Jim Hoagland tackles Germany’s fearful posture and lack of confidence. Germans are reluctant to invest in their own economy - which creates opportunities for outside investors. Most critically, there has been no serious debate on how to reform Germany to be able to compete globally. Here’s Jim’s lede:
What were we thinking?
To have ever expected a clear, definitive choice from Germany for its future in Sunday’s elections was to disregard fundamental information that every country transmits when politicians are not around to explain away the facts. We rushed past the obvious.
The obvious is this: Germany is a country that fears the future, or at least the painful choices that the future will bring. Germans said as much Sunday by refusing to choose between the unprincipled leftist chancellor they know in wearisome detail and a seemingly incompetent rightist challenger who remains a mystery to them. The voters checked none of the above.
This is a political expression of the consistent demographic response to the future that Germans make in their personal lives. Germany’s rate of population growth today stands at zero percent. Germany will lose 20 percent of its working population over the next 25 years. Fertility rates there stand below 1.5 percent — that is, well below the population replacement rate of 2.1 percent.
The same phenomenon surfaces in the troubled economy, which is the pivot for Europe as a whole. Germans know that their socially admirable and financially ruinous welfare system has driven unemployment to record levels and scattered new investment to other countries. But they refuse to overhaul the system to take global competition into account. The essential economic message out of Sunday’s muddled election results: Go away. Leave us alone.
A declined invitation to me to consider the obvious came in a conversation with a New York investment banker early this summer, as German polls were showing Christian Democrat candidate Angela Merkel leading Social Democrat Chancellor Gerhard Schroeder by 20 points.
My friend had just returned from a lengthy “shopping” trip in Germany to look at businesses, factories and other assets for purchase. You jest, I said, with the euro-dollar exchange rate heavily weighted toward the European currency and with German economic growth hovering around zero.
True, he replied. But German businesses and families have tax incentives to sell assets now, and other German businesses and families show little interest in buying them. If Germans are reinvesting, it is usually abroad. This lack of confidence at home in the German future is what makes business shopping there a good deal for foreigners, he added.
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