Economics, German Politics, oddly enough

Too cocky indeed.

Just two links to articles in today’s Sueddeutsche Zeitung in this post. But since they are about Mr Cocky mentioned in the previous post I decided to put them here.

In the first article, Juergen Peters is described as failed missionary, while the second reports that some people in his union want to see his head on the block after IG Metall’s historic defeat.

You can tell the extent to which the climate in Germany has changed when the metal employer association’s chairman, Martin Kannegiesser, sees it fit to state that “breaking the unions’ neck” would be stupid (just like the chancellor did yesterday, not without displaying a certain smugness). Boy, they do enjoy their victory… :)

Let’s just hope that they won’t get too cocky now and remember that even wounded animals can still be quite dangerous…

compulsory reading, Economics, German Politics, oddly enough

Strange Happenings…

Now at least the universe loves us ;-). From sixsixfive via Le Sofa Blogger

The Heal West Germans man

Entirely unrelated – the desk-cleaning action did take longer than expected, so I won’t be able to comment in lenght on this weekend’s exciting developments in German politics. The proposed accelrated tax break is quite remarkable in itself, as is the CDU’s refusal to do some serious subsidy removal business. Sure, the government will primarily target the oppposition’s target groups when proposing cuts – but why wouldn’t the CDU use this as a starting point to talk about cutting SPD-treasured subsidies as well, so that a substancial cut in subsidies would be the all-party compromise, instead of blocking change at all? This is clearly not going to help them electorally, but they may need some more time to figure this out.

As for the IG Metall’s ending the Summer Of Discontent, aka the most pointless metalworker strike ever, Papascott and Eamonn Fitzgerald have some coverage. To add something they can’t tell you…

When I was in Prague two weeks ago, I had un coup de rouge in a rather hidden little garden restaurant close to the Charles bridge where – at the table behind me – a group of German trade unionists was having a ball – drinking Moravian red and smoking cigars while discussing how to handle the strike and the press. At some point, one of the men at the table laughingly told the group that BMW had allegedly complained to the chancellor about the economic sideeffects of IG Metall’s strike…

When I shyly turned my head to look at the table behind me, I am almost certain I saw the profile of Juegen Peters, chairman to be of IG Metall, and now held responsible for the disaster by most commentators, laughing and zipping on his cigar – a scene slightlyreminiscent of those caricatures of cigar smoking capitalists.

Pulling off an unreasonable strike in the worst possible economic climate was probably intended to boost his – already agreed on – election as chairman in November this year. I suppose he wanted to demonstrate that the union does still have the power to go all the way.

Well, it looks like he might have smoked that cigar a little too early, like he was a little too cocky. But let’s face it – his mistake does have positive side effects – now everybody has understood that this time, change is for real – that is, maybe apart from the CDU. But they will get there eventually.

Economics, quicklink

CAP. Again.

However much I am fascinated by institutionalised European cooperation (aka EU), there’s one policy area in which even the most pronounced criticism is likely to be insufficient: The Common Agricultural Policy – reform resistent. Not that the US is only concerned with its effects on the world’s poorl, given the US farmers’ export interests, but disregarding underlying interests for the moment – the criticism sticks (from the NY Times).

compulsory reading, Economics, German Politics, Germany

Zeitenwende. End Of An Era.

It took some time and more of their money to make Germans understand.

It took more than ten years of subsidizing consumption and unemployment in a previously bankrupt former communist economy and virtual non-growth to make us see that it is not only necessary to think about the problematic long-term consequences of the current incentive structure in the German version of the continental model of the Welfare State but to actually change them.

It was no joke when, earlier this year, two people working in a zoo, who were fired for grilling the animals they should feed, successfully sued their former employer for a golden handshake. An extreme case, of course, but one indicating rather lucidly what’s keeping Germany from growing (possibly apart from too high interest rates, but that’s another story – albeit a connected one).

For ages, Germany’s consensus democracy was unable to get reforms going because, well, there was no consensus to speak of – whichever party was in opposition made a bet that it would pay off to block government reforms as far as possible because the electorate would not believe change was necessary. Sure, such a perception is partly a consequence of failed leadership. But only to a small part. Because they were right – the electorate did not want to see.

Then Schroeder won the 1998 election, largely because of the implicit promise that he would become the German Blair – that he could transform the German Social Democrats into some sort of NewLabour without the need for a Thatcher or a “Winter of Discontent”. But when he had just won his first power struggle and made the loony left’s star propagandist Oskar Lafontaine quit the finance ministry in March 1999, he realized that the internet bubble induced growth (weak, in Germany, but real economic growth nonetheless) would allow him to put off fundamental reforms and to mend relations with the loony left with even more rigid labour market reforms.

Unfortunately, after the bubble burst, it was too late for reforms that would have paid off for the government in last year’s election. A fiscal expansion was impossible and, moreover, unwise given strained public budgets. So Schroeder had to play the hand he was dealt – rectal rapprochement to the trade-unions, exploiting the flood-disaster in East-Germany, and betting on the public’s opposition to the American stance on Iraq.

Having narrowly won last year’s election, Schroeder knew that he would have to deliver on his 1998 promise, even thought the economic climate was far worse than it was back then. And even if though delivering would probably lead to the most serious conflict the SPD ever had with trade unions which, for no obvious reason given the steady decline in their membership, still claim to be speaking for “ordinary Germans” when it comes to “social justice”. The readjustment of the social security system, as well as the “intellectual” separation of the Social Democrats from the unions – developments that will undoubtedly be beneficial to both the SPD and Germany as a whole – will be a lot harder now than they would have been back in 1994, under Kohl, or in 1998.

The difference is that now, for the first time, a growing majority of Germans seems to be willing to give up something for a risky future benefit – or put differently, a lot more people are scared by what they think could happen to them, their children, and this country, if the social security system is not dealt with right now. Let’s hope it remains this way for sometime. The tough reforms are still out there in the think-tanks waiting to be pasted into bills.

Of course, the loony left is barking and whining about its loss of discourse hegemony on “social justice”. But don’t we all know that dogs that bark don’t bite?

If only because they have lost their teeth.

Economics, quicklink, US Politics

Much Ado about not much.

The McKinsey Quarterly looks at the incentive effects of the Bush dividend-cut proposal and decides that it, well, is largely a placebo. Won’t hurt, won’t heal, as most shares are held by tax-exempt entities anyway –

“The fact, however, is that tax-paying US individual shareholders own a minority of all US shares?28 percent in 2002, whereas tax-exempt US institutions and individuals who hold shares in tax-exempt accounts owned 61 percent. (The remainder was in foreign hands.) … Since these investors are indifferent to the issue of taxes on their dividends, they are unlikely to set in motion the kinds of changes in their portfolios that would drive up share prices.”