Risen from the ruins

Germany has known its ups and downs. The recession that struck in 2009, along with the global financial crisis, was the country’s worst since World War Two.

It dwarfed even the dire post-reunification problems that led many to consider this country an economic write-off.

But it’s bounced back in the past and it’s done so again, putting an impressive stable of highly-specialised, niche market exports back into play as the Asian giants reawoke with a fearsome appetite.

In 2009, as the cash-strapped global economy shunned German exports, the economy contracted by 4.7 per cent.

This year, by contrast, the government expects full-year growth of 3.4 per cent, cooling to 1.8 per cent in 2011.

Independent experts are even more optimistic. 2010 should be the best single year of growth since reunification in 1990.

Angela Merkel, the German chancellor, is determined to stick to a programme of cuts that has sparked some protests but nothing like on the scale seen elsewhere.

The budget deficit is forecast to be 3.7 per cent of GDP in 2010, dropping to 2.4 per cent next year, well below the European Union ceiling of three per cent.

And there’s even more good news: Germany’s labour market appears in astonishingly good shape.

While unemployment elsewhere in the eurozone has risen above 10 per cent for the first time ever, it’s 6.7 per cent in Germany, and rapidly heading below the psychological three million mark.

So what’s the secret? Below is my report for Al Jazeera that takes a look at the spirit of German industry and exports, in particular the small- to medium-sized enterprises that form the backbone of the economy – the so-called Mittelstand.

A lot of work went into saving them from collapse in 2009, not least because they account for 70 per cent of all employment.

They’re the engine of the export-driven economy. So government stepped in to provide loan guarantees and subsidies to allow employees to endure short hours and frozen pay.

The unions largely kept their demands at bay. Banks were lenient where they could be, not as hell-bent on short-term profits as their Anglo-Saxon cousins.

Owners stood ready to pour personal savings (Germans are big on savings) into their businesses.

So there was this agreeable network of forces that traditionally go hammer-and-tong at each other elsewhere, but in Germany instead seemed to operate according to shared beliefs and responsibilities.

German business was saved. As soon as the appetite returned for their products abroad, companies were ready to provide

Now it’s all very well catching a glimpse of what makes the German economy a tremendous survivor. Quite another matter to emulate it.

This system didn’t come into being overnight, nor was it drafted up by policymakers.

It’s about economic ideology and generations of dedication to craft, quality and innovation.

It’s about no boom-and-bust, and personal savings that provided a soft cushion for the fall.

As economist Professor Alfons Weichenrieder told me, “It’s very hard to copy the German export orientation.

“It comes from a stock of human capital that is very strong in applied sciences and engineering, that combines engineering with looking for market niches, and the dedication of families to their firms.

“That’s a culture that happens now to be an advantage.”

And here’s another thing that’s tough to emulate. Sitting in her office in Frankfurt, Isabel Hahn, fifth generation head of the Glasbau Hahn family business, showed me a painting of a bombed-out factory.

“It’s actually our company when it was bombed during the war,” she told me.

“It shows me that at some point there was no company, there was nothing, it was bombed. Nevertheless the company was built again and there was a new company and it was better than before. And that’s what I have in the back of my mind.

“Maybe because everything was destroyed in the war and the people knew they were able to build everything up again, they had the same confidence this time.”

Sure, there are underlying difficulties in Germany: relying too heavily on exports, not enough on domestic consumerism.

But there are signs that too may be changing.

Ultimately though, as Mrs Hahn suggested, there does seem to be a communal, familial fighting spirit here that comes from knowing and surviving the worst of things, and working together to put them right.