Living on love and air?
Gigantic dull red frames, in effect monstrous cranes, glide smoothly back and forth along Hamburg's dockside, carrying containers that are destined to travel all over the world.
Weirdly, and rather irritatingly as I am recording a radio piece, this ballet of mechanical behemoths is almost totally silent. The fork-lift trucks in the yard behind make more noise as they lift the individual containers, making a satisfying clanking sound.
Hamburg is Germany's biggest port, and for the last five years Germany has been the world's largest exporter. The majority of Germany's exports go to other parts of the European Union, with France as the major importer. But it is also German precision machine parts that have helped China's factories boom. The United States is also a big market.
With the whole of the globe as the target market, a global financial crisis is going to hurt.
Hans Heinrich Noll of Germany's shipowners' association professes himself an optimist, but he says they will be squeezed from both sides. People have less money to invest and the rest of the world isn't buying as much.
"It's a matter of demand. The financial and economic crisis will result in less demand for German exports: goods like machinery and cars, and high-technology products," he says.
"We have the largest container fleet worldwide, so we are very much dependent on the fate of trade worldwide and in particular the United States, Europe, China.
"We are not yet in the position to estimate what the effect will be on the real economy of the credit crunch, but there are some indications that freight rates are dropping and the demand for charter ships is declining.
"We had a boom for many years and now we have a quick decline in a short period of a few months."
To make it worse, more ships are being built for the German fleet and will be ready in a couple of years' time, perhaps as the downturn reaches a peak.
Mr Noll says politicians have to tell people that everything will be all right, whatever they really think, because this is not an economic crisis but a psychological one, about how people feel.
If he is a strategic optimist Reinhard Hauke seems the genuine article. We're talking in his factory in Schleswig-Holstein, a couple of hours' drive from Hamburg, standing in front of several glowing cherry-red fire engines. 
Ziegler Feuerschutz Rendsburg supplies everything a fire brigade could possibly need, and this part of the company doesn't export but sells to nearby local authorities.
They started in 1891, making fire hoses. Now their biggest operation is fitting all the kit into the chassis of fire engines. Each one is customised. Two men are at work rewiring the dashboard, while another drills into place frames that will hold communications equipment and computers for an incident control vehicle.
Mr Hauke, one of the bosses of the company, says "I think we are going to have a recession for a year and then we will be out of it. Our production is full: our books are full for nine months."
He takes me through a store room, crammed with shelves full of hose pipes, uniforms, caps and boots. In the draw of one metal cabinet there are medals for gallantry, silver bronze and gold.
"I don't worry too much because the situation of our company is ok. The bankers, the regional bankers will give money, give credit." He's talking not about the state banks but banks owned by city councils. "I am sure I know we will get the money we need to invest," he says.
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Then I meet that rarest of beasts these days - a cheerful economist. Some argue that German banks at the regional level have exactly the same problems as those in the US and UK, and are worried about their reluctance to take money from the government. Not Christian Dreger from the German Institute for Economic Research.
"We do not see a credit crunch in the data. All the data tells us there is not a serious credit crunch in Germany. In Germany the financial conditions of private firms are in good shape, and we have evidence that investment activity is more financed by profits than when compared to Anglo-Saxon countries, where credit demand plays a much larger role.
"In the UK and US you find a strong impact of the stock market or house prices on private consumption, but you do not find that for continental Europe, and especially not for Germany," he says, unable to suppress a chuckle.
"Of course we are in a period of economic stagnation at the moment, because of weakening demand from the United States. In contrast, demand from emerging markets like China and India is still quite strong and they have a similar weight to the euro area.
But after all this unexpected optimism I talk to shoppers - and the story is very different.
Even before the latest financial crisis Germany was suffering from consumers pulling their horns in, not spending as much. German businesses were crossing their fingers and hoping confidence would return, but now that looks very unlikely.
