The maintenance of hope: Germany's secret to recovery

Yet it seems to have worked, to an amazing degree: Despite suffering an economic contraction of 5 per cent last year � during which unemployment doubled in the United States to 10.1 per cent and approached 20 per cent in Spain and Greece � Germany actually saw its unemployment rate fall to 7 per cent, its lowest point in 17 years.

The system has driven up government debt sharply and means the German recovery won�t have the commensurate boost in consumer spending other countries will see. But German officials believe kurzarbeit has spared their country a far larger catastrophe and has allowed it to experience a boom in the midst of Europe�s slump.

The logic works like this: If Mr. Schieve had been laid off, he and his wife would have been forced out of their three-bedroom rented house. The landlord, facing the depressed housing market of eastern Germany, would likely have defaulted on the mortgage. Meanwhile, the shops and services of Ludwigsfelde, a one-industry town, would have failed due to the layoffs and created their own defaults. Mr. Schieve and his fellow laid-off workers would have gone on welfare, costing the state large sums of money without generating any tax revenue.

The mortgage defaults generated by Mr. Schieve and a million people like him would have driven several banks into insolvency, forcing much more expensive state bailouts. And their mounting social-assistance bill and vanishing income-tax payments would have created a chronic government deficit.

This domino collapse is precisely what has happened in many other European countries, including Greece, Ireland, and Spain. It�s also afflicted the United States. Germany�s economy is hardly perfect, with record levels of debt, but it appears to have avoided the self-destructive vortex of unemployment, housing and banking shocks that have decimated other economies.

Inside the offices of the Daimler factory, though, another benefit of the kurzarbeit program becomes apparent: It prevented the loss of industrial knowledge that has hurt countries like Britain.

�For automobile producers, it�s very important that you have experienced and highly trained people � especially for Mercedes. If you lay them off, you have lost them forever,� said Bertram Caspari, head of the factory�s personnel department, who was told in 2008 that production would drop by half and that at least a third of the work force would no longer be necessary.

It shows what Europeans have learned in their struggle with economic collapse: To keep a recession from becoming a catastrophe, the solution is not just in the bank headquarters but on the office floor and the kitchen table.

"BartSimpson" said
Bailing out Wall Street is far more important that helping regular people because Wall Street people donate to the DNC & the RNC.

"andyt" said
But everybody in the US is convinced that they're going to be a 1 percenter someday, so they keep voting to cut their own throats.

"andyt" said
It called the US a plutocracy, said that 1% of the population holds 95% of the wealth.

In the United States at the end of 2001, 10% of the population owned 71% of the wealth and the top 1% owned 38%. On the other hand, the bottom 40% owned less than 1% of the nation's wealth.

"andyt" said
Yes, you're right. As Saunders says, Germany is in trouble if there is no global recovery this year, ie if we dip again. But so is the US, and what they did there mostly is protect the fat cats. If you're gonna go down, better to do it in an egalitarian fashion.

"BartSimpson" said
Yes, you're right. As Saunders says, Germany is in trouble if there is no global recovery this year, ie if we dip again. But so is the US, and what they did there mostly is protect the fat cats. If you're gonna go down, better to do it in an egalitarian fashion.