THE INFLUENCE OF THE GLOBAL CRISIS ON GERMAN ECONOMY
Kurschus, Lawyers and Managers of bankruptcies
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Kaunas University of Technology
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Kaunas University of Technology
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Ralph-Jörn Kurschus is a lecturer at the Bank Academy in Frankfurt/Main and at Law Studies in the University of Jena. He has become a lawyer in 1990 and since 1994 has been working as a manager of bankruptcies in the Kurschus, Lawyers and Managers of Bbankruptcies. In 1994 Mr. R.J. Kurschus prepared a variety of expert reports related to the economic situation of the German Small and Medium Enterprises (SMEs) for the German courts. In 1998 he got the title of Lawyer for Labour Law; in 2005 – the title of Lawyer for Bankruptcy Law.
Petras Baršauskas is a Professor, Doctor Habilitus of Social Sciences and Rector at Kaunas University of Technology. Prof. Petras Baršauskas is a member of European Committee of Erasmus, Erasmus Mundus and Tempus programmes, member of the Commission of European CREST Network and the action group of Bologna process supervision, second term member of the Research Council of Lithuania. His key qualifications are in the area of international management and entrepreneurship. He is the author of more than 70 scientific articles, 4 monographs (the latest Doctoral Studies in Europe and Lithuania, 2009) and 1 textbook. He is a regular contributor to the Emerald Baltic Journal of Management.
Vaida Pilinkienė is a Professor and Doctor of Social Sciences, at Economics and International Trade Department in Kaunas University of Technology. Her research is focused on business environment analysis, demand forecasting. Her articles were published in various journals such as: Engineering economics, Baltic Journal of Management, Almanach des praktischen Managements in Mittel und Ost – Europa, etc., and researches were presented in various international conferences.
Abstract: This article analyses the influence of the global crisis on German economy and its sectors. The difficulties in market economy have increased since the real estate market in the USA collapsed and a worldwide economic crisis spread out. The research made by defining and analyzing the main factors of German economy is the basis of the article. The research proved that Germany was influenced by the global economic crisis in 2008 – 2009, resulting in unusually high levels of debt and losing its position in export markets. Whereas, the successful economic recovery was caused by the German government’s financially supporting programmes and new increasing investment of the shareholders in 2010.
Keywords: Global crisis, financial crisis, globalization, Germany.
JEL classification: F23, F41, F59.
In the recent years the global economy crisis and its consequences have become one of the major themes widely discussed in academic writing (Lakštutienė et al, 2009; Breiterytė, Rumšaitė, 2009; Zaharia, Miron, 2010; Belinskaja, Galinienė, 2010; De Bondt, 2010; Moshirian, 2011). The possible consequences of the crisis concern not only the most influential world leaders that make decisions largely determining the course of the crisis and the welfare of the countries, but also the ordinary citizens, that take responsibility for the future of their families, fear the rise of unemployment, and predict financial instability (Kroll, Tagscherer, 2009; Serbanica et al, 2009; Bonciu, 2010; Pakravan, 2011; Wim, 2011).
The first signs of global crisis appeared in the middle of 2007 as the growing default of financial mortgage in the USA. Since the Second World War, the average economic contraction lasted up to ten months (National Bureau of Economic Research, 2008). However, the recent recession went beyond the average, continuing up to nineteen months. In 2008, when 2.8 million people lost their jobs, job losses reached the highest annual level in the USA in 60 years (Goldman, 2009).
The beginning of financial crisis coincided with the structural crisis in the world’s economy (Colander et al., 2009; Stiglitz, 2009). Industries that prospered a rather long time during the rise of the economy and created great surplus capacities did fall into the deep recession when the world’s demand started to decline. The financial crisis coincided with the third stage of the economic cycle i.e. recession, which notably caused a negative effect of the crisis on the world’s economy (Pooran, 2010; Čibinskienė, Kontautienė, 2010).
The collapse of the real estate market in the United States of America was only the beginning of an economic disaster, which rolled over the whole world not reprieving a single country and having a large bearing on several economies, industries and multinational corporations. The Organization for Economic Co-operation and Development reported that the world’s economy appeared in the middle of the biggest recession of our lifetime, caused by a global financial crisis and deepened by a collapse of the world’s trade.
This situation recalls the time of the Great Depression, which was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in 1929 and lasted until the late 1930s or early 1940s. It was the longest, most widespread, and deepest depression of the 20th century. In the 21st century, the Great Depression is commonly used as an example of how far the world’s economy can decline. This particular historical analogy is rather dangerous and though not confirmed, does help to understand the current situation, when the years around 1929 and 2009 are being compared. Decreasing share prices, shrinking economies and struggling banks describe and illustrate the global economic crisis in 2009, altogether reminding the situation in 1929.
