Waiting for a Wunder

Germany's economy is picking up, and its football fans hope for a World Cup victory this summer. But a lot more will have to come right before the country gets back on track, says Ludwig Siegele

IF YOU are visiting Germany this spring, watch out for footballs. They are everywhere, on posters, buses or entire buildings, even though the World Cup which the country is due to host this summer is still four months off. A German firm is even wrapping the giant globe atop east Berlin's landmark television tower to make it look like a football. If marketing departments had the technology, a German daily recently joked, they would project a football on to the moon.

Nor is it just marketing people who are getting excited. For the duration of the tournament most German states will liberalise shopping hours, and the government is even thinking of deploying the army around stadiums for the first time in the Bundeswehr's history. Germans, it seems, are taking the World Cup extremely seriously--and not just because most of them are passionate football fans. "The last time the world paid so much attention to Germany was 16 years ago when the [Berlin] Wall came down," says Angela Merkel, the country's new chancellor.

Germany aims to use the attention generated by this world-class event to repair its battered image. "Made in Germany" has long since lost its ring; now government and big business have teamed up in a campaign to sell the country as the "Land of Ideas". In Berlin, where the World Cup final will be played, visitors will be treated to a "Walk of Ideas" through the capital, complete with oversized sculptures of German inventions.

The hope is that a victory, or at least a respectable result, will help cure the collective depression that descended on Germany when the economy started to sag at the beginning of this decade--just as winning the 1954 World Cup, held in Switzerland, helped to heal the national psyche after the war and kicked off the Wirtschaftswunder (the post-war economic miracle). The Wunder von Bern, as the unexpected victory came to be known, helped to restore Germans' battered pride in their country.

What are the chances that a Wunder von Berlin might kick off a similar cultural and economic rebirth? The answer depends on your perspective. Germany today is like one of those pictures where, depending on how you tilt it, you see two different images. In exports, it is already world-class. Many of its global companies have never been more competitive. With exports of nearly $1 trillion in 2005, this medium-sized country (smaller than the American state of Montana, but with 82m people) already sells more goods in the world market than any other.

Investment and domestic demand are also picking up at last, so Germany's economic outlook at home, too, has brightened. "In case you missed it, Germany is no longer the sick man of Europe," says Elga Bartsch, an economist at Morgan Stanley, an investment bank. In 2006, she predicts, the country's economy will grow by 1.8%, the highest rate since 2000 and in line with the European average. But the labour market does not seem to have turned the corner yet: in January, unemployment before seasonal adjustment again hit 5m, or 12.1% of the workforce.

Perhaps most importantly, after years of chronic depression, the mood is much improved. According to the Allensbach Institute, a polling organisation, 45% of Germans now say that they are hopeful for 2006 (see chart 1). Business sentiment has not been so good since the new-economy bubble. Politicians, too, have changed their tune since last autumn's election that ushered in a grand coalition. The new-year address by Angela Merkel struck an upbeat note. "I want to encourage us to find out what we are capable of," she told her fellow Germans. "I am convinced we will be surprised."

Look at the country from a different angle, however, as this survey will do, and it becomes clear that even if it won the World Cup for the first time since 1990, it would have plenty left to do. Germany may be in better shape than France or Italy, and many other countries would love to have its problems, but that does not mean it is in robust health. Most importantly, if it does not start tackling its structural problems in earnest soon, it may find itself stuck with something its people dread: amerikanische Verhaltnisse, or "American conditions", code for a socially polarised society in which workers are hired and fired at an employer's whim.

The risk is that Germany's labour market, in particular, will end up "Americanised", but without the good points of the American one, such as its openness and inclusiveness, argues Wolfgang Streeck, head of the Cologne-based Max Planck Institute for the Study of Societies. In many areas, he says, the German story has been one of "a high average and a low standard deviation": a rich society with wealth and opportunity fairly spread, with few outliers at either end of the scale. But increasingly, he says, the story is turning into one of "a low average and an exploding standard deviation".

If think-tanks have their numbers right, Germany has already ceased to be the "equitable middle-class society" that other social scientists have described, offering a "social elevator" for everybody. When it comes to social justice, Germany is already doing less well than many other European countries, according to a recent study by BerlinPolis. For instance, the risk of poverty has greatly increased in recent years, especially for the young. About a fifth of Germans under 16 now live in households with incomes below the poverty-risk threshold.

The fault does not lie primarily with globalisation and the "locusts", as many Germans have taken to calling foreign investors. Rather, it is the very systems meant to guarantee a well-balanced society, along with the attempts to preserve them, that are increasingly dividing German society. Those systems now serve vested interests, driving a wedge between well-provided-for insiders and marginalised outsiders.

This survey will describe the ways in which Germany's institutions have slid from virtue to vice: in politics, in the labour market, in education, in competition policy and elsewhere. It is not that the country has not tried to change. But most of these changes have been designed to optimise existing systems rather than change them fundamentally.

This survey will journey through a country struggling with change, passing through Berlin, Stuttgart, Nuremberg, Cologne and Frankfurt. It will note that in some ways the future has already arrived: it is simply distributed unevenly. Much of it can be found in places where you might least expect it--such as in the eastern city of Jena, where the journey ends.

Article forms part of a survey of Germany. This is the introductory overview article.