November 13th, 2008
10:26 AM GMT
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BERLIN, Germany - For a while, the German government thought the international financial crisis wouldn't really affect the country. After all, there was never a real housing bubble here, Germans save money rather then go into debt and, unlike many other western European countries and the United States, Germany still has a huge industrial sector.

But now Germany's economy has officially taken a nose dive into recession - and many Germans are wondering what's hit them.

The answer is simple. When the world's economies decline, the world's largest exporting nation is bound to suffer.

The auto sector, Germany's largest and most competitive industry is already feeling the pain. BMW, Opel, VW, and Mercedes have all announced they will halt production temporarily or have already done so because they can't sell enough cars.

Make no mistake; Germans aren't the most important consumers for German cars, the world is. In fact the average age of cars on German roads has drastically increased over the past five years, showing that German consumers are not buying.

Now that the world seems to have stopped buying as well, the automobile industry is looking at massive layoffs and temp workers are the first to suffer. Many have already had their contracts cancelled.

The same holds true in the German microchip industry, where manufacturers like Infineon and Qimonda have begun to lay off temp workers.

But to understand the full magnitude of what is going on you have to understand the sheer size of the German export economy. In the past four years, Germany has been the leading export nation of the world with a trade surplus larger than China's. Germans can export almost anything.

I was in the forests around Berlin the other day and talked to forest owners and lumberjacks. It turns out they were exporting much of their timber to the U.S. as construction wood and now also have to lay off workers since the American housing bubble has burst.

One forest owner told me how a chartered cargo ship with German wood was on its way to the U.S when the contract was cancelled and the vessel had to turn back. "The crisis hit us very suddenly and very hard," is something I have been hearing a lot.

And of course, even in the case of lumber, there are whole industries connected. Only a short drive outside the forest we found one of the world's largest makers of laminate wood floors and wooden panels. Of course the company was exporting almost their whole production to the U.S. Now they will have to lay off about 10 percent of their workforce.

The story of the German recession is not one of consumers closing their wallets; the wallets of German consumers have been closed for a long time. Rather it's a story of people fearing for their jobs and the threat of mass unemployment.

For a long time German politicians said they didn't think that would happen. Now they have become pretty quiet.



soundoff (25 Responses)
  1. wade

    I don't think we should bail out the auto industry, the prices of automobiles are sky high anyway, maybe the car industry should think of nocking off 10-15k of the prices to stimulate their profits instead of hanging on to overpriced cars and crying for a handout.

    November 13, 2008 at 1:25 pm |
  2. wade

    le me clarify my last post, the government should only bail out the autoworkers retirement and pensions. The automakers need to figure this out soon if they don't want to go broke. They need to build a better more affordable car. If the auto industry is bailed out and the prices of cars/trucks stays where they are at in this economy whos going to be able to afford it......it still does not solve the problem. The auto industy for years has cheated the public by overpricing and greed. The minute one drives off the lot they loose thousand of dollars and they want people to buy a car every 5-7 yrs. Just think if they made a car/truck that lasted 10-15 years people would not be buying as often and they would loose money. Its not hard to figure out, get the prices down, keep them down and make the car of more quality...

    November 13, 2008 at 1:39 pm |
  3. Eric Johnson City,TN

    Cooper,
    I want to ask a question. I've been asking this question for over a year now and have never heard a response to it. Why has our government never mentioned the Fair Tax system? It would not solve everything, but it sure would get our economy out of a recession and into the plus. I even beleive that it would get the country out of it's deficeit! It would empower the people and give consumer confidence to the people, while at the same time the government would still get there revenue and then some. So why has this not been mentioned. All that's been mentioned is doom and gloom, not great ideas like the Fair Tax, it's almost like our government wants us to fail!

    November 13, 2008 at 4:45 pm |
  4. Ramsi Hashash

    Dear Frederik
    Is this really a surprise? I would say no. However if Germany is in a recession, what kind situation is the US in?
    I find it silly to have to wait for quarterly figures even though everyone knows already how they will look like.

    So a surprise it is not, but if Germany is in a recession than certainly many other countries are in a recession too. the Germans are simply too honest and are telling the world what is really going on, other countries are trying to cover things up as long as they can.

    the reality is that the world is in a recession, however I believe By August next year the economic barometer will look positive again. All the stimulus packages will show effects around 6 to 8 month from now.

    So we all will have a tough time for the next half year, but then new opportunities will arise. New players will grew and certain wealth will have shifted even more from West to East or the South.

    12 month from now oil will be at USD 90+ and the Euro will be at 1.40 against the USD.

