It is high time for Germany to take positive actions, instead of letting the country simply keep slipping away into ruin. The economy continues to worsen, despite talk of upturns in other countries- so why is Germany missing the boat this time? In East Germany it looks particularly bad, even dangerous and if the government doesn’t step in and take decisive measures the rift between East and West Germany might become irreparably wide.

The economy in Germany continues to erode, despite talk of up-ticks in other countries, so why is Germany being left behind this time- and what can be done about it? It looks especially dangerous in East Germany, and if the government doesn’t step in soon, the rift between the two areas will widen to a point where irreparable damage might occur.

The Problems

The strong Euro is now literally strangling the German economy. Initially Germans had applauded the sharp drop in the dollar because it made them feel that the USA, which man had always complained about but at the same time secretly envied, was finally defeated. Soon came talk that basic materials prices would soon be calculated in Euros instead of dollars, which seemed like a clear European victory. But what was the real effect?

Now the Europeans have their strong currency but at what price did it come?

During the devaluation of the dollar, Europeans never really understood, what all of this would mean to them- less jobs and higher unemployment, as due to the weak dollar it is cheaper to move the jobs overseas to cheaper countries, such as America. A few years ago it would have been unimaginable to Germans to call upon America for cheap labour, but the sharp fall of the dollar has created a situation where even Volkswagen is considering moving some production to the USA, as announced a few months ago. BMW already has manufacturing plants in the USA.

One should bear in mind that a few years ago the Euro was trading to the dollar at $0.80 compared with $1.35 today.

At this time a VW Golf for $16.000 in America fetched the Germans about 20.000, the same priced car now only brings in 11.851. With a 40% difference in the revenue gained from the same car (not adjusted for inflation) how could Volkswagen even expect to stay competitive in this Market. Price increases to offset the exchange rate disparity would make it even harder for VW to sell their models in the American market.

At home in Germany, despite all logic that cheaper prices on imports should keep inflation in check, the prices seem in some cases to have doubled since the Euro was introduced as a real currency. Before the introduction of the euro the ECB went on a mad publicity campaign with statements that the purchasing power of the unified currency would stay the same, yet anyone buying products or services in Germany saw a clear 1:1 conversion ratio on certain items instead of the 2:1 ratio that was promised. This is partially attributable to the greed of the shops that simply rounded prices up, and partially die to the psychology that 1DM goods don’t seem much more expensive at 1.

The ECB is now talking of raising interest rates for the Euroregion, taking the stance that the risk of high inflation in Europe now exceeds the risk of an economic recession. Although the aforementioned factors and oil prices have contributed to inflation in Europe, raising interest rates in the region would damage European economies even more. Higher interest rates would further strengthen the Euro, thus causing even higher unemployment, less tourism, and less competitiveness for Eurozone exports.

Although the author of this article in no way supports aggression against foreigners in Europe, the wave of immigration in Germany, due to EU regulations, is now making thinks difficult in Germany. People are talking of an emptying out of parts of East Germany, especially on the border of Poland and the Czech Republic, as foreign workers, especially tradesmen come across the borders to perform jobs and serviced for lower prices than Germans could afford to charge, yet still higher than what could be gotten at home outside of Germany.

But the foreigners are not at fault here; the German people wanted the EU, and even pushed quite hard for EU borders to be expanded to Poland; yet now Germans must simply accept what is happening of try to leave the EU. In the 1970’s Germany found itself with a dearth of workers and was forced to turn to Turkey to import labourers; what Germans didn’t think of then was that the Turks would in turn have children who had no ties whatsoever to Turkey and considered themselves German. Germany in turn rewarded these people with xenophobia and hatred, which is shameful of Germans- guest workers are invited into the country and backs are turned upon them as soon as their usefulness wears out. But what about the EU- isn’t a similar situation brewing in Germany now? Now Europeans of all nations are invited by Germany’s relative prosperity and membership in the EU, yet do Germans still want a unified Europe if it means that people from poorer countries actually do immigrate?

Had Germans even considered that allowing all Eurozone citizens leave to work in the country would put strains on their already flagging economy and social system, and that foreign workers legally working in the country would start pressuring salaries of the locals, especially in the border area.

Put another way- even though foreigners in Germany are clearly a big problem, it is not their fault and shouldn’t be punished for their actions; they are simply legally coming into a country that has opened the borders to foreign workers- the doors to Germany are now wide open and the consequences are now unavoidable.

Way back when, the EU asserted that the prices in Europe should become more or less unified in the whole Eurozone, yet with huge disparities between the average incomes of Germans, Italians and Czechs, how could this happen without enormous inflation in the poorer countries? In this scenario one would think that the poorer countries would benefit, while the richer countries would have to pull weight to bring the rest up to their level. Really this is no different from the tenets of Socialism. Therefore at some point the prices must become unified, but how long will it take for the average Czech to earn 35.000 per annum and can Germans wait for this day?

