The Berlin Update: 30th March 2013

by Ares Kalandides

As every week here is my pick of news from and on Germany. Today with the following:

1. Save the Berlin Wall!

2. Interview with Heiner Flassbeck, former German State Secretary of Finance

3. Dubious journalism: Institute of New Economic Thinking and the Greek SYRIZA according to the German press

4. Germany and the crisis

5. German political party economics

6. The decline of collective labour agreements in Germany

________________

1. Save the Berlin Wall!

Photo: Michael Gottschalk/dapd

Photo: Michael Gottschalk/dapd

There are not many pieces of the Berlin Wall left. Imagine the surprise, when one day in early March 2013 Berliners woke up to find that a piece of the remaining parts, and one of the most famous ones, was being torn down: East Side Gallery, a 1.5km piece of the Wall, covered with graffiti art and protected by law. Before anybody could stop them, machines had removed slabs of the Wall to make place for a new development – a luxury housing project on the river Spree. The Wall happened to be in its way. Protests managed to stop the demolition for a while, in particular because a strong movement – known as “Mediaspree versenken” – to protect the banks of the river from development had already existed for years. Yet, demolition resumed at once, this time protected by a police force of 250.The district (Friedrichshain-Kreuzberg), the Mayor (Berlin)  and all political parties competed in throwing the responsibility round like a ball.  Nobody knew, nobody was responsible. Not even the developer. As he claimed he had bought the plot back in 2000 as part of the Berlin privatisation frenzy and got an absolutely legal permit to build. The Wall was simply in the way of development. What we see here is the results of a combination of ideological blindness, where private property is worth more that world history, profit greed, incompetency of the administration and self-disempowerment of politics.

http://www.spiegel.de/international/germany/developer-resumes-removal-of-berlin-wall-section-for-luxury-housing-a-891223.html

2. Interview with Heiner Flassbeck, former German State Secretary of Finance

Photo: Iris C. Ritter/FuW

Photo: Iris C. Ritter/FuW

In an interview with “Finanz und Wirtschaft”, the economist Heiner Flassbeck explains how in a currency union, ever land should give wages according to productivity. State debts, on the contrary, are not so important:

For him there is still a possible scenario for the Euro: “A large group of southern European countries – including France – exits, and the pain would be much lower. Because of the devaluation many imports will become very expensive, but the southern Europeans would continue to buy Italian and French cars of the same currency area rather than considerably more expensive cars from Germany – where the pain would be much harder, because a large part of the export market would disappear overnight. But this logic is not usually understood in Germany.”

“In order to meet the inflation target, the wages should rise along with productivity. Each country must adjust labour costs to productivity, taking into account the inflation target. This will result in a convergence of competitiveness. ”

“Q: In the U.S. economist Paul Krugman says that the state has to borrow more to stimulate the economy.

A: I would prefer if the private businesses borrowed. They are the only ones who can service the debt again – if they invest. The state is an established institution. Companies are a revolving mass, they bring innovation… We need new companies with investments in the real economy.

http://www.fuw.ch/article/deutschland-muss-die-lohne-erhohen/

3. Dubious journalism: Institute of New Economic Thinking and the Greek SYRIZA according to the German press

Alexis Tsipras, head of the Greek main opposition party SYRIZA

Alexis Tsipras, head of the Greek main opposition party SYRIZA

The German business magazine, Wirtschaftswoche, published an article  claiming that INET (and in particular George Soros) had financed the appearance at a panel at Columbia University of the leader of the principal Greek opposition party, Mr. Alexis Tsipras, along with two of his advisers. According to INET, all that happened was that one of their scholars, INET’s Director of Research Projects, Dr. Thomas Ferguson, joined five other economists and international law specialists on one of the panels that comprised the night’s program.