The worldwide economic crisis affected the real economy in Germany as well, the official GDP declined by 5 percent in 2009 and unemployment increase too. In 2010 a moderate growth of 1,5% of the GDP was expected, however the unemployment increased further (Schneider, 2010). The German banking system was the first to be affected by the economic crisis. Whereas, the American sub prime crisis led to a worldwide financial crisis. Not only in the USA, but in Europe as well the investment banks collapsed and the world financial system threatened to break down. For example, the Hypo Real Estate Bank (HRE) in Germany had considerable difficulties that were solved by 50 billon EUR funding from the state and other banks. In 2009 when the German state owned 90% of HRE, the bank was finally nationalized (Maushagen, 2009). Furthermore, such German multinational companies as BMW, Daimler and Volkswagen were greatly affected by the economic crisis as well. Due to a succession of events people could not afford such cars and premiums. Therefore, the sales decreased worldwide, many car dealers went into bankruptcy and many people lost their jobs (Hawranek 2008).
German government declared of a huge rescue package worth of 500 billon EUR for the Germany’s banking and insurance sector that was stricken in 2008. The bail-out, which was endorsed by the cabinet at lunchtime, is considered to be the biggest state intervention in the German economy since the end of the Second World War. It includes 400 billon EUR in guarantees assigned for interbank lending in order to restore liquidity and 100 billon EUR in fresh capital. German government, which had resisted taking stakes in the country’s troubled banks, made a considerable change in its politics with the bail-out package marks. However, Berlin has been enforced into a U-turn due to the shortage of liquidity held by German banks, which resulted from the slump in markets and the difficulty in securing short-term lending. The German government declared that package did not help to achieve a balanced budget by 2011 which would have been the first time in years (Connolly, 2008).
The German economy is considered relatively immune to crises in individual markets. Many companies in the machine building, medical and environmental engineering sectors could be considered the undisputed world market leaders in their industries. Therefore, German companies predicted that if sales to the United States or other European countries declined, they could offset the shortfalls by increasing sales to China, India and Russia. However, the current crisis is different; it affects companies in various ways. It is not only a sales volume crisis brought by consumers and other companies ordering fewer products, but also a financing crisis, because customers that are interested in buying goods lack the necessary capital, as the banks have curtailed lending. Furthermore, it is a crisis of confidence, because those who could buy goods are no longer interested in doing so. When consumption drops off, companies must cut additional jobs, the markets decline and a vicious circle of self-fulfilling poor prospects begins. Thus, the financial crisis, which had seemed more like a virtual crisis to ordinary citizens, is becoming a real, palpable drama (Bovensiepen, 2008).
It is obvious, that the financial crisis raised the fear of globalization. On the one hand, suddenly all positive factors of globalization, such as internationalization, networking, cooperation and investing became overshadowed by the breakdown of the whole market economy system. On the other hand globalization could be that force, which will initiate the qualitative leap of the world’s economy as well as country’s economy. Therefore, the aim of the article is to analyse the influence of the global crisis on German economy.
2. Research methodology
In order to analyse the influence of the global crisis on German economy and its sectors the expert evaluation method was used. According to such scholars as S. Makridakis, S.C. Wheelwright, R.J. Hyndman (1998), the employment of this method requires from 10 to 100 experts, depending on the objectives of the research. Furthermore the expert’s degree of competence should be taken into consideration as well. Regarding the objectives of the research and the demands for the experts 20 people were chosen that could be considered experts on the evaluation of the economic situation in Germany due to their qualification and experience (economists, professors of business schools, businessmen).
The experts defined the factors, which caused the global economic crisis and described how the factors arose, developed and which effect they had on the German economy (see figure 1). The following overview, created by the experts, shows the outcome of the discussion and serves as the basis for the article.
Figure 1. The crisis factors influencing German economy
3. Global crisis and German economy: research results
Real estate crisis. Not difficult guidelines by granting loans and a low interest policy of the US Federal reserve led to an oversupply of cheap money in 1999. After the attacks on the Twin Towers at September 11, in 2001 the CEO Alan Greenspan of the American Federal Reserve decreased the prime rate significantly in order to keep the economy in progress. In fact, the banks temporarily were able to refinance themselves with an interest rate of 1%, which made many people’s dream of an owned house possible. Even people with a very low income were able to afford a house. However, the expected increase in value of estates made the risk appear rather low, although interest rates were established only for a short time and might have increased at any time, since the interest rate is variable in the USA. In this case, debtors were not able to pay their instalments. Between the end of the 1990s and the beginning of 2006, real estate prices in the USA doubled, enabling homeowners to borrow new credits for their houses, which were increasing in value (Wissen Media Verlag, 2009).