    November 13, 2008 at 4:47 pm |
  5. Art from Holland

    Not only in Germany, Holland is on the verge of a very deep recession as well. It's even worse due to the enormous debts from the Dutch Government. It's going to take a few things; less government, including the EU and less taxes.
    Things will get worse before they get better, my guess is 2011.

    November 13, 2008 at 5:46 pm |
  6. Kassandra

    The discussion and the actions of the politicians are almost the same worldwide: bail-outs, warrantees and other tax reductions. The interesting thing about the coming meeting of the Politicians at Nov. 15th is, that they have all the plans in their cases, but no country really has made a deep analysis about the crisis.

    Did anybody write an analysis about the floating currencies (starting to float in 1971) and their impact on the financial crisis?

    Where is the analysis of creation procedure of money, especially government money and bank money?

    What is the impact of the speed of globalisation and the globalisation itself on the financial system?

    Why are banks not better prepared for the crisis and need help now although the crisis was forecasted since years?

    K

    November 13, 2008 at 8:48 pm |
  7. Peter

    "Economic terrorists" appear to have been at work over these past few years. These economic terrorists have come both from within and outside our borders. The damage and resulting fear has far exceeded the 9/11 attacks on our country. Governments and the news media should be identifying the culprits and aggressively going after them. We seem to be glossing over who ran up the oil prices, who mismanaged our financial institutions, who drove many of our major companies into the ground and caused so much damage.

    November 14, 2008 at 3:32 am |
  8. consultman

    The unanswered questions: Have we the correct definition, what is recession? Who makes this definition? Is it correct, if only any scientists purpose a definition and a organ of the state to pass it.
    May be, that a real recession begins by 3,% ore 5 % drop in the real economy and without financial sector. The financial sector said any years "make money with money". But I've never seen only one dollar ore one Euro, who stand in a factory and produce products, ore sit on the tractor to produce our bread for today. Only we human create all value in industries and agriculture. And the old Ford said that cars are not bye cars. And so money can’t work real. And so we must over think our definition recession and a lot of other definitions, why they must not be correct….

    November 14, 2008 at 1:02 pm |
  9. Goetz Mosig-Baumeister, Germany

    Hi Frederik,
    part of your story is true, the other part not. If Mecedes and BMW are building the wrong cars, it is their fault. If developping countries cannot buy our machines, we should give the a credit, and not our banks, etc. So the picture looks different from every perspective.

    I am working as consultant in the IT industry, and we are short of about 50.000 specialists. My company is expandig, 10 more specialists this quarter. Even in a recession companies need IT specialists.

    What we need is an EU-strategy for our economy (for all 30 countries).

    Regards Goetz

    November 14, 2008 at 1:37 pm |
  10. S.R. Milam

    Don't think the automakers should be bailed out until someone identifies when former Sec. of Treasury Snow and his Cerebus group bought over half the stock in GM and Chrysler. If that large group thought they were such a "good" investment ...why do they need financial help now??

    November 14, 2008 at 5:57 pm |
  11. antonio

    coming back to the bailout of the car companies.
    I don't like to see the tax payers money going into the coffins of G.M. or Ford; so they can continue to live a life we dream of.

    I would like to see the goverment first fix the price of all domestic cars.

    Then; give a rebate to all taxpayers who will buy a domestic car, this way the money goes to the consumer, the BIG 3 would sell a lot of cars and evryone would be happy ever after.

    Same story for the banks In past years they posted huge profits, they never gave a penny to anyone. Why now we have to bail them out.

    What about all the small businesses that because of the slow down they have to close, who bails them out.

    The old proverb proves to be right again:[ the richer gets richer and the poor gets poorer}.

    November 14, 2008 at 7:36 pm |
  12. Greg Atkinson

    I guess we are now seeing just how interconnected the world's economies really area. I am sure there are plenty of other countries hurting just as much,if not more, as Germany.

    Greg Atkinson
    http://shareswatch.com.au/blog

    November 15, 2008 at 1:33 am |
  13. captindimasalang

    yes , there is economic slowdown the world over .now the germany is feeling the the hit of the crisis .but germany unlike the usa ,can invest anywhere else . the germans are not targetted by the so-called terrorist , besides the govt. of germany is exporting their technology like the solid waste management , the water treatment technic ,thus making germany gaining friends in asia like the philippines and vietnam , and many countries in central and south america . all these projects is part of their technology transfer to the developing countries .so, this must be an option to invest somewhere .the germans with their advance technology can fully maximize their worth if utilized in agro business development where there are vast potentials for developments in asia .asians need german expertize .

