No Bounce for Europe in Rebound by Germany

FRANKFURT — Whenever Germany thrived, so did the rest of Europe. But that long-held belief is being questioned by its neighbors, which see evidence that the country is taking off without them.

Despite Berlin’s hefty financial support of the euro zone’s more beleaguered members in the last few years, the economic crisis has corroded commercial ties between Germany and the rest of Europe. Countries like Italy and Spain no longer have the purchasing power they once did, and they trade less with Germany because of it.

Greece, the most distressed country in Europe, is now little more than a German rounding error. German exports to Greece plunged 40 percent from 2008, while Germany imported 9 percent less from Greece. Last year, Greece ranked 44th among German trading partners, just behind Vietnam.

No wonder German companies, cheered on by the government of Chancellor Angela Merkel, have turned their attention to faster-growing places like Asia or the United States.

“Right now it’s a decoupling story rather than a helping-hand story,” said Carsten Brzeski, a senior economist at the Dutch bank ING.

It is not simply an economic issue, but a geopolitical one.

Ms. Merkel is running for re-election this month in a campaign in which one of the few debating points is how many more financial handouts Germany will give to its weaker neighbors. She has made a conscious effort of building closer ties with bigger and faster-growing markets like China. If the Merkel government succeeds in making Germany a bigger global player through trade and investment policy, it not only insulates Germany from European structural woes but also ensures that it remains a global economic force in its own right.

For the rest of the euro zone and the larger European Union, however, unity depends on the sustained energy and commitment of Germany, the wealthiest and most powerful member. The more that Germany sees its long-term interests lying outside Europe, the less certain the future of the entire European project.

“Germany is less willing to play ball,” said Stefano Micossi, director general of Assonime, an Italian business group and research organization. Rather than pulling together, he said, European leaders have been “falling back to mutual mistrust and national solutions.”

On Tuesday, the Organization for Economic Cooperation and Development said that even as Germany resumed growth, the euro zone’s most vulnerable countries were unlikely to follow until sometime next year. European banks remain weak, the group said, while lending — usually considered a prerequisite for economic growth — continues to decline.

The euro zone’s economic future remains heavily dependent on Germany, the biggest market for products like shoes from Italy or Ford minivans made in Spain. German companies like Linde, a large supplier of gases for use in industry and health care, are major employers in Southern Europe.

But Linde’s big growth this year was in the United States, where sales rose 58 percent in the third quarter, to $2.6 billion, thanks to the purchase of Lincare, a company that supplies oxygen to patients in their homes.

The United States has also become a hot market for German companies like Voith, a maker of industrial equipment, which said last month that it expected to profit from a new law intended to encourage construction of hydroelectric power plants. Voith issued a statement calling the new law “terrific news” — no surprise considering that the company is one of the world’s largest suppliers of hydropower equipment.

In addition, China has become the most important market for Volkswagen, which sold 1.5 million cars there in the first six months of this year, more than in Western Europe. Volkswagen is also putting renewed emphasis on North America. In 2011, it opened a factory in Chattanooga, Tenn., that contributed to a 10 percent increase in American sales through June from a year earlier.

In Germany, Union Culture Clashes With Amazon’s Labor Practices

But across the Atlantic — nein, non, no.

Even as President Obama spoke about middle-class jobs last week at an Amazon warehouse in Tennessee, Amazon was facing strikes at warehouses in Germany, its second-biggest market. Unions there say the company has imported American-style business practices — in particular, an antipathy to organized labor — that stand at odds with European norms.

“In Germany, the idea that warehouse workers are going to be getting opposition from an employer when it comes to the right to organize, that’s virtually unheard-of,” said Marcus Courtney, a technology and communications department head at Uni Global Union, a federation of trade unions based in Nyon, Switzerland. “It puts Amazon out in left field.”

Amazon is hardly out there alone, however. Large American technology companies are increasingly running into obstacles as they expand in Europe. For Facebook and Google, the running issue is privacy. Google was fined this year by German authorities for illegally collecting personal data while creating its Street View mapping service, after facing minimal sanctions over Street View at home. Meanwhile, European privacy regulators are considering tough regulations to protect consumers on the Internet, a direct challenge to Google, Facebook and other online companies that mine personal data.

