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
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links