| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
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| INTERNATIONAL BUSINESS
Commentary: Germany Is Leading--in the Wrong Direction This is not Germany's--or Europe's--finest hour. Former Chancellor Helmut Kohl, the most revered European statesman of his generation and the man most responsible for German reunification and the creation of Europe's single currency, stunned his countrymen on Nov. 30 by admitting that he oversaw a campaign slush fund during his years as head of government. The honorary chairman of the opposition Christian Democratic Union may be forced to make more damaging admissions as German prosecutors look into cash payments made by a Bavarian arms dealer who played a role in the export of German armored personnel carriers to Saudi Arabia. More than Kohl's legacy is at stake. His mea culpa is the latest sad reminder of the leadership crisis facing Europe's dominant economy. Once Germany was the Continent's voice of probity, flogging its less disciplined Latin neighbors into fiscal shape. Together, Kohl, his tough Finance Minister Theo Waigel, and imperious Bundesbank President Hans Tietmeyer strong-armed France and Italy into accepting the spending restraints that set the stage for the euro's launch last January. LURCHING LEFT. That era is over. The danger now is that Germany could serve as a different kind of model for Europe. Under Chancellor Gerhard Schroder, the center-left government in Berlin has been pursuing policies that seem increasingly aimed at holding back market forces and ensuring that the freewheeling Anglo-Saxon model of capitalism doesn't take hold in Europe's heartland. Once hailed as a Teutonic Tony Blair, Schroder has been lurching to the left faster than you can say ''sozialismus.'' In late November, he shamelessly used $129 million in taxpayer funds to save construction group Philipp Holzmann from well-deserved bankruptcy. Playing to the gallery gained Schroder a few popularity points in Germany but cost the country billions in credibility. Only days before, Schroder had appalled the business community whose investments he needs when he called for European Commission intervention in hostile takeovers like the $128 billion play by Vodafone AirTouch PLC for Germany's Mannesmann. ''Hostile takeovers don't work. They cause managerial problems, they destroy value, they aren't to be welcomed,'' he declared. Fittingly, the riposte came not from Vodafone but from Mannesmann CEO Klaus Esser. Hands off, Esser retorted. ''The shareholders are the referees.'' Will the other two big center-left leaders in continental Europe--France's Lionel Jospin and Italy's Massimo D'Alema--be tempted to revert to outdated, crowd-pleasing policies? So far, Socialist Jospin has paid lip service to policies such as the 35-hour workweek, even as Paris has increased labor flexibility and stepped aside as French corporations and banks duke it out in the market. The result has been an investment and consumer spending boom that is making France Europe's success story this year. But Jospin now has his eyes fixed on the 2002 presidential elections, and the backsliding has started. In recent weeks, he has pushed through legislation making it more expensive for companies to restructure. Similarly, when it comes to standing up to unions and radical elements in his coalition government, Italy's Massimo D'Alema is looking like a pushover. Long gone are hopes that this former Communist would ram through much needed reforms of his country's antiquated pension system. Ironically, the economic cycle is allowing leaders to avoid tough reforms. The European economy is looking up for the first time in half a decade. Germany is expecting growth to almost double, to 2.7%, next year. France could grow by as much as 3.5%, while Italians are plowing savings into their booming stock market. ''The favorable economic cycle is allowing us to buy time,'' admits Jurgen Pfister, chief economist at Frankfurt's Commerzbank. But Schroder, Jospin, and D'Alema may be misreading the political tea-leaves. Already, signs are that the political boost won by Schroder for his moves on Holzmann and Mannesmann is dissipating. D'Alema and Jospin could also be penalized for their zigzags in upcoming elections. European voters will reward consistency, decisiveness, and courage in their leaders. These qualities are in painfully short supply. To read a letters to the editor about this story, click here and here. By John Rossant _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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