In the early evening I stop in a cheap supermarket on the outskirts of a little town in eastern Germany. Astra, and her son Christian, who looks to be in his early twenties, have only a few items in their trolley and are choosing with care.
"We're being hit hard here. It's never been good in this region and we've always had to count the pennies but now it's worse," she says.
"Nowadays I try to go shopping only once or twice a week, so that I don't get carried away buying little things that I don't really need. I make sure I go to the supermarket on the way home so I don't use any more petrol than I need to, and always shop around for special offers. I write a list of what I need: bread, butter, just stuff like that. I used to pop in every evening and get a salad and some fresh fruit. Not any more."
She explains that the family runs a little shop, selling flowers and trinkets.
"I wouldn't normally shop at this time of day but we've had to close our own shop because there are no customers. People have to spend their money on rent, food, maybe fuel for the car, so they don't have anything left over for the little luxuries."
Christian and his wife have two children, the youngest just five weeks old. They help in the shop but Astrid says they are all going to have to talk about whether this can go on. Although the government has brought unemployment down, there are parts of eastern Germany where as many as 30% are out of work.
"Mum's right," Christian says "Fewer and fewer people come to the shop. I have to think about moving to the West or a big city in the East where there's work and a better standard of living. I don't want to, this is my home. But you can't live on love and air. It would be nice if you could, but you can't."
Astrid holds aloft a round advent calendar, a big circle of purple and gold filled with milk chocolates, examining it carefully.
"Look at this, it's very beautiful... very different. Lovely. It's good quality: I bet it tastes good too. But 11 euros 99! I don't even have to think about it! Not this year."
She goes on: "Christmas this year the family will be together, children and grandchildren. We'll all celebrate and have dinner together. It'll be nice. But only the little ones will get presents this year."
The Germany economy is undoubtedly strong and better placed to resist some of the effect of the downturn, but I can't help wondering if a lot more people will be trying to live on love and air by this time next year.
This is based on a piece broadcast on Friday morning on BBC Radio 4's Today programme. One more to come on Saturday, on how Germany sees itself.
UPDATE: Interesting debate on Chancellor Merkel.
I wrote that Germany was the most powerful country in Europe, because it is the biggest economy, the biggest exporter in the world (see article above) and arguably the strongest economy in Europe. There is no doubt in my mind that Germany is the major player within the European Union, although its wishes can be defeated by some alliances. Merkel's skill is perhaps that she doesn't allow that to happen.
Clearly Britain has more impressive armed forces, but I am not sure how much power that gives us in the real world. Since the Falklands our fights have been those endorsed by Nato or the US. We have a seat in the UN Security Council, which Germany doesn't. But I think in general it is easy for the British to underestimate the power of other European countries, because their influence is under-reported. I don't moan about that, it is natural the focus is on our leaders, but the danger is that it makes it look as if they are the only players. It is not just journalists, of course: I was struck while researching this piece that, while I have read two books about the bloke who probably won't be US president, none of the three biographies of Merkel that I know about have been published in English. I am sure the publishers know what they are doing, and there isn't an audience, but who is the more important - powerful, if you like - politician?
I’m Mark Mardell, the BBC's North America editor. These are my reflections on American politics, some thoughts on being a Brit living in the USA, and who knows what else? My 
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Well i think the recession will hit Germany more than most will think..
In the last 8 years thjere have been a lot of reforms .
Most of these reforms entail cuts in social security,increasing taxes+social insurance payments for ordinary workers,cutting taxes for industry and wealthy people.
As part of the social reforms workers who have lost their jobs get 12 mths unemployment benefit.
After that Hartz 4-A part of this legistlation ist that you MUST take any job !
In Germany there is NO minimum wage.
This means wages have plummeted at the same time the cost of living has exploded(escpecially after the Euro came in)
Company profits have dramatically increased too.. while they pay less and less taxes.
The index from the total of wages/company income has changed from 74%(wages) in 2000 to less than 64% in 2008.
This means since 2000 there is no impuse for the economy through spending in the high street.
