Noam Chomsky: The term neoliberal is a bit misleading. The doctrines are neither new, nor liberal. As you say, big business and the rich rely extensively on what economist Dean Baker calls “the conservative nanny state” that they nourish. That is dramatically true of financial institutions. A recent IMF study attributes the profits of the big banks almost entirely to the implicit government insurance policy (“too big to fail”), not just the widely publicized bailouts, but access to cheap credit, favorable ratings because of the state guarantee and much else. The same is true of the productive economy. The IT revolution, now its driving force, relied very heavily on state-based R&D, procurement and other devices. That pattern goes back to early English industrialization.

However, neither “neoliberalism,” nor its earlier versions as “liberalism,” have been myths, certainly not for their victims. Economic historian Paul Bairoch is only one of many who have shown that “the Third World’s compulsory economic liberalism in the 19th century is a major element in explaining the delay in its industrialization,” in fact, its “de-industrialization,” a story that continues to the present under various guises.

In brief, the doctrines are, to a substantial extent, a “myth” for the rich and powerful, who craft many ways to protect themselves from market forces, but not for the poor and weak, who are subjected to their ravages.

What explains the supremacy of market-centric rule and predatory finance in an era that has experienced the most destructive crisis of capitalism since the Great Depression?

The basic explanation is the usual one: It is all working quite well for the rich and powerful. In the US, for example, tens of millions are unemployed, unknown millions have dropped out of the workforce in despair, and incomes as well as conditions of life have largely stagnated or declined. But the big banks, which were responsible for the latest crisis, are bigger and richer than ever, corporate profits are breaking records, wealth beyond the dreams of avarice is accumulating among those who count, labor is severely weakened by union busting and “growing worker insecurity,” to borrow the term Alan Greenspan used in explaining the grand success of the economy he managed, when he was still “St. Alan,” perhaps the greatest economist since Adam Smith, before the collapse of the structure he had administered, along with its intellectual foundations. So what is there to complain about?

The growth of financial capital is related to the decline in the rate of profit in industry and the new opportunities to distribute production more widely to places where labor is more readily exploited and constraints on capital are weakest – while profits are distributed to places with lowest [tax] rates (“globalization”). The process has been abetted by technological developments that facilitate the growth of an “out-of-control financial sector,” which “is eating out the modern market economy [that is, the productive economy] from inside, just as the larva of the spider wasp eats out the host in which it has been laid,” to borrow the evocative phrase of Martin Wolf of the Financial Times, probably the most respected financial correspondent in the English-speaking world.

That aside, as noted, the “market-centric rule” imposes harsh discipline on the many, but the few who count protect themselves from it effectively.

What do you make of the argument about the dominance of a transnational elite and the end of the nation-state, especially since its proponents claim that this New World Order is already upon us? 

There’s something to it, but it shouldn’t be exaggerated. Multinationals continue to rely on the home state for protection, economic and military, and substantially for innovation as well. The international institutions remain largely under the control of the most powerful states, and in general the state-centric global order remains reasonably stable.

Europe is moving ever closer to the end of the “social contract.” Is this a surprising development for you?

In an interview, Mario Draghi informed The Wall Street Journal that “the Continent’s traditional social contract” – perhaps its major contribution to contemporary civilization – “is obsolete” and must be dismantled. And he is one of the international bureaucrats who is doing most to protect its remnants. Business has always disliked the social contract. Recall the euphoria in the business press when the fall of “Communism” offered a new work force – educated, trained, healthy and even blond and blue-eyed – that could be used to undercut the “luxurious lifestyle” of western workers. It is not the result of inexorable forces, economic or other, but a policy design based on the interests of the designers, who are rather more likely to be bankers and CEOs than the janitors who clean their offices.

One of the biggest problems facing many parts of the advanced capitalist world today is the debt burden, public and private. In the peripheral nations of the eurozone, in particular, debt is having catastrophic social effects as the “people always pay,” as you have pointedly argued in the past. For the benefit of today’s activists, would you explain in what sense debt is “a social and ideological construct?” 

There are many reasons. One was captured well by a phrase of the US executive director of the IMF, Karen Lissakers, who described the institution as “the credit community’s enforcer.” In a capitalist economy, if you lend me money and I can’t pay you back, it’s your problem: You cannot demand that my neighbors pay the debt. But since the rich and powerful protect themselves from market discipline, matters work differently when a big bank lends money to risky borrowers, hence at high interest and profit, and at some point they cannot pay. Then the “the credit community’s enforcer” rides to the rescue, ensuring that the debt is paid, with liability transferred to the general public by structural adjustment programs, austerity and the like. When the rich don’t like to pay such debts, they can declare them to be “odious,” hence invalid: imposed on the weak by unfair means. A huge amount of debt is “odious” in this sense, but few can appeal to powerful institutions to rescue them from the rigors of capitalism.

There are plenty of other devices. J.P. Morgan Chase has just been fined $13 billion (half of it tax-deductible) for what should be regarded as criminal behavior in fraudulent mortgage schemes, from which the usual victims suffer under hopeless burdens of debt.

The inspector-general of the US government bailout program, Neil Barofsky, pointed out that it was officially a legislative bargain: the banks that were the culprits were to be bailed out, and their victims, people losing their homes, were to be given some limited protection and support. As he explains, only the first part of the bargain was seriously honored, and the plan became a “giveaway to Wall Street executives” – to the surprise of no one who understands “really existing capitalism.”

The list goes on.

In the course of the crisis, Greeks have been portrayed around the globe as lazy and corrupt tax evaders who merely like to demonstrate. This view has become mainstream. What are the mechanisms used to persuade public opinion? Can they be tackled?

