Germany Sheds "Sick Man" Image to France and Italy
By David Crossland
Political turbulence in France and Italy is highlighting how slowly Europe is undertaking reforms seen as essential to cope with globalization. Germany, long regarded as chronically unable to modernize its economy, is starting to look dynamic by comparison.
How times have changed. Just a few months ago, Germany was still regarded as the "sick man" of Europe, incapable of modernizing its once-proud economy. Many of its five million unemployed seemed doomed to a life on the dole and its graying population faced a gradual decline in prosperity caused by a hemorrhage of jobs to cheaper competitors in Eastern Europe and Asia.
Not any more. Things might not be exactly rosy in Germany, but some of the country's neighbors now seem in far worse shape. The French government's failure to implement its youth jobs law and the emergence of what looks set to be a fragile, Socialist-led government in Italy is making Germany look positively dynamic by comparison.
As students and trade unions staged parades across France on Tuesday to celebrate their victory, commentators said the center-right government's withdrawal of the hated First Job Contract in response to weeks of strikes and mass demonstrations had killed off any prospect of reform until after the presidential election in 2007.
"There probably will be only tentative reforms in France now, if any at all, until the 2007 election," said Stefan Bielmeier, senior European economist at Deutsche Bank in Frankfurt. "And whatever government emerges in Italy, it looks as if it will lack the broad mandate needed to implement necessary changes. Germany is definitely ahead of them at least with part of the reforms."
In Italy, after a night of confusion over who had won in the closest election in modern Italian history, Romano Prodi claimed victory over Prime Minister Silvio Berlusconi and pledged to form a "strong" government, Italy's 61st since World War Two.
But his wafer-thin margin -- 25,000 votes out of some 38 million cast -- raised the prospect of political deadlock that would prevent him from cutting the budget deficit and revamping the country's bloated welfare system. "The threat of a stalemate, the worst possible scenario, has emerged and clouds the future with uncertainty," bank UniCredit Banca Mobiliare said in a note to investors as share prices fell on the Milan Stock Exchange.
Economists say Italy, France and Germany face the same problem -- a vicious circle of high unemployment and high labor costs needed to finance the welfare system, and heavily regulated labour markets. But their efforts to deal with the problem has exposed big differences in political culture.
Germany began tackling reforms three years ago under then-chancellor Gerhard Schröder, whose "Agenda 2010" made it easier for small firms to fire workers, cut jobless benefit and imposed penalties on unemployed people who refused work. While the reforms still left Germany's unemployed better off than those in most other European countries apart from wealthy Scandinavia, they amounted to the most radical revamp of Germany's welfare state since World War Two.
The measures were highly unpopular, but the people protested in a very orderly and, well, German, fashion. Punctually on every Monday evening during the summer of 2004, months before the most hard-hitting measures were to be implemented, tens of thousands would gather in cities, mostly in eastern Germany where unemployment is highest.
They chanted "We Are The People" and blew whistles, and would march through town to squares where union leaders and left-wing politicians riled against the reforms. Then they would roll up their banners and go home quietly. No violence. No general strike. No one seemed to consider staging a protest on a Tuesday, or a Wednesday maybe.
To a tough-skinned politician like Schröder, it must have seemed like being savaged by a flock of dead sheep. The reforms, which had already received the blessing of the main opposition conservatives in lengthy parliamentary negotiations, were implemented.
Dead German sheep vs rioting French students
Not so in France, where street protests, often violent, are part of the political process. Some 3,400 people were arrested during nationwide protests against the First Job Contract, with which President Jacques Chirac and Prime Minister Dominique de Villepin wanted to combat youth unemployment by making it easier for employers to hire and fire workers aged 26 or under.
Participation in nationwide demonstrations twice exceeded a million people during a period where the situation intensified after trade unions began organizing a series of national strikes. Cowed, the government in Paris has now proposed new labor market measures to replace the disputed youth jobs law. They include giving financial incentives to employers to hire young people under 26.
The climbdown has dented Villepin's chances of running for the presidency in 2007. In Germany, Schröder's reforms ultimately ended his political career after a series of regional election defeats forced him to call an early general election for last September, which he lost to conservative challenger Angela Merkel.
But Merkel campaigned on even tougher changes, and has begun to discuss reform of the health care system in her right-left coalition with Schröder's Social Democrats. While unemployment hasn't started coming down yet, business and consumer confidence is improving, boosted by the prospect of the World Cup in June.
"I wouldn't go as far as to say Germany is the reform engine of Europe, but it is making slow progress," said Deutsche Bank's Bielmeier, adding that Germany's dependence on exports, and its proximity to cheaper labor in neighboring Eastern European countries had put Germany under greater pressure to modernize.
http://service.spiegel.de/cache/international/0,1518,410970,00.html
By David Crossland
Political turbulence in France and Italy is highlighting how slowly Europe is undertaking reforms seen as essential to cope with globalization. Germany, long regarded as chronically unable to modernize its economy, is starting to look dynamic by comparison.