As more people will lose their jobs this will send the economy downwards.
Exports will not help because of a decease in demand from abroad together with collapsing consumer confidence will prolong the recession.
This imbalance is still being not addressed at this time!
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I was in Germany two weeks ago, and was struck by the way in which the media reports the current financial crisis. The ARD Morgenmagazin programme was reporting the situation, ups and down in the markets, German bank bail-out plan etc - but in measured tones; which contrasts very much with UK reporting, where, what with the alledged "catastrophe" of falling house prices we are being talked into recession by the media. Radio reporting is similarly understated and more rational.
You report this morning on "Today" in which the German economist played down the idea of recession was typical. As to whether they are diluding themselves remains to be seen.
The follow-up to yesterdays blog on Fr. Merkel was also very interesting, and underscores my view that the UK needs to take a more active interest in Europe, and less in the USA. Europe is where we live, work and trade and it is more important than the population, lead by the UK media, would like to believe.
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Mark:
Nice title and a interested story!
@ least business is moving!
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I think most of us would be delighted to give up our permanent seat on the security council, a big chunk of our armed forces and certainly withdraw our troops from all confict zones in exchange for a powerful productive economy like Germany. In the end, that counts for more, and will make their future much more secure than ours.
Sadly there seems no hope of that as all our (mostly male) politicians like to play war games rather than run a successful economy.
Funny, too, that the armed forces "carbon footprint" (which must be enormous) is never discussed either... perhaps CO2 emissions from fighter jets, tanks and warships are less serious for the environment than taking the family hatchback to Sainsburys?
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#4 - SuperJulianR
"... perhaps CO2 emissions from fighter jets, tanks and warships are less serious for the environment than taking the family hatchback to Sainsburys?"
Yes, I am afraid so.
If you count the number of mainly unnecessary supermarket runs that are made daily, add the dozens of flights that are sometimes stacked over London waiting to land and think of the hours spent in traffic queues spewing out CO2, military output pales into insignificance.
You can blame the bankers for the economic woes and the bloodletting on world leaders but CO2 emissions are down to us mostly.
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A very interesting read Mark. I always like to see your entries interspersed with comments from the individual people and the fact that you give their names and their backgrounds adds the colour to their identities and adds real flavour to the ensemble. Thank you.
I think you hit the nail on the head as to which Head of State probably has more influence these days upon the future of the British and other Europeans as in my view the British should be looking to its neighbours far more than we tend to do.
But, is not the BBC not also obsessed with the USA political show and as guilty of making this fundamental mistake. It is sending 147 of its employees to the USA including some of its top Presenters for News and Politics to look at the election of the US President.
Angela Merkel and Germany gets "The name is Mardell, Mark Mardell" and I would rather see more about Europe from the BBC than we currently get!
Its not that I am not interstest in the US Elections but (and I shall be as guarded as Mark!) the most likely winner is going to lead a country that has a history, when that probable President-Elect's Party is in power, of becoming very protectionist, isolationist and a country of navel-gazers. If the outcome is what I suspect it will be the President and both the Senate and the Congress will all be dominated by one party. Historically that has led to protectionism and that has NOT been very good for the rest of the world despite the thunderous applause from around the world that the result is likely to evoke.
Meanwhile, back in Germany the profitablity of Germany is key to the funding of the EU and the shape and future of the EU is at the heart of all our discussions within this Blog . . . we happy few who have an interest in the EU will remain loyal to this Blog!
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Size of economy still determines raw power even in peacetime, but the influence of a particular head of government varies as a factor of this in time and place. For example Gordon Brown has increased his influence worldwide during this financial crisis without his raw power base as leader of the world's 5th largest economy having changed. Tony Blair was able to increase his influence in Washington by sacrificing some in Europe, while Chirac and Schroeder effectively lost all influence on the global stage while still remaining influential within the EU.
