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Why do the German and UK economies differ sharply? | Why do the German and UK economies differ sharply? |
(40 minutes later) | |
By Stephen Evans BBC News, Berlin | By Stephen Evans BBC News, Berlin |
Compare and contrast, as they used to say in the exams. | Compare and contrast, as they used to say in the exams. |
The German economy grew by 3.6% last year and is expected to grow by more than 2% this year. | |
According to the latest figures, the British economy actually shrank in the last three months of 2010, although it is expected to grow by 2% in 2011. | According to the latest figures, the British economy actually shrank in the last three months of 2010, although it is expected to grow by 2% in 2011. |
In the UK, unemployment is rising. In Germany, it is falling. The British unemployment rate is higher than Germany's, and so too is the rate of inflation. | In the UK, unemployment is rising. In Germany, it is falling. The British unemployment rate is higher than Germany's, and so too is the rate of inflation. |
In Britain, trade is in deficit. In Germany, it is in sizzling surplus. | In Britain, trade is in deficit. In Germany, it is in sizzling surplus. |
Drilling for growth | Drilling for growth |
Trade is the key to the German recovery. | Trade is the key to the German recovery. |
The country makes things that others want to buy - particularly in growing economies, and particularly in China. | The country makes things that others want to buy - particularly in growing economies, and particularly in China. |
The German economy currently meshes nicely with China's needs, such as machinery to industrialise. It is also good at providing China's wants, including BMWs for the new rich. | The German economy currently meshes nicely with China's needs, such as machinery to industrialise. It is also good at providing China's wants, including BMWs for the new rich. |
As Germany's Economy Minister, Rainer BrĂ¼derle, told the BBC: "We give the equipment to the world, to the virgin markets that need it and want it". | As Germany's Economy Minister, Rainer BrĂ¼derle, told the BBC: "We give the equipment to the world, to the virgin markets that need it and want it". |
German industrialists make much of the strength of their manufacturing. | German industrialists make much of the strength of their manufacturing. |
Dieter Burmester created and owns Burmester Audio Systems which makes very high-end amplifiers and speakers - the price tags say hundreds of thousands of pounds, euros or dollars, for the top of his range. | Dieter Burmester created and owns Burmester Audio Systems which makes very high-end amplifiers and speakers - the price tags say hundreds of thousands of pounds, euros or dollars, for the top of his range. |
"I don't understand politicians who don't know the value of production", he says. | "I don't understand politicians who don't know the value of production", he says. |
You can see German technology all over the world, very often from small companies. | You can see German technology all over the world, very often from small companies. |
The disaster in Chile with the mining workers? The drilling machinery was from Germany. Drilling a tunnel in Switzerland? The machinery comes from here. | The disaster in Chile with the mining workers? The drilling machinery was from Germany. Drilling a tunnel in Switzerland? The machinery comes from here. |
"Many years ago, when some countries saw their future in service industries like I believe the British did, I wondered about it. | "Many years ago, when some countries saw their future in service industries like I believe the British did, I wondered about it. |
"The strongest economy you will have is when you have to deal with something concrete, and it's not just a number written on paper," said Mr Burmester. | "The strongest economy you will have is when you have to deal with something concrete, and it's not just a number written on paper," said Mr Burmester. |
Dependable products | Dependable products |
He is a classic German engineer and entrepreneur. | He is a classic German engineer and entrepreneur. |
His company is a typical example of the "mittelstand", that swathe of medium-sized, often family-owned firms which produce things, often of high quality, with much investment in research and design. | His company is a typical example of the "mittelstand", that swathe of medium-sized, often family-owned firms which produce things, often of high quality, with much investment in research and design. |
His product is handmade in Germany. The words are written on the back of every item in English, but there is much research and development behind it. | His product is handmade in Germany. The words are written on the back of every item in English, but there is much research and development behind it. |
He is an unflashy engineer. Solid, but with carefully planned change, might be his motto. | He is an unflashy engineer. Solid, but with carefully planned change, might be his motto. |
