The Berlin Update: 2nd February 2013

by Ares Kalandides

As every Saturday here is my weekly pick of the German news. Today:

1. Mapping the extreme right in former East Germany

2. German business optimistic about the future while figures draw a different picture

3. Tax reductions, state income deficits and income distribution in Germany

4. Berlin real estate market is more attractive than London

5. Immigration to Germany creates a new population boom

6. Land grabbing in Brandenburg

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1. Mapping the extreme right in former East Germany, Der Spiegel

spiegel_farrightThe above map shows the percentage of the far-right party NPD in municipalities in former East German states. It is particularly strong in Mecklemburg-Vorpommern, where it received over 20% in 25 municipalities. The relative absence of the NPD in Brandenburg (i.e. in the state surrounding Berlin) may be explained by the strong presence there of another far-right party – the DFU.

See the graphic at Spiegel Online: http://www.spiegel.de/international/a-878468.html

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2. German business optimistic about the future while figures draw a different picture, Der Spiegel, 25th January 2013, Deutsche Wirtschafts Nachrichten, 31st January 2013

Industrie

The German industry is optimistic about the future.  The “ifo economic climate index” rose for a third time in a row. 7000 managers of the German industry asked are optimistic both in the short and the long-term. This is quite surprising, given that the end of 2012 the crisis was back with a vengeance. In November 2012 aggregate orders in the German industry shrank by 1.8 % in relation to the month before. From  August/September to October/November there was a growth  of 1.6 %. In the same period internal demand shrank by 0.1 % for the fifth time in a row, while external demand grew by 2.8%, most of which came outside the Eurozone  ( +4.7 %).

Read both articles here:

http://www.spiegel.de/wirtschaft/unternehmen/ifo-index-steigt-zum-dritten-mal-in-folge-a-879620.html

http://deutsche-wirtschafts-nachrichten.de/2013/01/30/bdi-bestaetigt-auftragseinbruch-in-der-industrie/

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3. Tax reductions, state income deficits and income distribution in Germany, TAZ, 26th January and Handelsblatt 28th January 2013

Income

The share of the lower 95% of the population in the total income has been sinking constantly.

The tax experts of the Left party in Germany (Die Linke) have calculated the income that the state lost between 1998-2011 because of tax reductions at 235 billion Euro.  The loss was 17 billion for the municipalities, 81 for the federal state and 137 billions for the states.  What the Left has calculated are tax reductions in  property tax, corporate tax, tax on capital yields, business capital tax, income tax and inheritance tax.  Against that they have calculated the rise of VAT. Measures that the Left considers fair, such as the rise of tax exempt amount and child allowance have not been calculated.  On the contrary, says Axel Troost from the Left, state expenditure, calculated against inflation, has remained unchanged. All in all, concludes the report, tax changes in Germany have contributed to a redistribution of income from the poor to the rich.

Real disposable yearly income changes in Germany between 1999-2009 by income groups from the poorest to the richest tenth (from left to right).

Real disposable income changes in Germany between 1999-2009 by income groups from the poorest to the richest tenth (from left to right).

It is interesting to note that this growing inequality is not visible in calculations of average wealth. That is why the Handelsblatt insists that Germans have become richer in the past year, since average wealth has risen substantially.

You can read the article on the Tageszeitung here: http://www.taz.de/1/archiv/archiv/?dig=2013/01/26/a0139

You can download the full report (in German) here: https://dl.dropbox.com/u/22984273/%22Staatsschuldenkrise%22_und_Handlungsfaehigkeit_der_oeffentlichen_Hand-3..pdf

The Handelsblatt article is here: http://www.handelsblatt.com/finanzen/vorsorge-versicherung/ratgeber-hintergrund/boersen-rally-sei-dank-die-deutschen-werden-stetig-reicher/7697096.html

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4. Berlin real estate market is more attractive than London, Die Welt, 29th January 2013

Prenzlauer Berg

A report  by Pricewaterhouse Coopers (PwC) und the Urban Land Institute,  Emerging Trends in Real Estate, shows that German real estate is directly affected by the  financial crisis. Investment in real estate goes to the countries and cities deemed more stable, Munich, Berlin and London being at the top three positions of the city ranking.  London is back from the 10th position in 2012, to the 3rd. This trend entails a huge increase in prices, which in Berlin is particularly stressed in the housing sector.

http://www.welt.de/finanzen/immobilien/article113192206/Berliner-Haeusermarkt-attraktiver-als-der-in-London.html

You can download the PwC report here: http://www.pwc.de/de_DE/de/finanzdienstleistungen/real-estate/assets/emerging-trends-in-real-estate-europe-2013.pdf

An atlas of rent prices in Berlin can be downloaded here: https://www.gsw.de/files/1213/5877/5420/WMR_2013_DE_WWW.pdf

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5. Immigration to Germany creates a new population boom, Der Spiegel

immigration

“Despite a low birthrate, the population in Germany is growing because of increasing immigration from other European Union countries. For the third year in a row, more people came to the Germany than left it in 2012. This development balances out the natural population decline from deaths and fewer births of about 200,000 a year. If the trend continues, population forecasts will have to be corrected upwards significantly. On average, immigrants are younger than Germans. And they are more likely to have a secondary education than they used to be. After they come, most look for jobs in the major cities and their surroundings”

Read the whole article on Der Spiegel: http://www.spiegel.de/international/reversing-population-decline-germany-s-new-immigrant-influx-a-880038.html

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6. Land grabbing in Brandenburg, Frankfurter Rundschau, 30th January 2013

15% of all fields in Brandenburg belong to companies that have nothing to do with agriculture

15% of all fields in Brandenburg belong to companies that have nothing to do with agriculture

More and more speculators, in particular from West Germany and abroad, buy agricultural land in Brandenburg creating huge oligopolies. This development is disastrous for local farming businesses (usually the successors of former East German LPGs, i.e. Agricultural Production Cooperatives). But even individual farmers can not afford to buy or keep land, as prices have risen by 132 % in the East, as opposed to only 19% in the West.

http://www.fr-online.de/wirtschaft/landgrabbing-in-brandenburg-spekulanten-sichern-sich-ackerflaechen-,1472780,21588312.html

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About Ares

Ares Kalandides holds a PhD in Urban and Regional Studies from the National Technical University of Athens. He is the founder and CEO of Inpolis, an international consultancy based in Berlin, Germany and has implement several projects around the world. Ares teaches Urban Economics at the Technical University in Berlin and Metropolitan Studies at NYU Berlin.
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