Within the EU institutions voting weights in the Council of Ministers can be used as a proxy for raw power. Several factors translate this into influence including personal relationships. Someone like Jean Claude Juncker may be able to achieve a multiplying factor greater than 1.0 such that his influence is greater than the raw voting weight of Luxembourg woud suggest. Someone in the EU doghouse (e.g. Kaczynski, Berlusconi) might have less influence that the size of the Polish or Italian voting weight would suggest.
The UK and France are the only countries to play a word role in recent history and remain the only two European nations who can be said to have a geo-strategic perspective of the world into which they place the EU. For the rest, Germany included, the EU largely is the picture. It is a characteristic of multinational organisations that they tend to reflect the interests of their largest members with the EU being unique among important bodies in not including the Americans. The EU has therefore become the preferred vehicle to pursue policy by those who perceive their national interest to be contrary to the American interest. This is especially true for France.
Rousseau said that a man is truly free when he is capable of doing what he wants and is not prevented by others from doing it (i.e. both ‘freedom from coercion’ and ‘freedom to act’ in the language of a previous thread). The same applies to nations too. However the EU is a double-edged sword if the desire for Europe to speak with one voice leads to the silencing of minority voices. In theory the EU could silence the voice of any country, but historically France and Germany have been able through alliance to ensure that they cannot (or at least are very rarely) coerced into silence by the loss of a vote in the EU Council of Ministers. The Lisbon treaty is largely about ensuring that this remains the case in an enlarged EU. In such circumstances the EU augments Franco-German influence ('freedom to act') without any danger of compromising their 'freedom from coercion'. The calculation for the UK is very different because we are the one country that believes it has something to say on the word stage yet whose ability to voice that interest could easily be silenced by the EU.
To ask who the most influential European leader is, one must also ask where and when. I would say that the norm is that the French and German leaders have the most influence within the EU but that the UK is slightly more influential world wide. However Brown is not yet up to speed (and may never be) and the removal men are waiting outside the White House, so the UK influence is currently below norm.
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Well let's all pray that the Euro and £ keep falling against the $. At least then we can compete against the US outside of their home market. With the oil price down we will at least not have to worry too much about the price of that.
It was a fascinating read Mark I don't think that Brits look enough to Europe they are still so caught up with the fact that the Americans speak a language roughly similar that they can't see the enormous differences between the US and The UK. Nor are they able to relate to the very real cultural and social likenesses between the UK and Europe.
Apart from the language similarity there are very few real similarities between the two cultures. Even with a conservative government the UK would still look 'socialist' to most US citizens. The whole energy inefficient, throw away, dog eat dog gun toting society, is a million miles away from the UK.
The US will, no doubt, turn in on itself in the coming years in many ways it has no choice. Rebuilding their infrastructure alone is going to cost $ trillions. They have to find a way of providing universal health care at a price everyone can afford, that's going to be difficult. The cost of looking after all those poor young people maimed in Iraq is set to top $1 trillion in their lifetime. The cost of bailing out the banks and insurance companies will be paid by the next two generations. That's Bush's legacy.
Europe, if it can get it's act together at this point has a lot to offer. Aside from the UK which tended to follow the US model (although not to quite such extremes) borrowing and lending in Europe has always been much more restrained. In France , for example, the level of credit card debt is negligible most people use debit cards. Europe has, in general, good infrastructure especially the core countries it is much more energy efficient and much less wasteful. We need to get our act together and start all singing from the same hymn sheet. That's the difficult bit.
I'll leave it like that so that all the anti's can have a go.
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SuperJulianR (4): All reports (e.g. from the IMF, Word Bank, CIA etc.) show that the UK economy is more productive per person than the German (on both nominal and purchasing power basis).
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Given up, gone to do something else, wake up moderators, we can't all spend all day waiting for you.
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Germany has continued to be a manufacturing economy which has stood her in excellent stead. In one of his last interviews in the late eighties, I remember Harold Macmillan's dire warning that the UK, even then was moving far too dramatically into the service sector and that all the skills would be lost.
