of the euro, but the giver countries can deny paying out the third tranche of payments, then they can’t pay pensions and salaries and have to start printing drachmas again,” he noted. “Effectively, this would mean they left the eurozone.”
The prospect does not concern him. “A eurozone without Greece would be the lesser evil,” he said. :”No one believes it would fall apart if Greece leaves.”
Coloring the German debate is the good times Germans are living now. While the unemployment rate among Greek young people is thought to approach 50 percent, and has reached a 15-year high in the rest of the eurozone, German unemployment, driven by strong exports, is the lowest it’s been since East and West Germany became one 22 years ago.
Anton Boerner, president of the German Foreign Trade Federation, notes that, in the end, what matters about Greece to Germany is that it doesn’t disrupt the current good times.
Germans, he and many others feel, have a right to be a bit smug about their current situation. In the past decade, Germany has carried out many of the economic reforms it now is pushing as necessary in Greece. These reforms – decreases in unemployment benefits, tax cuts, a higher retirement age, the creation of a low-wage sector and less protection from dismissal – were not without pain.
“We have carried out structural reforms before it was too late and were better prepared for the crisis than others,” Boerner said. “We have come out of the crisis stronger than we entered it, and the prospects for German business are excellent for decades to come.”