The Scope of the Crisis

Stagnated growth + high unemployment + bulging deficits + decreased tax revenues = "the German disease"

For Chancellor Schröder and his governing coalition of Social Democrats and Greens, this past week was a nightmare of almost farcical proportions. For that matter, the constant downpour of dismal numbers all week long was bad news for anyone trying to make a living in Germany. If the country were a patient, its condition could only be described as "highly critical" -- and its neighbors are anxiously hoping they won't be coming down with a case of what the international press is calling the "German disease."

The storm of economic indicators pointing to imminent doom and gloom peaked on what was immediately dubbed "Black Wednesday" when three items flashed across the wires within one hour. Germany's Council of Economic Advisors, more informally known as the "five wise men," handed their annual report on the state of the economy to the chancellor. The government had already severely downgraded its optimistic preelection growth forecasts to 0.5 percent for this year and 1.5 percent for next year. Nope, said the Five: it'll be more like 0.2 and 1 percent.

Then came the EU. Germany's deficit in 2002, the EU predicts, will exceed 3 percent; that was not news. But it'll also break that sacred rule of the euro stability pact (which the Germans had insisted on not all that many years ago in the first place) in 2003 as well, and so, will most likely have to pay a fine.

The third strike came from the government itself, announcing that there's a 15.4 billion euro gap (the euro and dollar are about one-to-one these days) between revenues projected by the budget and what'll actually be coming in as taxes.

And that was just Wednesday. Throughout the week, company after company went public with dire announcements. Pixelpark, for example, Germany's media darling back in the days of the "new economy," is to close its HQ in Berlin and lay off 210 of its remaining 250 employees. But it was Deutsche Telekom, of course, that took the prize when it announced the largest loss in German corporate history: 20.6 billion euros.

This naturally gets translated into higher unemployment. Nearly 90,000 jobs have been ditched by DT and Siemens alone. The major banks have added another 40,000 layoffs. As one commentator for the Tagesspiegel put it, companies are now firing as blindly during this bust as they were hiring during the boom. After all, if not now, when? "Whoever quickly knocks off a thousand jobs," wrote the paper, "will go unnoticed."

But this, in turn, hasn't stopped Verdi, the public services union, from hinting that it'll be demanding an across-the-board 3 percent wage hike. Some economists predict that if they get it, they'll pay with the loss of 120,000 jobs in the public sector.

Oh, and Berlin made it official this week, too: The city-state is broke. The mayor requested emergency federal aid; the Finance Ministry told him they'll see him in the federal constitutional court.

Throughout the campaign, Schröder kept blaming the slump in the global economy for Germany's problems. But, from the "five wise men" on down to the man in the street, the reply has been that the scope of the crisis is so broad and so deep that that excuse wouldn't cut it anymore. Neighbors such as Denmark, the Netherlands or Sweden are just as knee-deep in the global slump, yet they've managed to maintain growth rates of around 2.5 percent for 2002.

It'd be one thing if Schröder and Co were perceived as really giving it their best shot, but there's a widespread resentment against the newly reelected coalition because voters feel they've been lied to (see Broken Promises). Not only have Schröder's approval ratings plummeted, a song featuring a Schröder imitator delightfully reeling off the new taxes he's going to introduce (despite promising during the campaign that he wouldn't introduce any at all) has become an instant hit.

So what have we got: Stagnant growth; a bulging federal deficit; more unemployed, decreasing overall consumer spending and tax revenues; public disgruntlement. Those are the symptoms of the "German disease." But the essence of the disease itself, that is, just what the core problem actually is, remains a mystery -- and the cure all the more so.


What would Shakespeare, Mozart or Schiller look like if they were alive today? For an exhibition in Cologne, the German federal police, working with personality profiles supplied by a theater archive, have come up with these composite sketches (click through the numbers at the bottom). (David Hudson)