UK business must strengthen bridges with a rebuilt Germany

It was reassuring to see in Berlin last week that builders are the same all over New Europe. Even in somewhere as legendarily efficient as Germany, the capital’s reconstruction is far from finished. There was a forest of cranes around the newly-domed Reichstag a week after Gerhard Schröder’s government took up residence.

It’s obvious that the New Berlin has not been built yet. It resembles a giant and exciting post-war new town in Britain – Peterborough on a grand scale – but with a tangible purpose to its existence.

The first thing that struck me about Berlin was that it must have presented fantastic opportunities for international construction firms such as Taylor Woodrow and Costain. A developed Western nation rebuilds its capital only rarely. I hope that they took full advantage.

My next impression was the tremendous mood of optimism the city exudes. This is nothing to do with the millennium. It is more immediate than that. It will be a decade in November since the Wall came down – but Berlin is focused more on the present, than on anniversaries.

The physical frontier with the East has long gone, but Berlin has developed an altogether more positive stance at a new frontier. It is a symbol of European regeneration, standing between the old Europe of the West and the new Europe which must forge ties with the developing economies of the East.

There are those who are chilled by the resonances of rebuilding Berlin, a project charged with a consolidating pride that could overflow into a re-emergent nationalism.

I don’t buy that and nor do the people working in Berlin whom I met. The renaissance of Berlin is too tied up with the economy of the Euro-zone to the West and the developing economies of the East to be narrowly nationalistic.

This, again, provides considerable corporate opportunities. I have no doubt that the major Western consultancy firms, including names such as KPMG, Coopers and McKinsey, have been studying Berlin’s telephone directory. The potential in Berlin is further accentuated by Frankfurt having become a heavily over-serviced corporate and financial market during the past decade.

But the real story must be how easy it is for the commercial opportunities presented by Berlin to be squandered.

This is largely to do with the fact that Schröder and his “red-green” coalition are not riding into Berlin on the high that saw them beat Helmut Kohl’s Christian Democrats last year – and certainly not on anything like the wave of optimism that accompanied Tony Blair’s victory in the UK three years ago, a model that Schröder has shamelessly sought to emulate.

Schröder did not have to wait long for mid-term election torpor to set in. Local elections have recently delivered a series of crushing defeats for his Social Democrats, in favour of the Christian Democrats he deposed. Schröder has lost control of the Bundesrat, the German second chamber that can effectively block his reforms.

These reforms are based on a Blairite Third Way model and have proved deeply unpopular, in a manner far more damaging than the grumbles that Blair has had to bear from the traditionalist Left of his party. Schröder has embarked on an austerity programme to axe some £10bn from next year’s budget, through a cut to social welfare payments, reductions in the rate of pension increases and a shift of the burden of expenditure to the federal states.

His critics claim that he has sold out on social democratic principles in order to protect middle-class voters. Sounds familiar, doesn’t it? But Blair introduced his programme against the wholly different background of a discredited Tory government that had lost the radical benefits of Thatcherism, squandered the opportunities of Europe and run out of the economic come-ons which privatisation could deliver.

Say what you like about Helmut Kohl, but he was no John Major. Consequently, the economic expectations vested in Schr̦der have been much higher than they were for Blair. It has been sufficient for Blair not to have been his predecessor Рthe demands on Schr̦der have been far greater, especially given the greater challenges of the German economy.

Which brings me back to the opportunities presented by the new Germany to companies in the UK and elsewhere. There are still considerable areas of German industry, especially the utilities, in state ownership. The German financial community has very imaginatively made the step from industry funded by bank borrowings to an equity culture, but still has much to implement in this regard. The opportunities for venture capital investment in eastern Germany and beyond are untold. In all these areas there is expertise waiting to be co-opted in Berlin.

But, as importantly, the Berlin experiment offers us expert access not only to the developing eastern Germany, but also to developing economies such as Poland and the Czech Republic. Furthermore, Germany’s financial well-being is vital to the economy of the Euro-zone, which relates directly to British trade and our eventual membership of a single currency.

Schröder may not survive, but British business cannot afford to let the new Berlin fail.

George Pitcher is a partner of issue management consultancy Luther Pendragon


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