East shakes as Schneider runs: Cities such as Leipzig face the worst damage if the edifice collapses. Steve Crawshaw in Bonn assesses the ramifications

A LACONIC press release contained the bombshell. 'To our surprise and dismay Dr Jurgen Schneider has informed the board of Dr Jurgen Schneider AG that he has become ill over Easter and that, on the advice of doctors, he must immediately withdraw from active involvement in the business. We do not know his whereabouts.'

Translated: one of Germany's largest property groups was on the verge of collapse, putting thousands of jobs at risk and endangering economic recovery, especially in the east.

'Panic]' cried the front-page headline in Bild, the mass-circulation daily. 'Where is the rogue?'

Speculation has variously suggested that the 59-year-old property developer and his wife, Claudia, may now be in Switzerland (where he has a pounds 2m villa on the shore of Lake Lugano), or in Brazil or in Iran. Other accounts place him in Barbados or Martinique, which he regularly visited on holiday (with wife, son, daughter and bodyguards) in his private Lear jet. In short: name your exotic destination - he might be there.

Bild says that Mr Schneider helped himself to between DM50m (pounds 20m) and DM100m, which he allegedly cleaned out of various accounts in order to prevent the money being frozen or seized. According to Bild he took the money with him 'in four to eight suitcases'. Whether or not Mr Schneider took the suitcases with him before succumbing to his 'illness', the cause for the group's collapse appears to be a familiar one: property dealings. Mr Schneider bought many properties at a premium a few years ago when the market was high; then, after expensive renovation, and as prices began to drop, he found it difficult to get his money back.

Like Robert Maxwell, Mr Schneider insisted up to the moment of his disappearance that all talk of financial problems was nonsense. Two months ago he blithely told Frankfurter Allgemeine Zeitung: 'My projects are always sound and pay for themselves.'

Last week those reassurances were revealed to be fantasy. On Friday the Schneider group filed for bankruptcy. Meanwhile, as a result of evidence supplied by the Schneider group's biggest single creditor, Deutsche Bank, the authorities opened investigations into Mr Schneider in connection with attempted fraud.

A shopping arcade that Mr Schneider wanted to purchase was said to contain 20,000 square metres of rentable space (in reality: 9,000sq/m), which would bring in DM57m a year (in reality: DM8m). Not surprisingly, many are now asking how the banks allowed themselves to be so credulous.

It is reckoned that he has left behind debts and commitments of around DM5bn - most of it owing to the banks, and the remainder to contractors who will somehow have to pick up the pieces. Politicians of all parties, including Chancellor Helmut Kohl, have insisted that the banks should behave 'responsibly' and not force the smaller firms to carry the brunt of the disaster.

Deutsche Bank, which is thought to be exposed to the tune of DM1.3bn, saw its share price drop sharply when Mr Schneider vanished. By the end of the week, however, after 40 creditor banks attended a meeting with the rump board, the banks sounded almost sanguine. The properties are mortgaged, so the banks' own losses can be contained. There are suggestions, too, that at least some of the construction work will continue.

When things looked good for the Schneider group they looked very good. The headquarters of the now-collapsed empire was - is - a castle in the town of Konigstein, near Frankfurt. Schneider properties in both east and west were among the most prestigious in Germany. The 'building lion', as he was known, insisted that he loved old buildings, and gained praise for his schemes.

In the east German city of Leipzig and in his home city of Frankfurt Mr Schneider was particularly active. His company bought and renovated a number of historic sites in Leipzig - most notably, the upmarket Madler Passage, which opened last autumn, and includes the Auerbach's Cellar restaurant, the renowned setting of a scene in Goethe's Faust.

Now that the bubble has burst, there is no shortage of analysts who persuasively explain that the crash had long been inevitable and that the sums simply did not add up. Until recently, however, when the first complaints surfaced about delayed payments to contractors, few such worries were heard. Instead, in Leipzig and in Frankfurt, the authorities were delighted. The mayor of Frankfurt told him: 'Frankfurt can be proud of you.' In Leipzig Mr Schneider was welcomed as 'the saviour of the old city centre'.

Now, as with Maxwell, the enthusiasm has turned to bitterness. In the words of one critic, 'The dummies will again be the small firms, who were already squeezed.' Several thousand jobs could be lost, in Leipzig alone. In the east especially, such a blow would be considerable. The economy is just beginning to gain a momentum of its own. Growth is still fragile, at best. Crucially, the east German boom is still construction- led. Cranes crowd the city skylines, as buildings are renovated and rebuilt after wartime bomb damage and 40 years of decay. If that work were to slow down or come to an end the knock-on effect on economic confidence throughout east Germany would be enormous.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Ashdown Group: Marketing Assistant - Financial Services Sector - London

£20400 per annum: Ashdown Group: An established and highly reputable organisat...

Recruitment Genius: Financial Services Graduate Training Scheme

£20000 - £100000 per annum: Recruitment Genius: We are a successful and establ...

Day In a Page

War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future
Berlusconi's world of sleaze: The astonishing lifestyle once enjoyed by Italy's former PM

Berlusconi's world of sleaze

The astonishing lifestyle once enjoyed by Italy's former PM
Disney plans galactic domination with endless Star Wars spin-offs

Disney plans galactic domination with endless Star Wars spin-offs

Films and theme parks are just the beginning. Disney believes its control of the now decades-old franchise can bring in merchandise and marketing millions for years to come
Could the golden age of the gaming arcade ever be revived in the era of the Xbox?

Could gaming arcades be revived?

The days when coin-ops were the only way to play the latest video games are gone. But a small band of enthusiasts are keeping the button-pushing dream alive
Edinburgh Fringe 2015: The 'tampon tax' has inspired a new wave of female comedians to reclaim period jokes

Heard the one about menstruation?

Yes, if you have been at the Fringe, where period pieces are taking centre stage