As cracks in its economy widen, is Germany’s
miracle about to fade?
As the markets tumbled last week, Germany, hailed only months ago for its resilience
in the European crisis, came under fresh scrutiny. What lies ahead for the European
powerhouse?
Philip Oltermann
The Observer, Sunday 19 October 2014
Chancellor Angela Merkel and her allies are increasingly struggling to dismiss warnings over a declining
economy. Photograph: Markus Schreiber/AP
Locals call the cantilever truss bridge that connects the Dresden suburbs of Blasewitz and
Loschwitz the “blue miracle”. Built in 1893 without the support of river piers, it is the kind of
German engineering tour de force that could rightly claim a place in the British Museum’s
current Memories of a Nation exhibition, were it not impossible to transport.
However, in recent years the blue miracle has lost some its sheen. The blue paint has faded to
a dull turquoise (“the grey misery” is a common jibe), and a 2013 inspection revealed a
persistent problem with rust and erosion due to the 25,000 cars that pass over the bridge
every day. Local author Uwe Tellkamp, a winner of the German Book Prize, has even called
for cars to be banished altogether, as on Venice’s Rialto bridge.
Dresden city council is aware of the problem, but it is under financial pressure. Twenty-one
million euros are being spent on overhauling the Albert bridge in the city centre, which was
crumbling away so badly that bits of concrete were falling on the heads of cyclists passing
underneath. The Augustus bridge, the jewel in Dresden’s eight-bridge crown, will have to
come next after it was damaged by floods last year.
“Busy roads and bridges have a 70-year cycle. Sometimes they all come up for renovation at
the same time,” says Jörn Marx, Dresden’s mayor for development, walking through the
building site on the Albert bridge. “I know politicians across the country who are really
struggling to find the money at the moment.”
, Crumbling bridges and
potholed roads are a
politically sensitive issue in
Germany these days. Forty per cent of all
bridges and a fifth of the
motorway network are said to
be in a “critical
state”,
causing traffic
jams
and delays up
GDP. Photograph: Guim
and down the country. Worse still, a growing
choir of economists and politicians warn that
such cracks in the country’s infrastructure
are only the beginning of a much bigger
problem. Germany, Europe’s model austerian,
they say, is saving itself to death.
Only months ago, the German economy was
widely championed for its
dynamism and resilience; its
industry had weathered the eurozone crisis surprisingly well and looked like the only engine
capable of pulling the rest of the continent out of the mire. Newspapers announced a repeat
of the “economic miracle” of the postwar period; books predicted that the country was in for a
“bright future”.
But in October 2014 it is the pessimists who are setting the tone: the German economy is
looking about as rusty as the blue miracle in Dresden. In his book, The Germany Bubble, Olaf
Gersemann describes the current boom as the “last hurrah” of a nation that faces almost
certain decline after six successive generations of rising living standards, while economist
Marcel Fratzscher’s The Germany Illusion argues that the country needs to shed itself of the
fantasy that it can thrive while the rest of the continent continues to struggle.
Both identify a lack of investment in infrastructure as symptomatic of a wider malaise. Cliche
may forever have Germany as the country of efficient autobahns and trains that run on time,
but in reality it has invested less in maintaining its roads and bridges than other European
state. Its investment rate in 2013 was the fourth lowest in the EU; only Austria, Spain and
Portugal spent less. Fratzscher, who is head of the German Institute for Economic Research,
calculates there is an “investment gap” of €80bn (£63bn).
But at least potholes can be spotted and filled. Missed investment in education, research and
industry, on the other hand, might only be felt once it is too late. Gersemann, a journalist for
the centre-right daily Die Welt, points out that official statistics show negative net investment
in seven of the eight largest manufacturing industries since 2000, with the car industry the
only exception. “The government needs to think urgently about how it can convince
businesses to stay in Germany,” he said.
Fratzscher points out that Germany only invests 5.3% of its overall economic performance
back into education, 0.9% less than the average Organisation for Economic Co-operation and
Development country, the equivalent of €25bn. “Among western European countries, only
Italy spends less money on its education sector than Germany,” he said.
Chancellor Angela Merkel and her allies are increasingly struggling to dismiss such warnings,
with her finance minister, Wolfgang Schäuble, coming under attack from Merkel’s coalition
partners, the Social Democrats. Schäuble’s plans for the next budget see Germany taking on
no new sovereign debt for the first time since 1969, a historic achievement in the eyes of
miracle about to fade?