In 2000 the banks tried to reduce their risk from the estate credits by bundling them to funds and selling them in shares. Rating agencies helped by certificating good reports about the derivatives. In 2004 the USA Federal Reserve was concerned about the high inflation rate and increased the prime rate continuously. This action resulted in a chain reaction because the mortgage interest rates increased due to the variable interest rates. Many house owners were suddenly confronted with a debited interest which they were not able to pay. The situation led to a dramatic increase of compulsory auctions although the estate market experienced a downturn at that time. Thus, the real estate market completely collapsed due to the oversupply.
In 2007 the amount of needy credits increased rapidly. Banks, insurances and investment funds were forced to amortize high amounts of money. Several people with construction finances went bankrupt. Furthermore, the problems spread to Europe (including Germany) due to the collapse of the British major bank Northern Rock. The bank for small and medium-sized businesses (Deutsche Industrie Bank AG) in Germany got into difficulties. Within a few months even more institutions were affected, for example Bear Stearns, Lehman Brothers and the mortgage banks Fanny Mae and Freddy Mac. As a result one bank could not trust another. Even daily credits were refused. Whereas, the central banks tried to preserve money circulation by investing billion worth amounts (Seith, 2008).
The research has showed that the real estate crisis could have been prevented or at least reduced, if in the first place, the USA banks would have been more careful in checking the creditworthiness of debtors. In this case, “toxic credits” could have been prevented. Certainly, then, less people would have been able to take a loan, but the people that could have afford it were reliable in the future. Therefore, less people now would be bankrupted and the market would not be crowded with real estate. Furthermore, worldwide avid bankers should have double checked the security of the credit bundling they had bought. Banks within Germany, for example the Hypo Real Estate, should have been more careful in buying credits from American banks. Instead of anticipating the big business, they should have had the estate credits checked by rating agencies to avoid the risk of buying toxic credits. In this case, the real estate crisis would not have had such a strong effect on the whole world, especially on Germany.
Financial crisis. The American subprime crisis led to a worldwide financial crisis. The American banks bundled bad credits which could not be paid by its owner and sold them as bonds to avid bankers worldwide. This is where the chain reaction started.
The USA Bank IndyMac was nationalized in July of 2008. The Bank of America bought the troubling Investment house Merrill Lynch. The biggest American insurance institution American International Group was nationalized and the biggest USA saving bank Washington Mutual was smashed. Global investment bank the Goldman Sachs Group, Inc. and Morgan Stanley announced their transformation into normal commercial banks. At the same time, the Hypo Real Estate in Germany had considerable difficulties, but was saved by the grants of the state and other banks. The Benelux countries had to stabilize the financial institution Dexia (active in public finance, providing retail and commercial banking services to individuals and SMEs, asset management, financial markets and insurance) and Fortis (active in insurance, banking and investment management) in 2008. The USA commercial bank Wachovia was taken over by its competitor Wells Fargo. Then, after the collapse of the banks in Island the country almost bankrupted.
Due to the spread of default credits, which resulted from the subprime crises in the United States, banks lost reliance in each other, stopped giving loans to other banks and supplying money in form of credits to the companies. Such credit crunch constrained any companies’ businesses, since they could not do any new investment or expand. Additionally, the suppressed money supply led to wage reduction. Daimler CEO Dieter Zetsche stated that in 2009, around 150.000 less cars will be produced. Negotiations with the employees’ organization involved discussions whether the working hours will be reduced to 30 hours with respective wage reduction. “Maybe even more working places must be cut”, announced Mr. D. Zetsche (Hawranek, 2008).
Another reason for the financial crisis was wrong speculation on the stock exchange. The multi-million entrepreneur, Mr. Adolf Merckle, who among others owned the pharmaceutical company “Ratiopharm” and the cement producer “Hedelberg-Cement” was strongly affected by the financial crisis, not only because of economic burden of the company, but also due to the wrong speculation. He lost up to 1 million Euros with his VW shares. At the same time the banks demanded for additional securities for high credits or loans. Unfortunately Mr. A. Merckle was struck by financial problems he could not solve and committed suicide.
As already mentioned above, a double check of the real estate credits would have prevented the global overcrowding of toxic credits. German banks, as well as MNCs would have been in a better condition, if they would have set on a low-risk policy to secure the maintenance of the business. Such low-risk policy includes the MNCs activity on the stock exchange. However, it is not only the policy, which is responsible for the well-being of a bank or the MNC. German institutions have to secure enough equity in order to be prepared and survive such financial and economic disasters. Even if a company is led by a low-risk policy, a shortage of money may occur if the banks do not grant any credits. Therefore, it would rational to have a certain amount of savings.