Antitrust officials in Europe are scrutinizing Apple’s relationships with wireless carriers, as well as Google’s competitive practices. And Google, Apple and Amazon have all been criticized by European lawmakers for tactics that help them minimize their tax bills.

Amazon has been criticized for its working conditions in the United States — but not nearly to the same extent as in Europe. On the surface, Amazon’s labor problems in Germany revolve around wages.

The union says workers in warehouses in two small German cities are properly classified as retail employees, and should be paid at the higher rate required for people who work in department stores and other retail outlets. Amazon says they are more properly classified as warehouse workers, and paid at a lower rate.

The subtext, though, is Amazon’s opposition to unions in its warehouses as a general principle, because the company fears unions will slow down the kind of behind-the-scenes innovation that has propelled its growth.

Dave Clark, the company’s vice president of worldwide operations and customer service, says Amazon views unions as intermediaries that will want to have a say on everything from employee scheduling to changes in processes for handling and packaging orders. Amazon prizes its ability to quickly introduce changes like these into its warehouses to improve the experience of its customers, he said.

Last year, the company spent $775 million to buy a manufacturer of robots that it plans to eventually deploy in its warehouses, though it has not said when they would come to Germany. The last thing it wants is to have to get approval from unions for such changes.

“This really isn’t about higher wages,” Mr. Clark said. “It isn’t a cost question for us. It’s about what our relationship is with our people.”

“We’re still a developing industry,” he added — despite the fact that Amazon posted revenue of $15.7 billion in the last quarter and the company is enjoying a buoyant stock price.

In the United States, Amazon successfully thwarted efforts to unionize. Over a decade ago, Mr. Courtney of Uni Global led an unsuccessful effort in the company’s home state of Washington to organize Amazon’s customer service representatives.

Two years ago, an investigative article by The Morning Call newspaper in Pennsylvania’s Lehigh Valley chronicled poor working conditions in an Amazon warehouse in the state, including instances where it stationed paramedics outside to take heat-stressed workers to the emergency room. Amazon says it has addressed the problem by installing air-conditioning in all of its facilities.

More recently, a firm that provides temporary employees for Amazon warehouses is defending itself in a class-action suit that claims the firm shortchanged workers on pay as they waited in security lines to exit warehouses.

Jonathan Barnes, a spokesman for the staffing firm named in the suit, Integrity Staffing Solutions, declined to comment.

But it is a different story in Germany, where the powerful labor movement behind the Amazon strikes traces its roots back more than two centuries.

Mr. Courtney, the Swiss-based head of the federation of trade unions, said other American tech giants, including I.B.M. and Hewlett-Packard, have been more tolerant than Amazon of unions in their European operations.

And the strikes in Germany raise especially knotty problems for the company, which has ambitious expansion plans there.

Germany Works to Curb European Youth Unemployment

Wolfgang Schäuble, the German finance minister, and Vítor Gaspar, his counterpart in Portugal, announced a plan on Wednesday to use the German state development bank to help set up a financial institution to assist Portuguese under age 25 in getting jobs or job training.

This week, Ursula von der Leyen, the German labor minister, signed an agreement with her Spanish counterpart, Fátima Báñez García, that foresees bringing thousands of young Spaniards to Germany for apprenticeships. At the same time, Germany will seek to help Spain build a dual-track vocational system in which young people earn qualifications through a combination of work and study.

The initiatives are part of a multipronged effort by Berlin to quickly get more young people into the work force, a move that experts say is crucial if a unified Europe is to survive into the next generation. “What is decisive is that we must be faster and more definitive in fighting youth unemployment,” Mr. Schäuble said.

More than 5.6 million people under 25 are without work across the union, according to figures released by Eurostat, the statistical office of the European Union. Among the countries with the largest number of young people out of work are the weaker members of the euro zone that are undergoing deep cuts to social services and other structural changes, part of efforts to recover from the debt crisis.

Germany grappled with its own youth unemployment problem early last decade. While its numbers then were nowhere near the 60 percent of young people now out of work in Greece, or the nearly 56 percent in Spain, German leaders said their experience could be of value to their European partners.

Next week, German and French officials plan to draw up a bilateral agreement on employment when they meet alongside European business leaders at a conference in Paris. On July 3, Chancellor Angela Merkel of Germany will gather labor ministers and the heads of 27 European Union labor agencies in Berlin for a meeting to further discuss the problem.

