Battle to fix Germany's broken system

13 April 2012

WHEN Frank Hanuskiewicz arrived on Berlin's Kurf¸rstendamm he believed he had made the big time.

His property company Immoland occupied a prime position on the German capital's equivalent of Bond Street.

He drove a BMW, quaffed champagne at ultra-chic Newton's Bar, holidayed three times a year, wore designer clothes from Boss and Joop! and rented a lavish flat.

But for the past three years Hanuskiewicz has been one of the human statistics of Germany Inc's reversal of fortune. Over 41,000 small-to-medium-sized companies like his went bust last year, an average of more than 111 per day: the price, say critics, of Chancellor Gerhard Schr?der's failure to reform a broken system.

Fresh unemployment figures out yesterday show a 44,000 increase in the dole queue when the government was hoping for a reduction.

And economics super-minister, Wolfgang Clement, has been unable to staunch the outflow of business confidence and jobs. Germany has a palpable depression about it as it struggles to pull itself out of a business and social malaise.

Direct international investment was down 86% last year. Foreign companies have little inclination to come to a land with high taxes and a thick bureaucratic rulebook. As welfare cuts too brutal for many used to a cosseted life paid for out of their wages begin to bite, not only the disadvantaged are suffering, but also the middle class.

It has borne the brunt of Schr?der's 11th-hour economic reforms - tax relief on mortgages slashed, subsidies for working mothers curtailed and tax relief for commuters decimated.

The inability of German business to get working again poses a greater threat to the world's third-largest economy. Firms that have not gone bankrupt have simply gone. Manufacturing industry has headed out to places such as Poland and the Czech Republic.

'Germany has a major problem,' said economist Wolfgang Scheer, 'and it is a reluctance to change the social order to a more rapacious form of American or British capitalism. Until it does, things can only get worse.'

Hanuskiewicz himself said: 'Get rid of the red tape and let us work. Otherwise we won't again - not like we once did.'

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