"Solid" is the word that keeps recurring with the German economy. | "Solid" is the word that keeps recurring with the German economy. |
For consumers, it translates as "save then spend". In these times of austerity, that may be a virtue - though borrowing to expand is a virtue when times are less constrained. | For consumers, it translates as "save then spend". In these times of austerity, that may be a virtue - though borrowing to expand is a virtue when times are less constrained. |
Debt culture | Debt culture |
But those are not the current times. British households are more indebted than their German counterparts. | But those are not the current times. British households are more indebted than their German counterparts. |
In the UK, debt is about 80% of income left after tax. In Germany, it is about 60%. | In the UK, debt is about 80% of income left after tax. In Germany, it is about 60%. |
On top of that, Britons borrow to buy property - the weight is around their necks for life. | On top of that, Britons borrow to buy property - the weight is around their necks for life. |
Mortgages make up about 90% of people's debt. In Germany, it is about 70%. | Mortgages make up about 90% of people's debt. In Germany, it is about 70%. |
Artur Fisher is a good person to compare and contrast. He is the joint-chief executive of the Berlin stock exchange. He has worked and lived in London and he's married to a British woman. | Artur Fisher is a good person to compare and contrast. He is the joint-chief executive of the Berlin stock exchange. He has worked and lived in London and he's married to a British woman. |
His mother-in-law lives in East Anglia so he goes there often. | His mother-in-law lives in East Anglia so he goes there often. |
He makes much of the British belief that owning one's own home is one of the prime aims in life while Germans rent. | He makes much of the British belief that owning one's own home is one of the prime aims in life while Germans rent. |
"In Germany only 50-60% of the population own their own house. The rest rent. Renting is quite normal". | "In Germany only 50-60% of the population own their own house. The rest rent. Renting is quite normal". |
Contrast that with the UK where he says that 90% of households own their own home. | Contrast that with the UK where he says that 90% of households own their own home. |
"The most important thing in their life is to own their own house. So you tie down capital." | "The most important thing in their life is to own their own house. So you tie down capital." |
He notes, too, a difference in attitude between him and his wife when it comes to mortgages. | He notes, too, a difference in attitude between him and his wife when it comes to mortgages. |
The British, he says, are used to variable rates of interest - they go up and down over the lifetime of the mortgage. In Germany, you agree the rate and it stays fixed. | The British, he says, are used to variable rates of interest - they go up and down over the lifetime of the mortgage. In Germany, you agree the rate and it stays fixed. |
"My wife is English and when we agreed a ten year mortgage at 3.5%, she asked me why we didn't get a variable rate because it might go lower. | "My wife is English and when we agreed a ten year mortgage at 3.5%, she asked me why we didn't get a variable rate because it might go lower. |
"This shows you the difference of attitude whereby the English see an opportunity in change whereas the Germans hate change - we don't want change. We want to plan things." | "This shows you the difference of attitude whereby the English see an opportunity in change whereas the Germans hate change - we don't want change. We want to plan things." |
Artur Fischer, though, does not gloat. He does not feel the German way is always better. | Artur Fischer, though, does not gloat. He does not feel the German way is always better. |
And he can remember the 1970s when Britain reeled from crisis to crisis. | And he can remember the 1970s when Britain reeled from crisis to crisis. |
"The British economy was seen as the 'Sick Man of Europe'. This has turned around completely with all the measures that have been taken in the UK. | "The British economy was seen as the 'Sick Man of Europe'. This has turned around completely with all the measures that have been taken in the UK. |
"So we know that the British are able to get out of this trouble and become very strong. They were able to live a prosperous life without having all those manufacturing companies. | "So we know that the British are able to get out of this trouble and become very strong. They were able to live a prosperous life without having all those manufacturing companies. |
"If the framework is correct, you will come out winning - probably, in three years time, when Germany might just go back into recession." | "If the framework is correct, you will come out winning - probably, in three years time, when Germany might just go back into recession." |
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