Details of the German-French proposal remain vague, but Mr. Schäuble insisted that financing would not be an issue.

He cited the 6 billion euros, or $7.8 billion, that the European Union has earmarked in its new budget for addressing the problem, as well as additional money that was given to the European Investment Bank in Luxembourg intended for loans to small and midsize businesses, which would help create more jobs.

“We are working to use the existing funds more efficiently,” Mr. Schäuble said in Berlin.

Unemployment in the early stages of a person’s career damages the ability to integrate into society, or, in the case of the union, to later support the idea of more integration on the Continent, said Joachim Möller, director of the Institute for Employment Research in Nuremberg. “The long-term effects reach far beyond the working world,” he added. “It could be catastrophic for their idea of Europe.”

Europe Looks to Merkel of Germany to Revive Economy

BERLIN — Even as the United States economy displays unanticipated resilience, with a healthy jobs report released on Friday, the outlook for Europe’s economy grows ever dimmer. As it does, the pressure builds on Europe’s most powerful leader, Chancellor Angela Merkel of Germany, and her economic team to find a way to get the Continent growing again.

But this puts Ms. Merkel in a bind, as she has to answer to German voters in September when the country holds parliamentary elections. While the European economy may be deteriorating at an alarming rate, the electorate here is still enamored of her as the Iron Chancellor, advocating the austerity policies that are rapidly falling into disfavor elsewhere, among economists as well as the public.

Her response, in recent months, has been to try a delicate balancing act, quietly easing up on crisis-stricken states, giving them more time to narrow their budget deficits, while showing no outward signs of weakness that her political rivals can pounce upon.

But this stance may become increasingly untenable, if the United States’s more stimulative economic policies begin to bear fruit and Europe continues to struggle, as seems to be the case. The European Commission said Friday that the economy of its member nations would shrink by 0.1 percent this year, while the countries that use the euro would contract even more sharply, by 0.4 percent.

And there are signs that the contagion from the south is migrating north and beginning to drag down Germany’s export-driven economy, which is expected to grow by a meager 0.4 percent this year, adding another potential source of voter discontent to Ms. Merkel’s concerns.

So the question now is not just whether Ms. Merkel will further relax her insistence on strict austerity but how far she thinks she can go in an election year, or perhaps how far she needs to go to prop up her own economy. Few experts expect any drastic departures.

“In the end, she’s this sort of Prussian-Protestant determined person,” said Stefan Kornelius, an editor at the Süddeutsche Zeitung and the author of a new book about Ms. Merkel. “She’s not ideological, but she’s truly convinced about the rightfulness of her course.”

But the constant questions about austerity are taking their toll on Ms. Merkel, who has begun to bridle in public when people ask about spending cuts.

“I think budget consolidation is now interestingly labeled with the word austerity, which is otherwise not used in Germany,” Ms. Merkel said this week at a news conference with the new Italian prime minister, Enrico Letta. “In Germany we didn’t even know this word before the crisis.”

Aware of the shifting dynamics in Europe, Ms. Merkel has chosen instead to emphasize the need for structural reforms to the labor markets of struggling countries over slashed spending. And she is not insisting on strict adherence to budget-cutting goals. That may help in the long run but can do little to immediately pull economies out of free fall.

“Her overarching goal right now is to get re-elected, and she won’t get re-elected if she spends German money on French and Italian problems without getting anything in return,” Mr. Kornelius said.

Ms. Merkel is forced to navigate dissension within her own conservative ranks at the slightest wavering from the disciplined German line, and a new party on the right, the Alternative for Germany, pressing for the more extreme step of a breakup of the euro.

To critics, Europe is facing an undeniable economic crisis and Germany is making decisions based on politics. “They are prevaricating all the time and allowing short-term domestic considerations to determine euro-zone policy,” said Charles Grant, director of the Center for European Reform, London.

Critics contend that fiscally solid countries like Germany have already gotten plenty in return and that the narrative of parsimonious Northern Europeans bled dry by profligate southerners is a false one. They have pointed to studies quantifying how Germany has been able to save billions of dollars because lower interest rates for perceived safe havens have made borrowing money dramatically cheaper.

Chris Cottrell contributed reporting.