Import/export. German cars had an unquestionable success during the times of economic boom of globalization. A German car represents a status symbol for winners in China, Russia and India. Furthermore, German machinery was needed, when investments were done in rising countries. Therefore, Germany, as world champion in export profited from the globalisation significantly. And therefore, Germany was hit massively by the world wide economy decrease. Major parts of the export industry stood still because consumers from Western countries were more interested in saving their money instead of spending it (Dettmer et al, 2009).
In fact, the entire export sector was coming under pressure. German exports declined more than two times in 2009 compared to 2006, however, the import changes were not so rapid (see 2 figure). Nevertheless, Germany retained the title of being world champion in export, because Chinese and Japanese exports decreased significantly as well. German economy depends largely on its exports, but the global crises illustrates how risky the trade business is and how badly Germany has been affected when the balance of trade was incorrect.
The decline in German exports, in Germany’s largest market, was the most severe in the European Union. Exports to the bloc fell by 19.1 % in 2009, to 503.5 billion EUR. Exports to countries not in the European Union fell by 17.1 percent to 299.7 billion EUR. In comparison to the USA, former Germany’s second largest export partner, exports dropped even over 20 % to 4.6 billion EUR per month in the same period. Deliveries to emerging markets declined as well. Exports to India dropped by 13 %, to Brazil – 29 % and to Russia even in excess of 35% in 2009 compared to 2008. Only exports to China were nearly unchanged during this period.
Moreover, exports to the countries referred to as the „next eleven“ (South Korea, Mexico, Turkey, the Philippines, Egypt, Indonesia, Iran, Pakistan, Nigeria, Vietnam and Bangladesh) grew by approx. 12 % annually. Because of their population, exports reached roughly 1.3 billion exports to these countries and had a considerable growth potential. The countries’ huge catch-up potential, particularly in infrastructure and manufacturing, implies that their share in Germany’s exports could rise substantially from the current 4.6 % (Schott, 2010).
Source: German Federal Statistical Office, 2010.
Figure 2. German export and import changes in 2006-2009, %
The economic development described above should continue, because the emerging markets – first and foremost the BRIC countries, the countries of Eastern Europe as well as some of the “next eleven” economies – will increasingly gain an importance in Germany’s export industry over the coming years. Hence, China could make a second place in three years‘ time and even overtake France as Germany’s main export market in 2016. By then, Poland should also have forced its way into the group of top 5. In addition, German exporters will focus more on countries like Russia, India, Brazil, South Korea, Mexico and Turkey. Nevertheless, due to their geographical proximity the EU countries will also remain major export markets for Germany (Deutsche Bank Research, 2010).
The decrease of import had a direct effect on the big exporters of the world including Germany. Many orders were canceled and many companies, which used to export a number of products to the USA experienced a decrease in their turnover. For example, the car industry has suffered enormously. Americans used to buy big and prosperous cars and car manufacturers such as BMW made annually great sales in the USA. Since the economic crises and the reserved consumer behavior of the Americans, fewer cars were sold. The sales of BMW decreased significantly, the number of worldwide sold cars dropped by about 23.8 % in 2009 (Spiegel online, 2009a).
Although Germany is highly involved in exports, another branch should be taken into consideration i.e. internal consumption, which can still be extended.
Increasing oil prices. Referring to the Bundesverband der Deutschen Industrie (BDI) increasing oil energy prices (see figure 3) put the German economic growth at a risk. According to the experts in Hamburgisches WeltWirtschafts Institut, the increase of oil price by 10$ can lead to a decrease of the economic growth of about quarter of a percentage point. The price of oil, established on the raw material stock exchange in $ per barrel (159 liter), is normally determined by shortly appealing factors like political conflicts, natural disasters and speculations but particularly by the supply and demand. However, the supply and demand rule defining that the price is low if there is a lot of supply but a low rate of demand and vice versa, does not apply any more to the phenomenon of nowadays. Actually, because of the crisis including weak economies, there is an over-supply of oil and a low demand from several nations. Consequently, according to the logical thesis of supply and demand, the price should decrease. However it becomes more expensive instead.
Source: Index Mundi, 2011.
Figure 3. Crude oil prices from 2005 to 2010, $ per barrel
The increasing amount of speculations and trading with oil contracts in order to hedge against the depreciating dollar is playing an important role nowadays. Oil, with its predictably easy market rules and the increasing rate, seems to be a good way for profit maximizing. In fact, the world consumes about 86 million barrel oil per day, the trading volume is 15 times as high. This difference represents the predictions of future price developments. The result is that 45% of all oil contracts are concluded by the speculators (Balzli, Hornig, 2008).