Many years later when BMW took over Rolls Royce cars, they relocated to Goodwood close to Chichester Harbour. I vividly remember the outrage felt by local yacht marinas and boat builders when their joiners were recruited by RR to make those walnut facias. For those who complain so bitterly about the competitiveness of the Germans, they would do well to remember that they did not steal a march on the UK. We threw it away.
Germany continues to have excellent vocational training for youngsters who prefer working with their hands to academic pursuits and they reward them with degrees in these skills which are the equivalent of the academic qualification. An interesting World Service documentary recently followed an apprentice as he bacame a piano maker at Bechstein.
Sadly, in Britain, there is an education system which specialises in turning out estate agents, hairdressers and short order cooks when what you need at a time of recession is people who can make things.
At the end of that documentary, there was an interview with one of the lecturers at a technical school. He pointed out one young student who was about to graduate. He will never be a merchant banker, said the teacher, he is a diamond cutter. But he will never be out of work and he will always make a decent living.
Any idiot can build factories but it will be a generation or more before they can be staffed.
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"Christian and his wife have two children, the youngest just five weeks old. They help in the shop..."
Must be really tough there that they make five-week-olds work in the shop. In charge of wetting the flowers?
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#9 - Freeborn-John
Absolutely true but where is the manufacturing base?
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@11
That used to be the case.
Many employers are complaining that school leavers cannot properly read ,write and count properly now!
if you go to the wrong type of school(Haupt Schule) you have very little chance of getting an apprenticeship at all!
In Northrhein-Westfalia there is a school (Hauptschule is the school for the lowest 10% of children at 10 years old after primary school) who had lessons about surviving on state benefits because these children would have virtually no chance of finding an apprenticeship and therefore very little chance of finding work!(It was on the ARD about 6 months ago!)
The school system gets pounded every year after the PISA tests!
Now the Govt. is panicing because Germany has no natural recources apart from its education system.
To few skilled workers=bad for business.
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Mark,
Off-topic, but still in Germany: I read today that Berlin Tempelhof airport has finally closed.
I assume that in your extensive travels you will have passed through this beautifully designed and located airport - possibly the best ever.
Many Berliners are upset that it has closed - especially as no-one has any idea what the site will now be used for (it's a listed building).
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Threnodio (13): It is in Shanghai. The main reason that the Germans are now the poorest West Europeans north of the Alps is that they are the most exposed to low-cost manufacturing competition in the Far East.
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MaxSceptic (15): Maybe they can do what they did with old Munich airport when it closed in the early 1990s; turn it into a night club.
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#16 - Freeborn-John
I agree. Up to the point when the global crisis bit, certainly they were disadvantaged but do you not think that an economy that is as dependent on the service sector as the UK is more vulnerable in less prosperous times? Or perhaps you feel that manufacturing jobs are just as likely to be at risk?
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Freeborn-John @ #9
threnodio @ #13
The manufacturing base is still the largest contributor sector to wealth of the UK but at 147,000 million GBP it is a small fraction of what it used to be and it is dominated by industires such as Pharmaceuticals (GlaxoSmithKline and AstraZeneca) but which require more than educated staff but massive funding for Research and Development costs given a drug-patent limitations means that profit margins are limited by patent lifetime thus new products have to be researched, tested and approved BEFORE they even begin to realise a profit.
The old fashioned industries such as Ship Building of the 1950s have all gone to the wall.
The problem was always manufacturing sector shrinkage but I now think the the UK's mastery of the world's Financial Markets within Europe will steeply decline and possibly vanish form the UK's teritory. If that is the case, then the UK's GDP will shrink very much below desirable levels and we could be back to being the "Sick man of Europe" and the UK's unwelcome reputation of the 1980s for being an ailing economy.
I noticed that the Head of the London Stock Exchange recently left her post. I wonder if the London Stock Exchange is due to shrink and perhaps be superceded by Frankfurt meaning even less London kudos for banking and less attraction for the Financial Sector to remain in the UK?
