Nettime mailing list archives

<nettime> "look at what [sch??uble] inflicted on his own country when it
accidental loves on Sun, 19 Jul 2015 02:35:20 +0200 (CEST)

[Date Prev] [Date Next] [Thread Prev] [Thread Next] [Date Index] [Thread Index]

<nettime> "look at what [sch??uble] inflicted on his own country when it reunified..."


Why is Germany so tough on Greece? Look back 25 years

Dirk Laabs

To understand Wolfgang Sch??uble???s demands in the bailout talks, look at what he inflicted on his own country when it reunified

Friday 17 July 2015 17.17 BST
Last modified on Saturday 18 July 2015 00.02 BST

Every drama needs a great baddie, and in the latest act of the Greek
crisis Wolfgang Sch??uble, the 72-year-old German finance minister, has
emerged as the standout villain: critics see him as a ruthless
technocrat who strong-armed an entire country and now plans to strip it
of its assets. One part of the bailout deal in particular has
scandalised many Europeans: the proposed creation of a fund designated
to cherrypick ???50bn (??35bn) worth of Greek public assets and
privatise them to pay the country???s debts. But the key to
understanding Germany???s strategy is that for Sch??uble there is
nothing new about any of this.

It was 25 years ago, during the summer of 1990, that Sch??uble led the
West German delegation negotiating the terms of the unification with
formerly communist East Germany. A doctor of law, he was West
Germany???s interior minister and one of Chancellor Helmut Kohl???s
closest advisers, the go-to guy whenever things got tricky.

The situation in the former GDR was not too dissimilar from that in
Greece when Syriza swept to power: East Germans had just held their
first free elections in history, only months after the Berlin Wall fell,
and some of the delegates from East Berlin dreamed of a new political
system, a ???third way??? between the west???s market economy and the
east???s socialist system ??? while also having no idea how to pay the
bills anymore.

The West Germans, on the other side of the table, had the momentum, the
money and a plan: everything the state of East Germany owned was to be
absorbed by the West German system and then quickly sold to private
investors to recoup some of the money East Germany would need in the
coming years. In other words: Sch??uble and his team wanted collateral.

At that time almost every former communist company, shop or petrol
station was owned by the Treuhand, or trust agency ??? an institution
originally thought up by a handful of East German dissidents to stop
state-run firms from being sold to West German banks and companies by
corrupt communist cadres. The Treuhand???s mission: to turn all the big
conglomerates, companies and tiny shops into private firms, so they
could be part of a market economy.

Sch??uble and his team didn???t care that the dissidents had planned to
hand out shares of companies to the East Germans, issued by the Treuhand
??? a concept that incidentally led to the rise of the oligarchs in
Russia. But they liked the idea of a trust fund because it operated
outside the government: while technically overseen by the finance
ministry, it was publicly perceived as an independent agency. Even
before Germany merged into a single state in October 1990, the Treuhand
was firmly in West German hands.

Their aim was to privatise as many companies as possible, as soon as
possible ??? and if you were to ask most Germans about the Treuhand
today they would say it achieved that objective. It didn???t do so in a
way that was popular with the people of East Germany, where the Treuhand
quickly became known as the ugly face of capitalism. It did a horrible
job in explaining the transformation to shellshocked East Germans who
felt overpowered by this strange new agency. To make matters worse, the
Treuhand became a hotbed of corruption.

The agency took all the blame for the bleak situation in East Germany.
Kohl and Sch??uble???s party, the conservative CDU, was re-elected for
years to come, while others paid the price: one of the Treuhand???s
presidents, Detlev Karsten Rohwedder, was shot and killed by leftwing
terrorists. (Sch??uble too became the victim of an attack that left him
permanently in a wheelchair, only days after German reunification ???
but his paranoid attacker???s motives were unrelated to the political

But the reality of what the Treuhand did is different from the popular
perception ??? and that should be a warning for both Sch??uble and the
rest of Europe. Selling East Germany???s assets for maximum profit
turned out to be more difficult than imagined. Almost all assets of real
value ??? the banks, the energy sector ??? had already been snapped up
by West German companies. Within days of the introduction of the West
German mark, the economy in the east completely broke down. Like Greece,
it required a massive bailout programme organised by Sch??uble???s
government, but in secret: they set aside 100bn marks (??35bn) to keep
the old East German economy afloat, a figure that became public only
years later.

With prices for labour and supplies going through the roof, the already
stressed East Germany economy went into freefall and the Treuhand had no
chance to sell many of its businesses. After a couple of months it
started to close down entire companies, firing thousands of workers. In
the end the Treuhand didn???t make any money for the German government
at all: it took in a mere ???34bn for all the companies in the east
combined, losing ???105bn.

In reality, the Treuhand became not just a tool for privatisation but a
quasi-socialist holding company. It lost billions of marks because it
went on paying the wages of many workers in the east and kept some
unviable factories alive ??? a positive aspect usually drowned out in
the vilifications of the agency. Because Kohl and, during the summer of
1990, Sch??uble weren???t Chicago economists keen on radical experiments
but politicians who wanted to be re-elected, they pumped millions into a
failing economy. This is where parallels with Greece end: there were
political limits to the austerity a government could impose on its own

The lesson Sch??uble learned ??? and which is likely to influence his
decision-making now ??? is that if you act the pure-hearted neoliberal
you can still get away with decisions that don???t make perfect economic
sense. If Sch??uble is acting tough with Greece right now, it is because
his electorate wants him to act that way; it???s not just that he
doesn???t care about the Greek people, he wants people to believe he
doesn???t care, because he sees the political advantage in it.

But Sch??uble should have learned from history that the Treuhand gamble
had catastrophic psychological consequences. Even though the agency was
run by Germans, who spoke German, still it was seen by many in the east
as an occupying force.

Sch??uble???s idea of foreign countries controlling Greek assets and
moving them abroad is an even more humiliating concept for any country.
Sch??uble comes across as a tough and sober accountant. In fact he is
just an ordinary politician repeating old mistakes.

#  distributed via <nettime>: no commercial use without permission
#  <nettime>  is a moderated mailing list for net criticism,
#  collaborative text filtering and cultural politics of the nets
#  more info: http://mx.kein.org/mailman/listinfo/nettime-l
#  archive: http://www.nettime.org contact: nettime {AT} kein.org