Whereas, the additional reasons are as following: the more expensive costs for production and transport because of the whole current situation in the world and the momentarily recovering demand of oil by the US-economy, commonly known as the worldwide biggest oil consumer, as well as by Asia, Latin America and Near East. Furthermore, nowadays there is a cartel of twelve countries, the oil production countries of The Organization of the Petroleum Exporting Countries (OPEC). The OPEC general secretary Mr. Abdalla el Badri states, that even a price of 50$ per barrel would not be enough. A price of at least 70$ would be necessary to gain a reasonable receipts. Besides, the expanding monetary policy of the issue banks will increase the consumer prices as well. Oil price increase leads to a smaller consumption, less investments and savings as well as profits. Oil is an important raw material and energy carrier in a worldwide producing sector as well as the whole transport, logistic sector or private consumption.
The research has proved that the high oil prices could be reduced with the help of a lower OPEC production amount, which is not realistic due to the current high price. In addition, less speculation could contribute but this is unlikely to happen as the dollar does not seem to recover in the short-term. For this reason, the only possible solution could be increasing demands for which a better economic worldwide situation is necessary. Until that high oil price will continue to have influences and consequences on Germany. Therefore, companies in Germany have to deal with high transportation costs for goods imported from foreign countries and transportation expenses of trading partners including petrol for company cars. However, the most striking point for Germany, which is a mainly exporting country, are less orders from abroad because the international trading partners cannot afford the costs of transportation including oil.
Insolvent businesses. The dramatic situation in the world does not only provide difficulties for the private persons and their individual lives, but also for the different types and sectors of businesses over the whole world. The globalization depends on trading partners including exchange of different goods and services, import, export, R&D, exchange of information. All these factors worldwide were influenced when the different factors and results of the crisis appear.
As every individual and every company are fighting for financial surviving and consequently have to save as much money as possible, suppliers of different goods and services get fewer orders. For this reason several, but essential for the good development of business, trading partners fall out. This happens because they are unable to enter more orders or because they are bankrupted and declared insolvent. In turn, the company, depending on the trading partners, does suffer from the fear of going out of business as well. It cannot fully act as trading partner for other companies. This particular situation recalls circle, with a starting point that could be set in the USA crisis, without a point of ending in the current time and finally resulting in economies that become constantly weaker.
These worldwide circumstances could be applied for Germany. Many firms, particularly SMEs, as well as huge and traditional groups within Germany, are going in bankruptcy. The most recent, big insolvency is Arcandor, which is a holding company located in Essen, Germany, that oversees companies operating in the businesses of mail order and internet shopping, department stores and tourism services. After a long course of fighting the rejection of essential financial help from state was the final step. Consequently, the group itself as well as all subsidiaries having 100 % of sharing is involved. According to the Federal Minister of Economy Karl–Theodor zu Guttenberg, the provided 150 million EUR does not comprise the amount of contribution required by the government from the shareholders (Spiegel Online, 2009b).
It is a fact that the crisis is progressing to a certain extention not only German MNCs face problems; but also the companies working only domestically in Germany. Similar to the worldwide situation, the circumstances and time for doing business in Germany are difficult. German companies have to deal with several problems, e.g. fewer orders are made because less trading partners result in a lower profit and consequently are unable to pay employees. The companies can apply for governmental financial help or find solutions for themselves by adapting their business’ concept and strategy as well as by looking for possibilities of saving money in cheaper ways of production or giving notices to employees. Despite trying all opportunities of saving money, gaining new partners or receiving financial help a lot of enterprises in Germany go into bankruptcy.
Transport. Economic and financial crisis has a considerable impact on the transport sector. Less trade leads to fewer transports, whereas changed economic framework conditions have an influence on occupational and private mobility. The current situation has different impacts on goods and passenger transport. While transportation of goods is characterized by unusually large decreases in all areas, passenger transport by bus and by rail recorded increases in the first quarter of 2009.
Transports handled in German sea ports fell by nearly one fifth in the first quarter of 2009 compared with the same period in the preceding year (see figure 4). In August of 2008 the transport volume rose by around 10%, but growth has fallen sharply since September of 2008 and decreases in the transport volume have been observed since November of 2008. The worst result so far was recorded in February of 2009 (-20.9%).
Source: Germany’s Federal Statistical Office, 2010.
Figure 4. Comparison of the trends in air transport, sea transport, foreign trade and gross domestic product: change in the same period of the previous year, %
Whereas, goods transported by aircraft in 2008 (3.5 million tones) were just a fraction of the volume of sea freight, although, these goods are particularly of a high quality. The airfreight volume decreased considerably in the first quarter of 2009 (-14.5% on the same period of the previous year), though less strongly than the volume of sea freight. The decrease started in November of 2009 and reached particularly low level in February of 2009 (-17.5%). The current results show even and negative tendency in April of 2009 (-20.7%). However, first results in May of 2009 indicate a slowdown in the negative tendency: the volume of air freight for Frankfurt, which is the most important freight airport, decreased less strongly in May of 2009 (-17.1%), following massive falls in the period from January to April in 2009 (-23.1%).