Off the Charts: Industrial Production Sags, and Even Germany Is Affected

Figures reported this week showed that industrial production in the euro zone fell 2.5 percent in September from the previous month, the largest monthly decline since January 2009, during the worst part of the credit crisis. Production in Germany was off 2.1 percent.

Although the figures are seasonally adjusted, they can be volatile. But the longer-term trend was poor even before the September figures came in.

The accompanying charts show year-to-year changes in industrial production, using three-month moving averages to smooth out some volatility, among advanced economies as a group, in the euro zone and five major countries.

The Dutch government compiles industrial production figures from around the world. In August, the total for advanced economies was lower than it had been a year earlier, something that had not happened since 2009, although the three-month average, as shown in the chart, remained a little higher.

The September figures for some countries will not be out until the end of this month, but it seems likely they will show a drop as well.

“Germany has slowed because weak global demand, particularly for the major machinery that Germany exports, is creating lower demand for Germany’s exports,” wrote Greg Jensen of Bridgewater Associates, a hedge fund and advisory firm. He said German companies were accumulating large inventories and their profits were suffering.

There are exceptions to the world pattern. Chinese industrial production continues to rise at a rate of more than 9 percent a year. While that is down from last year, it remains good. On Friday, the Federal Reserve reported that industrial production in the United States slipped in October by 0.4 percent, the second decline in the last three months, although the Fed said it would have been close to unchanged but for the effects of Hurricane Sandy. The annual growth rate is down to less than 3 percent.

But the declines have spread to some developing countries. Brazil’s production is running about 3 percent below that of a year earlier, and Indian production is basically flat compared with a year earlier.

It is not clear how much of the weakness in industrial production represents a real weakening of demand and how much reflects inventory issues. During the credit crisis, production fell much more rapidly than final demand, as companies found it hard to get financing and worried that their customers would be unable to pay for what was being shipped. Much of the revival in 2010 reflected pent-up demand, and some of the current slowing may simply show that depleted inventories have been replenished.

But the declines also provide an indication of continuing problems, particularly in some of the European countries most in need of a growing economy.

Greece’s industrial production was never large to begin with, but it is now lower than at any time since the figures began to be compiled in 1995, and is down about a third from its peak, set back in 2000.

Italian production appeared to recover in line with that of other countries in 2010, but has since weakened appreciably. For much of this year, it has been down more than 6 percent from the previous year. Spain’s production has fallen almost as rapidly.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Germany Holds Talks on National Energy Strategy

Until now, each state has drawn up and worked from its own plan for the expansion of renewable resources in its territory, often in conflict with one another. On the federal side, there is no single leader for the project to increase reliance on renewable energy to at least 35 percent by 2020. Instead, responsibilities are divided between the ministries of the environment and the economy, with the education minister responsible for financing research on renewable energy and storage technology.

The opposition Social Democratic Party has pounced on the weakness in the Merkel government’s signature project ahead of national elections next year, while widespread public support for the plan faces strains from a nearly 50 percent jump in a consumer tax for the transformation next year.

“Germany’s energy transformation is threatened with collapse due to the inability of the government” to draw up a master plan, Hubertus Heil, a leading Social Democrat, said before Friday’s meeting.

Germans’ relationship to nuclear energy is deeply emotional, rooted in the antinuclear protest culture of the 1970s and memories of radioactive mushrooms and wild game in Bavarian forests that resulted from the 1986 meltdown in Chernobyl.

It would be a severe blow to Ms. Merkel and her Christian Democrats if the project, passed last year by her center-right government in the wake of the Fukushima nuclear disaster in Japan, were to fail. On Friday, she pledged to work with the states through a national dialogue on how best to move forward.

“Germans can be assured that we feel committed to the goal of energy transformation,” Ms. Merkel said after the meeting. “I felt a spirit that we all want, and perhaps can, achieve this.”

Torsten Albig, a Social Democrat who is governor of Schleswig-Holstein, also praised the discussions as “a considerable step forward” toward reaching a master plan by March.

His northern coastal state, along with Lower Saxony, has been criticized for expanding offshore wind energy at such a rapid pace that turbines have had to be switched off on exceptionally windy days, because they produce more energy than the grid can handle.

Ultimately, Ms. Merkel would like to see the energy generated by wind farms in the north transmitted to the power-hungry industrial south. A plan to expand Germany’s grid with that aim, which would require about 500 miles of new power lines and other major upgrades, is to go before Parliament next month.