“It is often said that in public life, it is the cover up, not the original mistake, that really causes damage. Neither publication was responsive, with Wirtschaftswoche actively stonewalling. Pretty soon, what we feared came to pass. Relying on the bogus magazine report, Mr. Evangelos Venizelos, the former Deputy Prime Minister and Minister of Finance of Greece, denounced the report in Parliament. In Greece, which in both the inter-war period and, alas, right now, has a tangled history of extreme right-wing rhetoric and some strongly anti-democratic political currents, the result was a spasm of newspaper commentary that sometimes bordered on the pathological.”

http://ineteconomics.org/blog/inet/wirtschaftswoche-and-handelsblatt-s-greek-myth-inet-subvention-never-was

4. Germany and the crisis

eurozoneWhile everybody in Germany seems to agree that the country’s situation in the Eurozone is quite a unique one, there is large disagreement on how to interpret it and what implication that has. For Germany’s Minster of Finance, Wolfgang Schäuble, it is the implementation of the right internal policies that have given it its strong position it is in now. As for the country’s relative isolation, he explains it as envy by the southern European economies who are not doing that well: “That is how it always goes, even in classes: if you get better results, the others, who have difficulties, are a little envious”.

Jakob Augstein  (Spiegel Online) sees it quite differently: “Just like twice before in our recent history, the Germans are falling deeper and deeper into conflict with their neighbours — regardless of the cost. It’s a path that could easily lead to fear of German political hegemony on the Continent. Indeed, Merkel’s idea of European integration is simply that Europe should bend to Germany’s political will.”

The left politician Axel Troost tries to understand why the Left has not profited from the growing criticism to capitalism: “In Germany there is a tradition, that in times of crisis people stick to what they know, rather than to look to the left. Not even the SPD [the social democrats] has managed to profit from the situation. The whole social movement, where I include the unions, Attac or the peace movement, does not have the power it had back in 2009”.

https://www.focus.de/finanzen/news/staatsverschuldung/finanzminister-kritisiert-sparkritik-schaeuble-arme-euro-laender-beneiden-deutschland_aid_948183.html

http://www.spiegel.de/international/europe/opinion-german-euro-leadership-stubborn-and-egotistical-a-890848.html

http://www.zeit.de/politik/deutschland/2013-03/troost-linke-krise

5. German political party economics

The CDU remains the first party to receive donations: in 2011 the Christian Democrats received 21.9 million euros from private donors, organizations and companies. That was just over 41 % of the total amount donated to all parties represented in parliament. Adding the 5.9 million of the CSU, the Union reaches 27.8 millions or 52 % of the total donations. The results from the official financial reports of the parliamentary parties for 2011, were announced last Tuesday. All parties except the Left received donations from companies and industry associations. Daimler and BMW gave different sums to the Union (CDU+CSU), SPD, FDP and Greens;  the Allianz group gave each party  50,001 euros. Employers also distributed money: the Association of Chemical Industry to the CDU, SPD and FDP; the association Südwestmetall additionally to the Greens. The largest single donor of the CDU, the Hamburg-based Berenberg Bank gave it EUR 180,000. In the SPD, Daimler is the largest donor with EUR 150,000 , the same amount they give to the CDU. The Association of Bavarian metal and electrical industry was the top donor for CSU and FDP.

http://www.tagesspiegel.de/politik/parteien-jeder-zweite-spenden-euro-geht-an-cdu-und-csu/7988888.html

http://mobil.stern.de/politik/deutschland/rechenschaftsbericht-2011-cdu-bekommt-die-meisten-spenden-1989846.html?mobil=1

6. The decline of collective labour agreements in Germany

Bildschirmfoto 2013-03-28 um 13.11.43

Souce: IAB

The diagram shows the development of collective labour agreements in Germany since 1996. The numbers refer to the percent of the workforce bound by such contracts. Blue in the (former) West and yellow in the (former) East. The three small pies in the top right read: branch collective labour agreements; company collective labour agreements; no collective labour agreements. While in the West collective labour agreements covered 70% of the employed labour force (excluding e.g. freelancers) in 1996 they dropped to 54% in 2011. In the East it went from 56% down to 37%.

http://doku.iab.de/aktuell/2012/Tarifbindungsentwicklung_1996-2011.pdf

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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