It is important to notice, that the decrease was particularly seen for goods leaving the country: the decreases in sea freight (-21.6%) and air freight (-16.3%) in the first quarter of 2009 in the same period of the previous year were markedly higher than the overall level. This trend is reflected in the results of foreign trade statistics: in the first quarter of 2009 the volume of exports fell by 21.8% in the same quarter of the previous year. In April of 2009 the year-on-year downward trend increased again (-24.8%).
Rail freight transport recorded considerable decrease (-21.2%) in the first quarter of 2009 as well. Similar to sea and air transport, the observed decreases started in November of 2008. However, the year-on-year decrease in the volume transported by railway enterprises was largest in January of 2009 (-27.9%). Since then the decline has slowed down. In this area the volume of goods leaving the country was much more affected by the crisis than the quantity of goods entering Germany. Altogether, 371.3 million tones of goods were transported in rail freight transport in 2008 (Walter, 2009).
The volume of goods transported to German inland by waterway vessels in 2008 (245.7 million tones) was smaller than the volumes in rail freight transport and sea transport. In this year, only the results of January und February has become available: in the first two months of 2009, the volume of goods transported by vessels to German inland by waterways decreased by 23%, which was slightly less than the decrease observed in rail freight transport (-24.3%) in the same period.
The largest decrease among all modes of transport from January to February of 2009 was observed in road freight transport (-26.9%). The most striking results has been recorded in January of 2009 (-28.2%). Road freight transport includes the transport for hire or reward and the transport on own account of all German lorries, while transport by foreign vehicles is not included. In January and February of 2009, the transport on own account (-30.7%) was affected much more by the economic and financial crisis than transport for hire or reward (-24.6%). In quantity terms, road freight transport is the most important mode of transport: In 2008, 3.1 billion tonnes of goods in total were transported by German lorries (Walter, 2009).
Moreover, the negative effects of the current economic situation are observed in air traveling as well. From January to April of 2009, the number of passengers flying from German airports decreased by 8.3% in comparison to the same period of the previous year. However, the downward trend in this area has already started at the beginning of the second half of 2008. While the upward trend of the previous year slowed down just slightly in the first half of 2008 (+4.9%), whereas, the crisis had a remarkable impact in the second half of the year. In July of 2008 the level of the previous year was almost reached (-0.2%). In August the numbers of air passengers started to decrease more strongly and the largest decreases were recorded at the beginning of 2009 (-11.4% in February and -7.2% in March). It should also be taken into account that February of 2008 was longer by one day due to the leap year.
In 2008 95.1 million embarking passengers and 95.3 million disembarking passengers were counted at German airports, while intra-German transport accounted for 24.7 million passengers. As passengers with only one air travel within Germany are counted only once, the total number of air passengers amounted to 165.6 million (Walter, 2009). The freight sector in Germany is – as well as all transport modes – heavily affected by the decline of industrial production and by the massive drop in external trade flows.
The year 2009 was characterized by the financial and global economic crisis, which, for Germany, led to the most severe economic downturn since the foundation of the Federal Republic. After one year of economic downturn, Germany’s economy overcame the decline in the summer of 2009. The crisis manifested clearly in terms of a decline in freight volume for companies in the transport and logistics sectors. To mitigate the effects of the crisis, the Federal Government closed consultation with the international community, taking comprehensive crisis management measures. Important elements of these measures are the economic stimulus packages with a total volume of almost 100 billion EUR: the Economic Stimulus Package I of November in 2008 (package of measures entitled “Safeguarding Jobs by Promoting Growth”) and the Economic Stimulus Package II of January in 2009 (“Pact for employment and stability”). It was particularly important for the Federal Government that these economic support measures took into consideration long-term challenges and boosted the overall growth strengths.
In accordance to this background, the economic stimulus packages facilitated a faster implementation particularly of urgent investment in transport infrastructure – for this, an additional 4 billion EUR have been made available to develop the federal transport infrastructure in 2009 and 2010. These funds served as the implementation of the following measures in particular: strengthening the ongoing and new transport infrastructure projects, spreading mitigation measures, promoting passenger station programme for the acceleration of the refurbishment of train stations, constructing of urgently needed HGV parking spaces in parking sites along the federal motorways, upgrading the seaward approaches and the hinterland connections of the ports.