As the markets tumbled last week, Germany, hailed only months ago for its resilience
in the European crisis, came under fresh scrutiny. What lies ahead for the European
powerhouse?
Philip Oltermann
The Observer, Sunday 19 October 2014
Chancellor Angela Merkel and her allies are increasingly struggling to dismiss warnings over a declining
economy. Photograph: Markus Schreiber/AP
Locals call the cantilever truss bridge that connects the Dresden suburbs of Blasewitz and
Loschwitz the “blue miracle”. Built in 1893 without the support of river piers, it is the kind of
German engineering tour de force that could rightly claim a place in the British Museum’s
current Memories of a Nation exhibition, were it not impossible to transport.
However, in recent years the blue miracle has lost some its sheen. The blue paint has faded to
a dull turquoise (“the grey misery” is a common jibe), and a 2013 inspection revealed a
persistent problem with rust and erosion due to the 25,000 cars that pass over the bridge
every day. Local author Uwe Tellkamp, a winner of the German Book Prize, has even called
for cars to be banished altogether, as on Venice’s Rialto bridge.
Dresden city council is aware of the problem, but it is under financial pressure. Twenty-one
million euros are being spent on overhauling the Albert bridge in the city centre, which was
crumbling away so badly that bits of concrete were falling on the heads of cyclists passing
underneath. The Augustus bridge, the jewel in Dresden’s eight-bridge crown, will have to
come next after it was damaged by floods last year.
“Busy roads and bridges have a 70-year cycle. Sometimes they all come up for renovation at
the same time,” says Jörn Marx, Dresden’s mayor for development, walking through the
building site on the Albert bridge. “I know politicians across the country who are really
struggling to find the money at the moment.”
, Crumbling bridges and
potholed roads are a
politically sensitive issue in
Germany these days. Forty per cent of all
bridges and a fifth of the
motorway network are said to
be in a “critical
state”,
causing traffic
jams
and delays up
GDP. Photograph: Guim
and down the country. Worse still, a growing
choir of economists and politicians warn that
such cracks in the country’s infrastructure
are only the beginning of a much bigger
problem. Germany, Europe’s model austerian,
they say, is saving itself to death.
Only months ago, the German economy was
widely championed for its
dynamism and resilience; its
industry had weathered the eurozone crisis surprisingly well and looked like the only engine
capable of pulling the rest of the continent out of the mire. Newspapers announced a repeat
of the “economic miracle” of the postwar period; books predicted that the country was in for a
“bright future”.
But in October 2014 it is the pessimists who are setting the tone: the German economy is
looking about as rusty as the blue miracle in Dresden. In his book, The Germany Bubble, Olaf
Gersemann describes the current boom as the “last hurrah” of a nation that faces almost
certain decline after six successive generations of rising living standards, while economist
Marcel Fratzscher’s The Germany Illusion argues that the country needs to shed itself of the
fantasy that it can thrive while the rest of the continent continues to struggle.
Both identify a lack of investment in infrastructure as symptomatic of a wider malaise. Cliche
may forever have Germany as the country of efficient autobahns and trains that run on time,
but in reality it has invested less in maintaining its roads and bridges than other European
state. Its investment rate in 2013 was the fourth lowest in the EU; only Austria, Spain and
Portugal spent less. Fratzscher, who is head of the German Institute for Economic Research,
calculates there is an “investment gap” of €80bn (£63bn).
But at least potholes can be spotted and filled. Missed investment in education, research and
industry, on the other hand, might only be felt once it is too late. Gersemann, a journalist for
the centre-right daily Die Welt, points out that official statistics show negative net investment
in seven of the eight largest manufacturing industries since 2000, with the car industry the
only exception. “The government needs to think urgently about how it can convince
businesses to stay in Germany,” he said.
Fratzscher points out that Germany only invests 5.3% of its overall economic performance
back into education, 0.9% less than the average Organisation for Economic Co-operation and
Development country, the equivalent of €25bn. “Among western European countries, only
Italy spends less money on its education sector than Germany,” he said.
Chancellor Angela Merkel and her allies are increasingly struggling to dismiss such warnings,
with her finance minister, Wolfgang Schäuble, coming under attack from Merkel’s coalition
partners, the Social Democrats. Schäuble’s plans for the next budget see Germany taking on
no new sovereign debt for the first time since 1969, a historic achievement in the eyes of
