> This outpouring of anguish at
>Germany’s alleged terrible plight was provoked by Chancellor Schroder’s
>rescue of Philipp Holzmann, the nation’s second-largest construction firm.
>On top of that, the Chancellor indicated that he was opposed to the
proposed
>$125 billion hostile takeover of Germany’s Mannesmann AG by Britain’s
>Vodafone Airtouch PLC. From the hysterical splutterings of our reporters
and
>editorial writers you might have thought Lenin had just seized power in
>Berlin.
The howls of outrage over Holzmann were absolutely moronic -- a real case of too many lazy journalists hanging round, and too much autotext saved in their computers about "unwilling to let the market decide". For a start, Schroeder put up no money -- the figure of Dm250mn refers to loan guarantees, which are clearly worth something, but clearly worth a lot less than the full face value.
Second, the government was doing *entirely the right thing*, in bashing a few heads together to expedite a debt workout which everyone knew had to be concluded anyway. The banks knew that they couldn't let Holzmann fall -- it would have brought down half the German construction industry, and done material damage to the rest of the loan book.
But, all the banks wanted the others in the lending syndicate to bear the pain. Things were not helped by the fact that Holzmann had drawn down Dm50mn of a line of credit from Commerzbank the day before it declared insolvency (quite a naughty thing to do). So there was much bad temper, much "you knew and didn't tell us", lots of "I shouldn't be in this deal so I want to be bought out of it", etc ,etc.
In which case, it's pretty much the job of the government to come round and point out that if all the workers have to be sacked, nobody's going to get paid anything ever, whereas a going concern might make 88 cents in the euro. Like the Fed did with Long Term Capital Management. The Bank of England typically has two or three similar cases on the go at any one time even outside a recession, though they do not typically give loan guarantees (cf Eurotunnel).
I thought the Economist's coverage was bad, and the FT's was just horrendous. Confirmed my opinion that the FT is trying to be the poor man's Economist these days, to increase sales in America.
>
>Holzmann, a 150-year-old company that had built opera houses and
>train stations in the 19th century,
And built a few things in the twentieth century that it would rather not talk about . . .
>“Analysts say German banks, locked in mounting competition with
>international banks, can no longer justify bailing out loss-making
companies
I'm one of these analysts, and all I can say is that trying to compete with international banks has been disastrous for the Germans. Beyond disastrous. I think in retrospect, we'd rather they had just stuck to industrial lending.
>just for the sake of rescuing jobs.” Of course not. Who cares about jobs?
>The only thing that matters is staying competitive and that means
>continuously boosting the value of the banks’ shares.
No German banker has ever knowingly done this, as far as I'm aware.
This was a good article.
dd
>Interestingly enough, despite predictions of its imminent demise, the
German
>economy is actually astonishingly robust. A reader of the American press
>would be surprised to learn that in 1998, the hidebound, sclerotic Germans
>improved their manufacturing productivity by 4.3 percent -- the best
>performance of any OECD country. Americans workers would be surprised to
>learn -- unpleasantly so unfortunately -- just how much better off their
>German counterparts are. In 1997 hourly direct pay for manufacturing
workers
>in the United States was $14.34 an hour. In Germany it was $20.94 an hour.
>To be sure, the Germans have high unemployment. But what is better? To
wash
>dishes here at $2 an hour? Or to be unemployed in Germany and to enjoy
>generous welfare benefits, first-rate health care and a largely free
>education system -- one that is vastly superior to anything in the United
>States? Remember, too, that during the past decade the Germans have had to
>bear the staggering costs of absorbing the former East Germany.
“America uber alles” was always a nonstarter. Forever basking in the Cold War victory, Americans fail to see how much has changed in the last 10 years, as Ambassador Kornblum’s disastrous performance demonstrates. For all the bluster of the Washington elite, America’s economic performance is simply too insipid to support an imperial foreign policy.
[end]
Carl
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