A Chafing Social Bind in Germany

The Washington Times (Washington, DC), April 7, 2004 | Go to article overview

A Chafing Social Bind in Germany


Byline: Benjamin P. Tyree, THE WASHINGTON TIMES

With a flat economic outlook and several recent state elections already lost by the ruling Social Democratic-Green coalition, Germany may well get a new and more conservative government within two years.

However friendlier Germany may be toward the U.S. when led by the center-right Christian Democratic Union, the European industrial powerhouse faces many demographic and fiscal problems that may block any significant participation in U.S. global commitments for a long time.

Germany currently budgets military expenditures below the percentage of gross domestic product (GDP) required of new members of the North Atlantic Treaty Organization. That and the rising cost of generous social benefits hinders significant projection of German power. In addition, though more internationally involved than before in the last 60 years, Germans have a phobia about military interventionism after their catastrophic misadventure in World War II.

But with the Soviet threat evaporated, Germany finds itself in a friendlier neighborhood. This means the U.S. can, as now planned, reduce its troops committed in Germany, freeing them for deployment elsewhere.

Germany's current economic growth of about 11/2 percent yearly is "Barely above the water line, and nothing to write home about," Norbert Walter, chief economist of the Deutsche Bank Group, told an audience hosted by the American Institute for Contemporary German Studies last week.

Low growth is coupled with high debt projections due to Germany's generous social obligations and German labor participation far below that of the United States. The German population is aging and, as elsewhere in Europe, reproduction rates are well below replacement levels. These facts require a number of basic changes, Mr. Walter said.

He noted growth is "barely out of stagnation," and that low rate pales further given there are four additional workdays in Germany this year. Mr. Walter said the German standard of living is barely better today than 10 years ago, compared with 50 percent improvements in Britain and the United States.

In addition to prodigal social benefits, the west German economy has donated about 5 percent of its GDP - "or 1,000 billion euros" - to rehabilitating the economic ruins of former communist east German states after reunification.

He noted this investment was fifteenfold the U.S. contribution to the 2003 Iraq war. "Since the German economy is one-third the size of the U.S. economy, you could at that [German] rate fund about 45 Iraq wars." He discussed Germany's ambitious restoration of many historic churches and castles in the east. The churches stand closed and unused "because very few Germans attend church anymore ... and the same is true for castles."

Asked about other possible public-private uses of such antiquities, Mr. Walter said he unsuccessfully tried to interest Deutsche Bank in taking over a couple of "Schloesser," or castles, that "would provide excellent space for a Vermeer exhibit or a symphony," as well as meetings. As German disposable incomes limit vacations abroad, perhaps such venues could provide profitable domestic tourist attractions.

He said the "implicit public debt" of Germany, including projected outlays for pension and health care, is about 200 percent of GDP. Germans are so used to lavish benefits that "a great outcry was raised" by the recently announced out-of-pocket 10-euro charge for a doctor visit, equivalent to "the cost of two packages of cigarettes. …

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