For many Germans, the euro crisis remains a non-event

For many Germans, the euro crisis remains a non-event

CATHERINE MCLEAN

CONSTANCE, GERMANY— From Monday's Globe and Mail

Published Sunday, Jan. 29, 2012 6:19PM EST

Last updated Sunday, Jan. 29, 2012 7:31PM EST

It’s a rainy winter day outside, but inside his office the head of economic development for the southern German city of Constance is explaining why the outlook for his country is sunny, despite the continent’s persistent debt crisis.

All of Constance’s industries – ranging from manufacturing firms to shops to tourism – reported “outstanding” results in 2011, according to Friedhelm Schaal, the city’s head of economic development. And far from fearing a meltdown in 2012, the year has instead started “very promisingly,” he said.

“The real economy held up extremely well.”

A trip to this town of 80,000 offers a window into how Germans are dealing with the debt crisis that has gripped the continent from Ireland to Greece. The Germans have taken the lead in trying to pull their European Union partners out of the abyss, but the cost is still unknown and success very much uncertain.

Germans are feeling less then favourable toward the euro and the EU, and believe the bad news will continue. But when it comes to their own country, they are more optimistic.

In 2011, the number of unemployed in Germany fell to an average of 2.98 million workers, the lowest level in two decades. In a survey conducted by the Allensbach Institute at the end of last year, roughly half of Germans said they were looking toward 2012 with hope, while another 17 per cent said they had concerns, and the remaining 26 per cent were skeptical.

“Germans feel that their individual present situation is positive and are positive about what the future will bring,” said Richard Hilmer, manager director at the Infratest polling institute. But at the same time, “there is the fear that the euro crisis won’t be over for a long time and the worst is possibly still to come.”

Even as German Chancellor Angela Merkel and other key EU finance officials voiced optimism that a deal to avoid a Greek default was imminent, worries persisted that tough new austerity demands of the region’s weaker economies will spark a painful recessionary spiral.

So far, though, Germans have suffered little to no impact from the debt crisis. In Constance on a recent Friday, the streets were bustling with shoppers and the cafés were full of grandmas treating themselves to coffee and cake.

The town’s pretty centre, and festivities like the Carnival and Christmas market, attract plenty of tourists. Retailers have also profited in recent years as Swiss shoppers flood over the border to take advantage of the weaker euro currency. And over the past 50 years, the city has shed old industries like textiles to focus on environmental technology, health care and nanotechnology.

Germany is certainly one of the “haves” among the EU’s 17 members, which is why it is driving bailout efforts to stabilize the “have nots” such as Greece, first through the European Financial Stability Facility and then the European Stability Mechanism.

“[The debt crisis] doesn’t affect everyday life,” said Professor Claudius Marx, leader of the Hochrhein-Bodensee Chamber of Commerce, based in Constance. “The bus drives in the morning like always, the shops open, the shelves are full, we have almost full employment. It is not tangible. It is an abstract crisis.”

Indeed, the owner of a sausage stand in the centre of Constance said the outlook isn’t so bad and he believes Germany should stick with its EU partners.

“Germany is doing well,” Marcus Gloeckler said. “People have to see the good in the euro. It’s one of the best currencies in the world.”

Confusion may be helping to shape Germans’ resilient views. Experts believe the endless rounds of crisis meetings and complicated rescue packages are too abstract for most people to truly grasp.

“I think that most citizens have big difficulties in understanding what it’s about,” said Günter Franke, a professor for international financial management at the University of Constance. “I think people go on the street (to protest) when they feel directly personally affected by something and when they feel emotionally stirred by something, and I think this emotion hasn’t been the case up until now in Germany.”

That may soon change, as the crisis starts to drag on German’s economy. While gross domestic product grew 3 per cent last year, it’s forecast to slow to 0.7 per cent in 2012 as exports to the stalled European economies slow.

“In the middle and long run, the plain truth is we can’t do well if our neighbours aren’t doing well,” said Professor Marx of the chamber of commerce.

Lower economic growth, and the job losses that will likely follow, will make the Germans feel less sanguine about the euro drama, experts agree. An older woman strolling the streets of Constance pointed out that Germany has its own people to take care of, saying she receives a pension of just 400 euros a month after working 20 years as a nurse.

“The opinions will certainly be more critical,” said Professor Renate Koecher, the director at Allensbach.

Germans are clearly wary of the euro. A poll last year by Allensbach showed that 67 per cent of Germans have little or no trust in the EU. Yet, they have no intention of leaving it.

Parting ways with the euro would be a greater disaster for their country, they say, as a return to the German mark would push up the value of their currency, making exports more expensive and damaging their economy.

“(Germany) would be a small country with 80 million inhabitants with an economy that is directed toward an EU area that doesn’t exist any more,” said shopper Michael Knecht, a judge who lives in the Constance area.

“Then it would become unbelievably expensive.”

What they would like to see is change within the struggling countries and stricter rules for the euro zone, as indicated by Ms. Merkel. The latest summit on the crisis is slated for this Monday in Brussels.

“We will only be able to strengthen our common currency if we co-ordinate our policies more closely and are prepared to gradually give up more powers to the EU,” Ms. Merkel told The Guardian and other European newspapers last week (week of Jan. 23). “If we make loads of promises about debt reduction and sound budgeting, those need to be things that can be enforced or brought to court in the future.”