Germans thrive amid neighbors’ crisis

Posted Dec. 15, 2011, at 7:59 p.m.
Last modified Dec. 15, 2011, at 9:42 p.m.

BERLIN — Amid crushing unemployment, slashed benefits and deep pessimism about Europe’s future stands one beacon of cheer this holiday season: Germany, where shoppers are spending more than they have in years.

The country whose leaders have the most power to address the euro crisis is also the one that has been most insulated from its effects, resulting in an unhurried pace to address the continent’s problems as others gnash their teeth. While Germany preaches the virtues of governments not spending more than they have, its own means have proved expansive, with unemployment the lowest in decades and government benefits largely untouched.

As cash registers ring with activity, Europe’s largest economy feels far different from its southern neighbors, where shuttered businesses line the streets. The lack of pain among ordinary taxpayers here is contributing to a skepticism that Europe’s ills are truly as urgent as leaders elsewhere on the continent have made them out to be. That sentiment has been reflected in Chancellor Angela Merkel’s reluctance to assent to drastic actions to save the currency zone, which the reelection-minded leader knows would be deeply unpopular at home.

German retail sales are up 4.8 percent since June 2009, when they hit a low because of the previous recession, according to data from Eurostat. Spain’s retail sales have declined 10 percent in the same time period, and Greece’s have declined 14 percent. Even in the first 10 months of this year, retail sales in Germany were up, and businesses say that trend has continued into this month.

“Germany, amongst all E.U. countries,” has consumers who are “saying it’s a good time to make big purchases,” said Gernot Nerb, an economist at the Ifo Institute, an economic research firm. “It’s astonishing.”

German consumers may not be able to keep spending much longer: Germany’s central bank slashed its 2012 growth estimates last week to near flat, as the world’s economic ills reduce demand for Germany’s exports, and many analysts expect unemployment to start rising again after scraping bottom at 5.5 percent, the lowest since November 1991.

But because that hasn’t taken hold, German buyers have continued to be uncharacteristically spendthrift, after years in which their leaders tried to cajole them into buying more and saving less.

“We personally don’t see a need to change our habits” in response to the crisis elsewhere, said Gisela Becker, 62, a schoolteacher who was shopping in Berlin’s bustling central district last weekend. “We’re quite optimistic about the future.”

That optimism doesn’t travel much beyond Germany’s borders, as many worry about what might happen if a country with a tremendous amount of debt, such as Italy, can no longer pay its bills as a result of a spike in borrowing costs.

Economists say that the fastest route to halting the crisis is to allow troubled countries to borrow money with the backing of the euro zone as a whole, or to set loose Europe’s printing presses to unleash a wave of euros that would help push down borrowing costs that in Italy, Spain and elsewhere have soared to euro-era highs in recent months. That would buy time to address the root problems of the crisis, such as poor growth prospects.

German leaders have focused on the euro zone’s root problems first, arguing that easy fixes would be worse for the currency union in the long run. Merkel and her top associates say that if they do not push for reforms now, the euro zone will quickly run into the same problems in the future.

“If the house is burning, you have to call for the firefighters and help them in their work. But you also have to make up your mind why this fire started,” German Foreign Minister Guido Westerwelle said last week in an interview in Berlin, as a summit billed as make-or-break for the euro zone was under way.

Special correspondent Eva Schroeder contributed to this report.

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