I don't mean to sound over-pessimistic but I urge caustion to Freeborn-John for overbuilding confidence in the UK's economic robustness and capability from coming through the forthcoming Recession that quickly.
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To Menedemus (19):
The head of London Stock Exchange left because of botched up IT decisions that lead to a failure of their system. That's the real reason Furse on leaving.
The Register commented on the matter:
http://www.theregister.co.uk/2008/09/13/furse_lse_comment/
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#19 - Menedemus
For the first time in a long time, this really does, I think, depend on governments itself. Whatever our personal feelings regarding the present administration, I think we would agree that the quite radical approach that Brown and Darling adopted has been widely mimicked and generally greeted with approbation. If the UK is seen to have answers not just when times are good, I cannot see why the City would not continue to be competitive with Frankfurt.
The big downer of course is the pound, which world markets seem to be deserting in droves. At present, it might not be over optimistic to see this as an adjustment in relation to a strengthening dollar but if the pound continues to get hammered, one would have to think that, in rough times, it gets very chilly outside the euro zone and Frankfurt will come out clearly on top.
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128. At 1:22pm on 31 Oct 2008, Ticape wrote:
' Ticape! Please give me at least one example of one of my posts that the English should be embarrassed about and tell me why.
e.g. #4 "She is part of the arrogant anti-democratic clique that wants to force a European Superstate upon us all." Stuff like that (I've seen you post worse in the other entries) having said that post #15 was much, much, much better, I'm embarrassed by the fact my post came after #15 even though I was referring to post #4. '
I stand by that comment. It is true. If it were not true then it would be rude. It would still not be as rude as promising the people of Britain a referendum and then denying them one. She is part of the conspiracy that wants to force Lisbon upon us.
Further: "...I simply consider myself European."...
In the 70's in Germany I asked my Yugoslav line manger whether he was Serb or what. He replied "I am Yugoslav." I wonder whether he still feels like that. The "EU" has similarities with Yugoslavia.
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Freeborn-John @17,
That would be sacrilege.
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Jukka_Rohila @ #20
I know the given reason of her resigning but I just wonder if she is jumping ship before the LSE becomes a viable asset to be bought by the Germans.
The Stock Market price for the LSE must be quite low. Everything else is pretty much now below the waterline!
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To Menedemus (24):
I don't think that the Germans are going to even try to think about buying LSE. If my memory deserves right, last time Deutsche Borse tried merger what they got was an shareholder revolt, thus I would assume management is very careful with the issue.
Secondly it could be questioned is the price right for LSE if we look at the long term view. Frankfurt is poised to gain power as an financial center of Europe as Eurozone is enlarged and as EU continues to integrate European markets.
Of course there is a question could the merger of Deutsche Borse and LSE be blocked by EU competition officials or it be set terms that would make the deal unattractive.
Don't know what will happen, anything is possible.
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threnodio (18): I think it is inherently harder to relocate service industries than manufacturing industries, but I have first-hand experience that this is happening. The company I work for has a facility in China but the decision has been taken to concentrate in India on a massive scale. The stated advantages (relative to China) are things like English language, legal protection for intellectual property protection, and even democracy / common law system. In my experience the practicalities of doing business in India (relative to China) are quite significant, e.g. much poorer infrastructure of all types, fewer direct flights in, unreliable and high-cost electricity, vastly over-priced business hotels, etc. Southern Africa has similar advantages to India but with better infrastructure and time zone, but the killer advantage of India seems to be the vast pool of graduate talent.
I would expect employees in UK services industry to face increasing cost pressure from Asia somewhat similar to that experienced by German manufacturing industry, even if not quite so intense. If India can get its infrastructure and professionalism up to Chinese standards then we will be in trouble, but it has a long way to go. Longer term I only see jobs in the UK that need to be here with those that can be sent to Bangalore going there.
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