Fear stalks the Fatherland

The onset of globalisation poses a real threat to the protective, comfortable and ordered lifestyle that German citizens have long taken for granted, says Rupert Cornwell
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For a snapshot of post-war German history, look no further than the long, narrow harbour of the great maritime city of Kiel. On the eastern side, beyond the HDW and Preussag shipyards, twisted concrete blocks jut from the water, remnants of U-Boat pens smashed by allied bombers during the Gotterdammerung of 1945. Exactly opposite, on the western bank, hundreds of private yachts, fruit of the wealth amassed during half a century of subsequent recovery, rock softly at anchor. But an even more revealing symbol passed almost unobserved a few weeks ago. A giant floating tri- dock for ship repairs left for a permanent new home by the Suez Canal. An introduction, among many others to a strange, half-understood beast called Globalisierung.

To Anglo-Saxon ears, "globalisation" has a bracing ring, promising access to the economic wonders of the world. For Germans however, the term conveys only menace, of a new and unforgiving single world economy that takes no prisoners, where jobs and capital move unimpeded from country to country, threatening the very survival of the cosy, protective system under which they have prospered for 50 years. A fearful, mostly unspoken suspicion abounds, that a post-war era may be closing.

Outwardly little seems to have changed. The Teutonic quest for a perfectly ordered life continues. Deutsche Bahn has installed waste bins on railway station platforms divided into four different-coloured sections, each for a different category of recyclable. In Bonn, the municipality has installed electronic signs along main streets informing drivers exactly how many places are available in nearby parking garages. Imperceptibly but relentlessly however, the new order advances. "We're at a watershed," says Horst Siebert, member of Chancellor Kohl's five-man Council of economic advisers, and director of the influential World Economics Institute at Kiel University. "But neither the politicians nor the people understand what globalisation means for Germany."

Already though some old certainties are in shreds. No longer is Germany top of the economics class. Italy - the same feckless Italy that Germany used to bail out with multi-billion-dollar loans secured by Banca d'Italia gold - now has a lower inflation rate. Britain, long Europe's basket case, is enjoying a sustained boom. The air is thick with warnings that the generous pensions, welfare and health care benefits its people take for granted are no longer affordable - yet unions are girding up for battle, to reduce the working week from 35 to 32 hours. The unemployment rate is almost 12 per cent, double that of Britain. And now the deutschmark itself, ultimate symbol of this most successful chapter of modern German history, is to disappear. Just like Italians, Spaniards and Frenchmen, Germans will have to make do with the unknown, untrusted euro.

"What is the matter with our country?" asked Roman Herzog, the German President, in a now famous speech last spring after a visit to the Asian tigers on the Pacific rim. There all was dynamism, but "here the mood is overwhelmingly despondent ... a feeling of paralysis pervades our society". There was a loss of momentum, "an ossification and a failure to modernise ... an unbelievable mental depression".

Germany being Germany of course, nothing is ever simple. Could this not be merely a new outbreak of angst immemorial, in a people for whom no silver lining is complete without a leaden grey cloud? And indeed, in the short term, another hardy German perennial may be about to blossom - an export-led upswing. Fuelled by a weaker currency, the monthly trade surplus in June of DM13bn (pounds 4.5bn) was the largest in eight years. Growth in 1998 could be a very decent 3 per cent. And "Made in Germany" remains a byword for the excellence of a manufacturing sector which still comprises a third of the total economy (double its share in Britain).

But take the young London foreign exchange dealer in a radio interview this summer, asked to explain yet another drop in the value of the mark against the pound. "The mark's a dying currency, isn't it," he said, "and the markets kind of feel Germany has had it." Even a year ago, such words would have been unimaginable. Now foreign exchange dealers are not the fount of all wisdom. And even if they were, a dash of Schadenfreude is forgivable after endless German economic over-achieving. Nor does trouble in Germany matter as it did when the country was the biggest prize in the Cold War and the likeliest battlefield for a hot one. But "Germany has had it"? As Europe seeks to forge a common currency, and prove it can compete with the US, the Asians and an emergent China, the last thing it needs is a creeping crisis in the continent's pivotal economy.

But the signs of one abound. The most obvious are the 4.3 million Germans who are unemployed. Other difficulties are less measurable: a lack of flexibility and innovation, industry's focus on middle-level technology (in computers and biotech, Germany is a slouch) an over-rigid labour market, and a well-meaning but suffocating web of bureaucracy and regulation. If Bill Gates had started up his computer factory in a garage in Germany, President Herzog said, only a quarter in jest, health inspectors would have shut the place inside a week. Above all there is demography. Germany is growing old - so old that by 2010, under the country's company-financed social security system, employee contributions will have risen to an intolerable 50 per cent of wages if nothing is done. And that is before income tax.