No wonder that the NDP and PDS (Germany’s extreme right and left wing parties respectively) continue to attract new members; the conditions are worsening to the point that East Germany are literally driven to desperation. Unemployment overall in Germany was recently quoted at 12,6%, the highest since World War II. Regrettably it appears that the extremists on both sides have now conveniently forgotten, what Communism under Honecker and Fascism under Hitler really meant, and that both systems have been largely been abandoned by successful governments.

What the Communists don’t want to remember is that their Soviet-style planned economies purposely choked off the availability of consumer good and people had to be satisfied with inferior products and food products, sometimes at exorbitant prices. One had to wait years for a Trabant, if one could even get lucky enough to get one. On the other hand the Fascists don’t want to hear that assailing the foreigners is not the solution, and that foreigners might even be what saves Germany in the future. Bear in mind the low birth rates in Western Europe, which are low enough in Germany that the government is forced to bribe the population to have children with monthly grants of „Kindergeld" or „money for children". This bribery is now seen as a basic right of Germans and people rely upon this money, but in reality it is just another example of the all too generous and all-pervasive system of entitlements in Europe, which have kept the population in check for generations.

Germans don’t want to hear it but these types of entitlements have spoiled the German population, as everything is expected and demanded from the government. In the 1980‘s in better times the government was able to finance this bloated system, but in leaner times it looks very different, with the state coffers virtually bankrupt. People normally talk about the government creating jobs, but this clearly doesn’t work, as Germany typically has about double the unemployment of for example the USA. Isn’t this proof enough that the German system has failed the people, and that changes are essential for Germany to move forward?

Of course every government must provide some basic services for tax collected; a common defense must be provided, the financial system must have guarantees, the laws must be enforced and the justice system should be fair. But is it the government’s job under normal circumstances to keep the people working? It is not being challenged that the government should step in during times of emergency or for short term unemployment, as not having some sort of a safety net for people without work for the short term will drive them to acts of desperation and crime, and nobody wants the population to starve. But the question at hand is whether the government should be guaranteeing long term solutions to welfare roles; but how can the German government ever make changes when nationwide demonstrations occur whenever politicians ever start talking about reducing unemployment benefits.

As mentioned, politicians and citizens are already expressing great concern of the emptying of East Germany, and in fact it is happening already today. How many East Germans have friends of family members that have „gone over" to the West in order to find trade jobs?

So according to the NPD the foreigners are to blame, and the PDS blames the Capitalists, but what use is it to assess blame when the problems still go unsolved?

The Euro is too high and the ECB overnight lending rate is too high; interest rates in Europe should be lowered to weaken the Euro and make German goods more affordable and competitive overseas. This would also make investment and borrowing in the Eurozone cheaper, which should build consumer and business confidence alike. Despite what the ECB says, the risk of a recession is much higher than the risk of inflation- even if this were not to be true the effects of a recession would be much more bitterly felt in Germany than inflation.

Although there are many reasons that the dollar has become so weak over the last 4 or 5 years, notably due to the US trade deficit, a weaker Euro policy is now called for in Europe. It might be President Bush’s biggest mistake to allow for an unbridled devaluation of the dollar, but the world should now work to-gether to stop the dollar’s slide before a worldwide depression occurs. For surely a $2: 1 would cause profound economic problems.

The German government should continue to reform government programmes and try to stop the population’s daily dependency on grants. This would mean transition programmes, but the decision must be made at some point to stop negotiating and start acting, bearing in mind that the government will have to prepare people for the changes. Another good idea would be to return money to the rank and file by lowering taxes.

Regarding the situation that is brewing over xenophobia there isn’t much the Germans can do in the short term. Now it is time to accept what is happening in Germany or get out of the EU once and for all. The European earnings parity will take quite some time, and until this parity exists the foreigners will continue to come into Germany in search of greener pastures. Fear, ignorance and desperation are what cause racism and hatred. Maybe it is time the Germans start reforming their very archaic school system so that the population is really ready to deal with the challenges of the 21^st century.

What an embarrassment for Germany a few years ago that they had to offer „Greencards" to Indians to entice computer specialists into the country, because at home there were just not enough Germans to do the work, although the unemployment was hardly at 0%.Maybe it is time to start better preparing students for jobs that are will really be in demand in the coming years.

Now Germany, like Holland, is at a crossroads, Either the „pure German Culture will be fostered or abandoned; but no matter what the culture will change as more foreign influences come into Germany. One can’t close the borders to other EU countries anymore, so the only way is to integrate foreigners as best as possible.

Germans I wish you luck and success! The future can be prosperous and brighter, but not without a lot of luck and the courage to change"

This article was written in March 2005.