In Germany the economy hums and the euro crisis seems elsewhere


If Berlin’s Alexa shopping center is any indication, Germany is having a very good crisis.

While the rest of Europe enacts crippling austerity measures to soothe nervous creditors and bring down dangerously high interest rates, shoppers continue to pour out of Alexa’s doors with bags full of presents to sip mulled wine in the cheery Christmas market outside.

Fenja Kothe, a social worker juggling three shopping bags, said she and her countrymen felt no need to cut back on their purchases this holiday season.

“Germany seems to be in a much better position than a lot of other European countries,” Kothe said, “so we don’t worry about the crisis.”


That blithe spirit has aroused the resentment of Germany’s neighbors and the fear of economists around the world. Germany is the only country with the financial clout to rescue the continent from its raging debt crisis, but leaders in Berlin have brushed off international pleas for decisive monetary intervention to put the crisis to rest.

After all, what’s the rush? Germany’s export-oriented economy is humming along. The unemployment rate is at its lowest in 20 years. The business confidence index released this week by the Munich-based Ifo Institute posted its biggest gains since February. Consumer spending continued to rise last quarter, and chain stores reported strong sales in the weeks before Christmas.

“This is a crisis that no one feels,” said Sebastian Dullien, a Berlin-based economist and senior fellow at the European Council on Foreign Relations. “There is a sense here that Germany has survived this crisis because it’s done so many things right.”

With a second recession threatening to overtake the continent, economists have called for massive official intervention to reassure jittery investors. Two common proposals are the introduction of collectively backed “eurobonds” and the establishment of the European Central Bank as a lender of last resort.

But Berlin has consistently rejected these ideas as dangerous precedents that run counter to the founding principles of European institutions and German zeal for fiscal prudence. Instead, Germany’s leaders have pushed for tighter budgetary controls on its wayward neighbors and greater fiscal unity in the Eurozone.

This month, Germany, in conjunction with France, persuaded nearly all of the European Union’s 27 nations to agree to strict borrowing and spending limits and near-automatic sanctions on member states that violate these rules. The countries are now hashing out the details.


But the effort has led to criticism that Germany has used the crisis as leverage to implement policies it has long sought.

A German government official denied that his nation is in any way capitalizing on the crisis.

“We’re neither so clever nor so evil,” said the official, who spoke on condition of anonymity because he is not authorized to speak publicly about the negotiations. “We’re not taking advantage of anybody. We just want a euro that works.”

Yet there’s evidence that Germany has benefited from the crisis. The Brussels-based research group Re-Define found last month that the German government’s borrowing costs had dropped by more than 50% over the course of the crisis as investors fled from risky bonds in other European countries to safer German ones. As a result, the group concluded, Germany had saved more than $26 billion in borrowing costs since 2009.

The German official disagreed with the idea that economic difficulties should trump the need for structural reforms in the Eurozone.

“This situation is not new,” he said. “We had 9/11, and before that we had the dot-com crash, and every time there’s been this tendency to go down the easy path and inject liquidity into the system. We feel that every time we provided short-term relief, it made things worse in the long term.”


This line of thinking is shared by Germany’s political and business leaders. A poll of 500 elite German politicians and businessmen taken by the Allensbach Institute this month showed overwhelming support for the government’s handling of the crisis. Only 11% think the Eurozone will break up as a result of the crisis, and 90% agreed that bailouts of ailing nations should be tied to strict austerity measures. The poll gave Chancellor Angela Merkel an approval rating of 70%, nearly twice its level in June.

The optimism at home has allowed Merkel to work patiently to strengthen European institutions rather than intervening as quickly and aggressively as some outsiders would prefer.

It has also allowed Germans to shop till they drop this holiday season.

Sophie, a student pausing from her shopping at the Alexa mall to roll a cigarette, said she and her fellow consumers were simply doing their part to keep the German economy moving.

“I’m no economic expert,” she said, “but I think it’s a good thing that we keep on shopping, right?”

Wiener is a special correspondent.