    November 15, 2008 at 12:48 pm |
  14. Patrick

    It is true that car prices are sky high but this is a consecuense of unions that always wanted more and more....aswell as the goverments and the companies that delivers water,electricity,etc....
    So people reached there posibilities, we are no robots and pressure is always higer ....so at the end of the month people have dificulties managing all living costs, all kind of taxes (to many to write) and that is why the world is in a recession (apart from the errors comited by some political leaders), if those taxes and living costs were lower than there is more money left in your pocket to by a car for example and so economy can be rescued from a real disaster.TO ALL POLITICIANS IN THE WORLD CUT THOSE TAXES (VAT)AND STOP SOME WARS!! and people will have more money to spend.

    November 15, 2008 at 1:46 pm |
  15. Uma in Liverpool, UK

    Funny, that's just what Chinese people thought...

    November 15, 2008 at 6:43 pm |
  16. Elvis

    Germans are well known for producing highly efficient auto vehicles, and anything produced by Germans are highly regarded by rest of the world. How about Americans goods? Like baseball (World Series?), americans are out of touch with the rest of the world, i see a decaying civilization slowly becoming irrelevant to the rest of the world. Soon America will join countries like Iraq, Iran, Africa nations, North Korea. Tigers with no tooth.....

    November 16, 2008 at 11:50 am |
  17. jj

    I don't think they should get the money to continue doing what they are doing.
    I think they should get help in a new generation and another type of development of vehicles..

    November 17, 2008 at 10:35 pm |
  18. MR

    if the auto industry fails as it seems likely! what will it be like trying to buy a car in 2009?

    November 18, 2008 at 2:07 pm |
  19. Maurice

    Given that the system will most likely support the American auto industry, an industry that does little but contribute to carriages and rolling, not to GNP, I will buy my next automobile either from the "used" pool, or from that "new" pool of vehicles produced by whichever manufacturer seems committed to producing hydrogen and/or electric powered vehicles to replace the oil powered ones. I will then drive that vehicle proudly as my part in the solution, to work, or business, not for pleasure. It is high time we all gave our heads a big shake. WE NEED A NEW COMMITMENT. The US needs a president with the balls to commit to HYDROGEN POWER like Kennedy commited to putting a man on the moon.

    November 18, 2008 at 3:29 pm |
  20. gunn ramos

    when will maritime nations get tough on the somali and malacca pirates? chasing them is not enough. not giving them some bloody noses makes them bolder and go on with their dirty work.

    November 19, 2008 at 8:15 am |
  21. Gabriel Varvaro

    The main thing here is to look at here is how Americans have been living and want to be living... always above their means.

    See for example an European home and compare it with an American pad...
    how many years does an European has to save money to pay the down-payment for a property?
    how often does an European changes his TV set?
    How often does an European changes car?
    How often does an European buys all the rubbish is presented before his eyes?
    How long does an European has to drive to go for groceries, pharmacy and a DVD? very little and most probably it would have walk between stores... I could not say the same for Americans when every business is surrounded by a massive car park and set miles apart from each other.

    One should only look at life styles and will draw quite a few interesting conclusions.

    It's sad people go unemployed but it would also make some good to be shaken and wake up from that dreamy way of living.

    November 19, 2008 at 11:40 pm |
  22. William

    Germany has a false since of self who told you that the best comes from your country,who told you that europeans have it so easy when your banks are failing just like U.S. banks because you were cheating on your books claiming your assets as liabilities.With out the U.S. there is no market as the world is now able to see.Your system of government in europe is not based on equality when you have hatred as europeans and you donot accept other races points of views or even allow them into your countries.Europe rushes to Africa and divides up a whole contient like they own it not respecting the rights of others with your skinheads,nazi mentailty we are all one people as the U.S. has shown the world the question you need to ask would europe elect a black man?

    November 24, 2008 at 11:55 am |
  23. William

    Europe claims to be something it is not as we look at the world we need to see what impact has Europe really had on getting peace and harmony.U have had two world wars,you supply arms to cause harm to your fellow humans,and you don't even like each others as europeans yet you still want to pretend that you are better then other cultures with out knowing what other cultures are all about.What is race relations in europe like when you deny people opportunity because they donot look like you or speak your same lanuage.If europe was serious about helping other countries develop why is it that so many countries remain underdeveloped

    November 24, 2008 at 12:05 pm |
  24. Phil Gatchell

    The Germans have lost quite a bit on the markets, but still keep pushing the Euro to ruin the U.S. dollar. The DAX goes down, the DOW goes down, and the Euro has declined, but not back to where they originally set it at 1.1785. The Euro is ruining Europe and the EC does nothing about it. The Germans should lose their butts.

    November 25, 2008 at 9:24 am |
  25. Swecha

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    November 5, 2012 at 7:27 am |

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