With its scrap page scheme (volume: € 5 billion) the Federal Government provided incentives for the scrap page for old and newly purchased cars, boosting sales in the automobile sector and making an important contribution to the reduction of air pollution.
In 2009 and 2010, 500 million EUR have been made available for the applied research in the field of mobility, specifically for innovations in the field of transport and vehicle technology. This should promote the entire emerging sector of electric mobility (further development in particular of fuel cells and storage technologies as well as hybrid propulsion systems) (United Nations Economic Commission for Europe, 2010).
State support. During the crisis Mrs. A. Merkel’s government had to deal with new and painful economic facts, including the record of public debt of about 100 billion EUR, or about 136 billion USD. Mrs. A. Merkel’s initial tough stand against the bailout for Greece was immensely popular at home, and her belated support for a series of ever-bigger rescue packages was not. Despite a rapidly reviving economy, the unemployment was almost lower in summer of 2010 than before the crisis, her coalition had lost control of the upper house of parliament and her power was increasingly tenuous.
The “Economic Foundation Germany” is the official name of the loan and guarantee programme for distressed companies. It was implemented by the German government as economic stimulus package in March of 2009. Its volume amounts to several billion EUR. It is the state’s aim to help companies, which were strongly influenced by the financial crisis. The state bank “KFW- Kreditanstalt für Wiederaufbau” offered loans up to 40 billion EUR in total, where 23 billion EUR were given to big companies and 15 billion EUR were given to smaller companies. In fact, a company usually could ask for financial support maximum of 300 million EUR. During the application process, the companies had to fulfill given requirements which were checked by auditors. The final decision of acceptance to receive a loan was made by the committee. The economic stimulus package from the state mentioned above had a positive effect, which was quickly seen in the stock of exchange markets. The relief after the state’s help become obvious due to strong worldwide capital gains at the stock exchanges.
Another possibility to help an enterprise out of its unfortunate situation was to nationalize it. In behalf of Germany, the government could nationalize a company over a certain period of time, until it had discovered and became stable enough to operate on its own. The example was the “Hypo Real Estate”, which was discussed above.
The research has proved that the recovering process with such financial help is complicated and not every company can be assisted or saved. Due to the money limitations, the state must set priorities with regard to the benefits of the German society. Nevertheless, the stock exchange market, whose “well-being” depends on the circumstances of the worldwide economies, is already capitalizing due to the state’s efforts to provide financial support. German shareholders do not only deal with but also cope with the current market’s situation and can record reviving gains from their capital.
3.4. Economic rebound in 2010
In 2008 and 2009, Germany was hit by the global economic crisis; resulting in unusually high levels of debt and losing its position as the world’s greatest exporter to China. But its economy strikingly recovered in 2010, as the exports soared and unemployment recovered to nearly pre-crisis levels.
Germany’s revival differed from the rest of Europe, where economies ranged from sluggish to staggering. The global slowdown and recovery underscored the differences between Germany and its neighbours, and witnessed how Germany was taking a newly assertive role in foreign affairs. But the government’s role of reluctant saviour when the Euro zone’s sovereign debt crisis was increasing encouraged anger abroad for being too stingy and outrage at home for agreeing with everything in order to provide help for countries like Greece and Spain.
While Germans showed disappointment due to the debt – both their own and that of intensive-care cases like Greece and Spain – its export model was criticized by its neighbours, who preferred to see Germany buying more of their goods. Instead, the German government introduced an austerity budget, cutting nearly 100 billion USD in spending by 2014.
In the second quarter of 2010, Germany’s economy expanded by 2.2%, which was one of the best results since the reunification in 1990 – equivalent to an annual rate of 9%. The strong growth of figures promoted the conviction that German workers and companies in recent years made the short-term sacrifices that were necessary for a long-term success and which were not made by the Germany’s European partners. And it reinforced the widespread conviction among policy makers that they handled the financial crisis and the painful recession far better than the USA.
The battle over how to navigate the financial crisis helps to display Germany’s emerging post-cold-war identity as a country less tolerant to foreign demands and lecturing, with a tenser relationship with European partners. Though, Germany has many issues to solve, it has also become less obsessed with its historical crimes and more enthusiastic about its economic model, its culture and its improved place in the world.
It is clear that Germany’s export machine is recovering. The country’s unemployment rate fell to 7.6%, almost to the pre-crisis level in 2010. Companies, including the electronics and engineering giant Siemens, the truck maker MAN or the carmaker Daimler, began ramping up working hours. BMW had announced that it is seeking 1,000 employees in Germany to work in R&D as well as in purchasing and sales. As a country adding workers, Germany’s image stands in far different perspective than five years ago when unemployment was above 13%, more than 5 million people were jobless and the country was a symbol of labor-market inflexibility.