But as the Fatherland slowly burns, the politicians fiddle, unwilling to confront the interest groups, above all the elderly, who vote for them. The whiff of fin de regime is everywhere. Not perhaps quite the stench that permeated the last few years of Toryism, but inevitable when one man and one coalition have been in power for 15 years. Suddenly Chancellor Kohl looks tired, unable as he once would have been to stamp out squabbling within the centre-right coalition over a pre-election reshuffle. Where though is the German Tony Blair? "We need new ideas, new people," even a prominent Kohl supporter admits, "but we just don't have them."

Only next spring will the SPD select its Kanzlerkandidat, but the current choice is not inspiring. Oskar Lafontaine, the left-winger who lost to Kohl in 1990, in the third of his four consecutive election victories since 1982, is yesterday's man, and for all his PR gifts, there are legitimate doubts that the other leading contender, Lower Saxony's Minister-President Gerhard Schroeder, is tomorrow's. And Germany's predicament differs from Britain's in another way. In Britain, Margaret Thatcher did the necessary dirty work. Now it is Germany's turn to introduce similarly required market- oriented reform - but at the very moment when the "right-wing" government, more ideologically equipped to do so, seems about to leave the stage. Dare the Social Democrats offend their own supporters and administer the necessary medicine ?

Inevitably, the already meagre public esteem for conventional politicians has tumbled, and simultaneously a grass-roots activism buried deep in German historical tradition has re-emerged. In Bonn this week for instance, posters have been advertising a Burgergesprach, roughly a town hall meeting, on the theme of "How sick is our democracy?" The question is legitimate: German democracy is ailing. Not, of course, in the sense of an imminent relapse into totalitarianism, and no comparison is more absurd than that of today's republic with Weimar. Nowhere, the US included, does a constitution contain stronger checks and balances - which is a very large part of the problem.

Take the Bundesrat, the upper chamber of unelected representatives from the federal Lander or states, designed to prevent an excessive concentration of power in the executive government. This summer though, the main claim to fame of an SPD-controlled Bundesrat was to block vitally needed tax reform endorsed by a majority in the elected Bundestag, or parliament. Unsurprisingly, calls for constitutional reform multiply. No one though believes there is the remotest chance of the two thirds majority in the Bundestag to secure it, and equally unsurprisingly, many despair of the country's capacity to reform itself. Naturally the Germans have a word for it, Reformstau, or "reform jam".

So what happens next? Possibly, though the odds are against it, a fifth Kohl victory in 1998. It is astonishing but true that never in the history of the Federal Republic has an electorate voted out a sitting chancellor. Safe, solid and predictable is how Germans like it, and Helmut Kohl, never a politician to be underestimated, is the embodiment of those virtues. The opposition sets no one alight, and the economy might be growing fast enough to make inroads into unemployment. Some think he does not intend to serve a full term, staying on long enough to see the euro into being before resigning.

And with or without Kohl, all is not lost. Having identified the problem, surely a people that is among Europe's best educated and certainly its best organised, can solve it. If not, harsh market forces will. Already too, amid the squabbling, the coalition and the SPD are hinting at a readiness to strike a partial pre-election deal on tax and welfare reform. The government too may soon be over the hump in its aid for the old East Germany, presently running at DM150bn (pounds 51bn), or 4 per cent of GDP, a year - a burden which makes it mildly miraculous that Germany is within spitting distance of the 3 per cent Maastricht budget deficit guideline. Then there is the impending change of capital; replacement of Bonn's enervating provincial vapours with the metropolitan fizz of the Berliner Luft will surely lift national spirits (albeit, inevitably, foreign apprehensions about Germany as well). And if the current Thai debacle is anything to go by, maybe the Asian dragons aren't quite as terrifying as advertised.

But the world, and Globalisierung, will not wait. This summer, a stone's throw from Kiel harbour, Professor Siebert's Institute held a convention on the subject of "Newly declining countries". For once Britain is not among them (though perhaps it falls into the "long declining" category). Nor is the Netherlands, nor even Italy. The two the organisers had in mind were France, and above all Germany. Can it make the necessary adjustments, or will it be gently overtaken by economic old age ? With the reassuring certainties of the Cold War just a memory, that is the new German question.