Being married to the most beautiful woman in the world makes you especially faithful, is how a former French finance minister described the reluctance of Germans to embrace a single currency in place of their beloved Deutschmark.
But that was a couple of years ago. This week, Germans are coming to terms with the fact that Economic and Monetary Union is going to happen. On 2 April the constitutional court threw out the final serious challenge to the adoption of the euro on the same day that parliament voted for the legal acceptance of the Deutschmark’s replacement. ‘Now it’s reality,’ says finance minister Theo Waigel.
For all the nations which are set to join EMU in the first wave, there is more doubt than certainty about what the euro will mean on a practical level. But for Germany the issue of the euro’s impact on labour markets is especially pertinent. This week, a nation-wide protest against joblessness was launched in the latest reaction to record unemployment figures.
Politicians here, anxious to put a positive spin on the euro, are also cautious in the run-up to September’s general election. So they are treating the question of the euro and jobs carefully. ‘The euro alone won’t create jobs,’ Waigel says. But the single currency will ‘create a climate in which individual economies will become aware of the challenges they face and the decisions necessary to secure their place in the world.’
Nowhere in Europe are those challenges greater than in Germany. Domestic manufacturers, fed up with high labour costs and taxation, have been shifting production abroad. Inward investment by US and Asian manufacturers has dwindled.
The introduction of the euro will expose Germany’s cost disadvantages to an even greater degree.
Slipping sales in Asia are also hindering performance. But the Asia crisis is being shrugged off by one famous engineering name: Mannesmann. The Dusseldorf-based plant and component supplier is riding high on the stock market. Germany’s private investors are queuing up for shares amid glowing recommendations from analysts at the big investment houses. The reason is telecommunications.
Mannesmann got into the telecoms market in the early 1990s, when its peers were moving in the opposite direction, offloading non-core businesses and concentrating on the sectors where they had built their reputations. But Mannesmann persevered. Now analysts are lauding its success in penetrating the German, French and Italian telecoms markets. But one observer warns that the group’s engineering interests are underperforming and that telecoms ‘can’t be seen as a license to print money’. Time will tell.