How times have changed. Just a few months ago, Germany was still regarded as the "sick man" of Europe, incapable of modernizing its once-proud economy. Many of its five million unemployed seemed doomed to a life on the dole and its graying population faced a gradual decline in prosperity caused by a hemorrhage of jobs to cheaper competitors in Eastern Europe and Asia.
Not any more. Things might not be exactly rosy in Germany, but some of the country's neighbors now seem in far worse shape. The French government's failure to implement its youth jobs law and the emergence of what looks set to be a fragile, Socialist-led government in Italy is making Germany look positively dynamic by comparison.
As students and trade unions staged parades across France on Tuesday to celebrate their victory, commentators said the center-right government's withdrawal of the hated First Job Contract in response to weeks of strikes and mass demonstrations had killed off any prospect of reform until after the presidential election in 2007.
"There probably will be only tentative reforms in France now, if any at all, until the 2007 election," said Stefan Bielmeier, senior European economist at Deutsche Bank in Frankfurt. "And whatever government emerges in Italy, it looks as if it will lack the broad mandate needed to implement necessary changes. Germany is definitely ahead of them at least with part of the reforms."
In Italy, after a night of confusion over who had won in the closest election in modern Italian history, Romano Prodi claimed victory over Prime Minister Silvio Berlusconi and pledged to form a "strong" government, Italy's 61st since World War Two.
But his wafer-thin margin -- 25,000 votes out of some 38 million cast -- raised the prospect of political deadlock that would prevent him from cutting the budget deficit and revamping the country's bloated welfare system. "The threat of a stalemate, the worst possible scenario, has emerged and clouds the future with uncertainty," bank UniCredit Banca Mobiliare said in a note to investors as share prices fell on the Milan Stock Exchange.
Economists say Italy, France and Germany face the same problem -- a vicious circle of high unemployment and high labor costs needed to finance the welfare system, and heavily regulated labour markets. But their efforts to deal with the problem has exposed big differences in political culture.
Germany began tackling reforms three years ago under then-chancellor Gerhard Schröder, whose "Agenda 2010" made it easier for small firms to fire workers, cut jobless benefit and imposed penalties on unemployed people who refused work. While the reforms still left Germany's unemployed better off than those in most other European countries apart from wealthy Scandinavia, they amounted to the most radical revamp of Germany's welfare state since World War Two.
The measures were highly unpopular, but the people protested in a very orderly and, well, German, fashion. Punctually on every Monday evening during the summer of 2004, months before the most hard-hitting measures were to be implemented, tens of thousands would gather in cities, mostly in eastern Germany where unemployment is highest.
They chanted "We Are The People" and blew whistles, and would march through town to squares where union leaders and left-wing politicians riled against the reforms. Then they would roll up their banners and go home quietly. No violence. No general strike. No one seemed to consider staging a protest on a Tuesday, or a Wednesday maybe.
To a tough-skinned politician like Schröder, it must have seemed like being savaged by a flock of dead sheep. The reforms, which had already received the blessing of the main opposition conservatives in lengthy parliamentary negotiations, were implemented.
Dead German sheep vs rioting French students
Not so in France, where street protests, often violent, are part of the political process. Some 3,400 people were arrested during nationwide protests against the First Job Contract, with which President Jacques Chirac and Prime Minister Dominique de Villepin wanted to combat youth unemployment by making it easier for employers to hire and fire workers aged 26 or under.
Participation in nationwide demonstrations twice exceeded a million people during a period where the situation intensified after trade unions began organizing a series of national strikes. Cowed, the government in Paris has now proposed new labor market measures to replace the disputed youth jobs law. They include giving financial incentives to employers to hire young people under 26.
The climbdown has dented Villepin's chances of running for the presidency in 2007. In Germany, Schröder's reforms ultimately ended his political career after a series of regional election defeats forced him to call an early general election for last September, which he lost to conservative challenger Angela Merkel.
But Merkel campaigned on even tougher changes, and has begun to discuss reform of the health care system in her right-left coalition with Schröder's Social Democrats. While unemployment hasn't started coming down yet, business and consumer confidence is improving, boosted by the prospect of the World Cup in June.
"I wouldn't go as far as to say Germany is the reform engine of Europe, but it is making slow progress," said Deutsche Bank's Bielmeier, adding that Germany's dependence on exports, and its proximity to cheaper labor in neighboring Eastern European countries had put Germany under greater pressure to modernize.
http://service.spiegel.de/cache/international/0,1518,410970,00.html