Germany’s unexpectedly strong economy is generally considered to be good news for the rest of Europe, which depends on German demand for its goods. However, this drop in joblessness should help increase consumer’s confidence and encourage Germans to take vacations in Spain and Greece. But Germany’s success is also a significant point of contention in relationships with leaders of France and other countries who believe that some of it comes at their expense. Germany’s export exceeds import, in part benefiting from easier access to credit than in the heavily indebted countries.
3.5. How to prevent another crisis
This worldwide crisis has aroused the question if globalization is a positive process? On the one hand, due to globalization the breakdown of one country spreads like a Domino effect among others, but on the other hand, protectionism minimizes competition. According to Mrs. A. Merkel, the greatest danger that threatens us is protectionism, however, we are still taking not enough means to ensure genuinely free trade.
The crisis has revealed a number of weaknesses in the regulatory and supervisory framework, both in Germany and internationally. While the German approach in these areas takes place within the framework of European regulations and international practices, there is substantial national discretion to impose regulations and the way supervision is applied is largely a national matter. The European and international regulatory contexts may change substantially as a consequence of the financial crisis, but, nevertheless, there is an important scope for Germany to strengthen its own arrangements. First of all, the banking supervision could be organized more efficiently. Secondly, the independence of the supervisor needs to be strengthened. Moreover, the supervisor should be sufficiently independent from political interference, as well as widening the scope for supervision beyond compliance with quantitative requirements. Finally, systemic risks were not taken into account to a sufficient extent as the banking supervision – as in other countries – focused on micro-prudential analysis. This concern, the risks from a maturity mismatch in the refinancing of the long-term loans, was the key issue in the fall of Hypo Real Estate.
Levity, avidity and credulity caused the economic crisis in Germany.
German multinational companies and banks should not underestimate the importance of rating agencies that secure investments. Careless decisions concerning personal or company’s enrichment resulted in bankruptcy of people, enterprises and even economies, as far as it is possible. The avidity of German investment bankers caused their job losses.
Banks, companies and private persons in Germany should adapt to a low-risk policy by investing and expanding the business and by enriching due to acquisitions of other companies or activities on the stock exchange. Private equity and large portions of savings can help company through the economic crisis.
On the one hand global crisis has surely had a negative influence on the economies worldwide, but on the other hand, it challenges economies and companies to reconsider their strategies and activities, to create and implement new ideas. It is important to free from dependencies. Germany should focus on internal consumption, in order to have another support, when it comes to revenues received from the sale of goods. Only then the additional danger, risk and problem of high oil prices, that have an impact on several sectors of doing business, can be dealt with. It is rather dangerous to focus entirely on global export.
New strategies should be considered by multinational companies, especially in car manufacturing sector; they should be innovative and reconsider their product portfolio.
Germany was hit by the global economic downturn in 2008 – 2009, resulting in unusually high levels of debt and losing its position as the world’s greatest exporter to China. Its economy started to recover in 2010, as exports soared and unemployment recovered to nearly pre-crisis levels.
Successful economic rebound was caused by the German government’s financially supporting programmes applied for certain enterprises as well as by the new increasing investment of the shareholders resulting in a recovery of the stock exchange market.
The fear of globalization is comprehensible; however, the protectionism is not a solution. There are more effective methods to prevent or at least to smooth the next financial breakdown. One of the most important actions is to restructure supervision of financing.
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Pasaulinės krizės įtaka Vokietijos ekonomikai
Ralph-Jörn Kurschus, Petras Baršauskas, Vaida Pilinkienė
Straipsnyje tiriama pasaulinės ekonominės krizės įtaka Vokietijos ekonomikai. Neramumai rinkos ekonomikos šalyse atsirado pradėjus kristi nekilnojamojo turto kainoms ir žymiai išaugus būsto paskolų neišmokėjimui JAV. Kokios šio proceso pasekmės buvo Vokietijos ekonomikai ir jos atskiriems sektoriams, kokiomis priemonėmis Vokietijos vyriausybė išsprendė susidariusias ekonomines problemas, kokias ekonomines gaires numatė tolimesniam šalies ekonomikos vystymui – visa tai išsamiai nagrinėjama šiame straipsnyje. Atlikti tyrimai parodė, kad Vokietijos ekonomikai didžiausią žalą padarė 2008 – 2009 m. pasaulinės ekonominės krizės sąlygotos skolos bei lyderiaujančių pozicijų praradimas eksporto rinkose. Tuo tarpu, sėkmingą atsigavimą po ekonominės krizės įtakojo Vokietijos vyriausybės finansinės paramos programos bei augančios investicijos 2010 m.
REIKŠMINIAI ŽODŽIAI: pasaulinė krizė, finansinė krizė, globalizacija, Vokietija.