In late September, the Frankfurt stock market dropped 5 percent, falling to its lowest level in more than five years. The country’s Dax index, listing the 30 major companies, has fallen 48 percent since January. That same month Deutsche Börse, which operates the Frankfurt stock exchange, announced that by the end of next year it will scrap the Neuer Markt--Germany’s equivalent of the U.S. Nasdaq high-tech index--after the value of the companies listed on it dropped 96 percent from its March 2000 peak.

A growing number of major banks and financial houses in Germany are loaded with bad loans and declining stock. "In dollar terms, shares of German banks have performed worse in the past year than those of any other country except Argentina and Brazil," the Financial Times reported October 14. "Twitchy investors are beginning to fear the worst," added the big-business daily, "that somewhere, a big bank failure is waiting to happen."

Allianz, the second largest financial institution, has watched its stock plunge 65 percent since reaching a year-high of $292 in March. Its Dresdner Bank unit lost more than $1 billion in the second quarter of this year. The bank has some $30 billion in uncollectible loans due to be transferred to an "institutional restructuring unit."

Major industrial companies are also faring poorly. Stock of telecommunications giant Deutsche Telekom, Europe’s largest phone company, fell more than 90 percent from its high point two years ago. The company lost a record $3.8 billion in the first half of this year. The bosses of the former state-owned enterprise announced October 8 that they would eliminate more than 15,000 jobs as part of a "restructuring plan" to reverse the company’s sagging profits. The news followed cuts of 30,000, announced earlier.

According to the Bundesbank, the nation’s central bank, 32,000 German companies went bust last year, a 14 percent increase from the previous year. In 2002 the figure will be higher still, said Michael Rogowski, the head of German industry association BDI. The German credit data bureau, Creditreform, estimated that bankruptcies could rise to 40,000 this year.  
 
‘Only Japan has performed worse’
The shrinking profits and stock market value of many of the largest German firms highlight growing problems for the German capitalist rulers. The German economy has stagnated for the past two years and is projected to grow less than 1 percent for the second year in row. Among the Group of Seven major capitalist countries, "only recession-plagued Japan has performed worse," said the September 20 Wall Street Journal.

Unemployment has been hovering at 4 million 1998 when Schröder took office, despite his campaign promise to bring it down to 3.5 million. While noting that the number of jobless workers fell to 3.9 million in September, German Federal Labor Office president Florian Gerster warned in early October of "increasing signs of slowing economic growth."

The differential impact of the crisis across Germany can be seen in North Rhine-Westphalia, the country’s most populous state. The jobless rate for the 18 million people in this western state is more than 9 percent. The state is home to the Ruhr, the traditional engine-room of German industry, which has been shrinking for the past 30 years, losing more than 100,000 jobs in coal mining and almost 250,000 steel jobs.

The sheer size of the German economy, the biggest in Europe and third largest in the world, means that this crisis has big repercussions. At $1.8 trillion, the country’s gross domestic product eclipses that of France, the next largest European economy, by almost 40 percent.

Berlin has been the most energetic advocate of the adoption of the euro currency and of a closer European Union, in which it is the strongest economic power. Its political authority among the EU powers has been somewhat undermined, however, by news that its budget deficit is threatening to breach the official EU limit of 3 percent of Gross Domestic Product--a mark established under the EU’s 1997 Stability and Growth Pact, which Berlin strong-armed other member-states to sign.

Last year Germany’s deficit reached 2.8 percent. "The risks of exceeding this limit this year have grown," said Bundesbank chief economist Hermann Remsperger.

In a number of European countries, assaults on social benefits won by working people have been launched under the banner of reducing the budget deficit and abiding by the EU deficit limit. Shortly after the September election, Schröder established a labor and economics "super-ministry" charged with implementing "essential reforms," including cuts to social security benefits, reducing job security for older workers, creating a "low wage sector" of the workforce, and measures to make it easier for bosses to fire workers.

Three years ago Schröder gained parliamentary approval for cuts in retirement pensions as part of a $16 billion austerity package. Since then, however, the government hasn’t been able to keep up the momentum of a wholesale assault on the social wage.  
 
Workers resist demands for concessions
The resistance they have bumped into among working people is one factor that has affected the capitalists’ attempts to gain something like a competitive position with their imperialist rivals, particularly those in the United States. In June, for example, thousands of construction workers walked off the job for a pay raise, in face of a loss of 500,000 construction jobs since 1995 and pressure from the bosses, who howled that the strike would cause "massive economic damage."

The construction trade union IG Bau demanded an increase in the minimum wage for workers in eastern Germany, where unemployment is considerably higher. The labor action--the first walkout in the industry in more than 50 years--followed a series of rolling one-day strikes by the metalworkers union IG Metall that forced the employers in the auto industry to agree to demands for a 4 percent wage increase.

The leaders of Germany’s Green Party, junior partners in the coalition government with the Social Democratic Party, are taking more responsibility for pushing assaults on the social wage. According to the September 24 New York Times, the Greens budgetary spokesman Oswald Metzger said that he hoped the party’s strong showing in the elections would enable them to prod Schröder into taking "bolder" actions, including cutting unemployment benefits and "reforming the health care and pension systems."

Final results of the September 22 elections show the Social Democratic Party of Gerhard Schröder winning 251 seats after getting just 8,864 more votes than the Christian Democrats and their sister party, the Christian Social Union, which together won 248 seats. The Green Party won 55 seats in the Parliament in one of its best electoral showings.

In the run-up to the elections, Schröder stated strong disagreement with Washington’s course toward a massive air assault and ground invasion of Iraq, including an assault approved by the UN Security Council. The appeal to German nationalism helped him to hold onto the chancellorship. After Schröder’s election victory, U.S. president George Bush reportedly refused to place the traditional congratulatory telephone call.

Since the elections the German imperialists have attempted to smooth relations with Washington. "We have to go back to normal business with our most important ally, the United States...the most important outside of Europe," said German foreign minister Joschka Fischer.

Some 70,000 U.S. troops are stationed in several U.S. Air Force and Army bases in Germany, which have been used for bombing missions against Yugoslavia in 1998 and Afghanistan last year. The Pentagon is using these bases as it moves men and materiel into the Gulf in preparation for its military offensive. The German military has also maintained reconnaissance tanks in Kuwait.

Some 10,000 German soldiers are deployed abroad for "peacekeeping duties" that include 600 German soldiers out of a NATO military force of 1,000 in Macedonia. Berlin has proposed that starting in December it replace the Turkish government as head of the U.S.-led international security force in Afghanistan. The German military has provided 1,300 soldiers for that operation. The Turkish government’s application for EU membership is another source of friction between Washington and its imperialist rivals in the European Union, including Germany. In spite of its three-year status as a candidate member, Turkey was absent from a list of 10 countries put forward October 9 by the European Commission. Its recommendation was a "disappointment" for Washington, "which has long supported Turkey’s claim to membership," noted the International Herald Tribune. It "coincides with U.S. attempts to enlist Turkey as one of its key regional allies in a possible military campaign in Iraq," the paper added.  
 
 
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