The portrayals are presented by those with the wealth and power to frame the prevailing discourse. The distortion and deceit can be confronted only by undermining their power and creating organs of popular power, as in all other cases of oppression and domination.

What is your view about what is happening in Greece, particularly with regard to the constant demands by the “troika” and Germany’s unyielding desire to advance the cause of austerity?

It appears that the ultimate aim of the German demands from Athens, under the management of the debt crisis, is the capture of whatever is of value in Greece. Some people in Germany appear to be intent on imposing conditions of virtual economic slavery on the Greeks.

It is rather likely that the next government in Greece will be a government of the Coalition of the Radical Left. What should be its approach toward the European Union and Greece’s creditors? Also, should a left government be reassuring toward the most productive sectors of the capitalist class, or should it adopt the core components of a traditional workerist-populist ideology?  

These are hard practical questions. It would be easy for me to sketch what I would like to happen, but given existing realities, any course followed has risks and costs. Even if I were in a position to assess them properly – I am not – it would be irresponsible to urge policy without serious analysis and evidence.

Capitalism’s appetite for destruction was never in doubt, but in your recent writings you pay increasing attention to environmental destruction. Do you really think human civilization is at stake?

I think decent human survival is at stake. The earliest victims are, as usual, the weakest and most vulnerable. That much has been evident even in the global summit on climate change that just concluded in Warsaw, with little outcome. And there is every reason to expect that to continue. A future historian – if there is one – will observe the current spectacle with amazement. In the lead in trying to avert likely catastrophe are the so-called “primitive societies”: First Nations in Canada, indigenous people in South America and so on throughout the world. We see the struggle for environmental salvage and protection taking place today in Greece, where the residents of Skouries in Chalkidiki are putting up a heroic resistance both against the predatory aims of Eldorado Gold and the police forces that have been mobilized by the Greek state in support of the multinational company.

Those enthusiastically leading the race to fall off the cliff are the richest and most powerful societies, with incomparable advantages, like the US and Canada. Just the opposite of what rationality would predict – apart from the lunatic rationality of “really existing capitalist democracy.”

The US remains a world empire and, by your account, operates under the “Mafia principle,” meaning that the godfather does not tolerate “successful defiance.” Is the American empire in decline, and, if so, does it pose yet a greater threat to global peace and security? 

US global hegemony reached a historically unparalleled peak in 1945, and has been declining steadily since, though it still remains very great and though power is becoming more diversified, there is no single competitor in sight. The traditional Mafia principle is constantly invoked, but ability to implement it is more constrained. The threat to peace and security is very real. To take just one example, President Obama’s drone campaign is by far the most vast and destructive terrorist operation now under way. The US and its Israeli client violate international law with complete impunity, for example, by threats to attack Iran (“all options are open”) in violation of core principles of the UN Charter. The most recent US Nuclear Posture Review (2010), is more aggressive in tone than its predecessors, a warning not to be ignored. Concentration of power rather generally poses dangers, in this domain as well.

Regarding the Israeli-Palestinian conflict, you have said all along that the one-state/two-state debate is irrelevant.

The one-state/two-state debate is irrelevant because one state is not an option. It is worse than irrelevant: It is a distraction from the reality.

The actual options are either (1) two states or (2) a continuation of what Israel is now doing with US support: keeping Gaza under a crushing siege, separated from the West Bank; and systematically taking over what it finds of value in the West Bank while integrating it more closely to Israel, taking over areas with not many Palestinians; and those who are there are being quietly expelled. The contours are quite clear from the development and expulsion programs.

Given option (2), there’s no reason why Israel or the US should agree to the one-state proposal, which also has no international support anywhere else. Unless the reality of the evolving situation is recognized, talk about one state (civil rights/anti-apartheid struggle, “demographic problem”, etc.) is just a diversion, implicitly lending support to option (2). That’s the essential logic of the situation, like it or not.

You have said that elite intellectuals are the ones that mainly tick you off. Is this because you fuse politics with morality? 

Elite intellectuals, by definition, have a good deal of privilege. Privilege provides options and confers responsibility. Those more privileged are in a better position to obtain information and to act in ways that will affect policy decisions. Assessment of their role follows at once.

It’s true that I think that people should live up to their elementary moral responsibilities, a position that should need no defense. And the responsibilities of someone in a more free and open society are, again obviously, greater than those who may pay some cost for honesty and integrity. If commissars in Soviet Russia agreed to subordinate themselves to state power, they could at least plead fear in extenuation. Their counterparts in more free and open societies can plead only cowardice.

Michel Gondry’s animated documentary Is the Man Who Is Tall Happy? has just been released in selected theaters in New York City and other major cities in the US after having received rave reviews. Did you see the movie? Were you pleased with it? 

I saw it. Gondry is really a great artist. The movie is delicately and cleverly done and manages to capture some important ideas (often not understood even in the field) in a very simple and clear way, also with personal touches that seemed to me very sensitive and thoughtful.

Source: http://www.zcommunications.org/chomsky-it-is-all-working-quite-well-for-the-rich-powerful-by-noam-chomsky.html

The Financial Secrecy Index ranks jurisdictions according to their secrecy and the scale of their activities. A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows.

The index was launched on November 7, 2013.

Shining light into dark places

An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. Illicit cross-border financial flows add up to an estimated $1-1.6 trillion each year. Since the 1970s African countries alone are estimated to have lost over $1 trillion in capital flight, dwarfing their current external debts of ‘just’ $190 billion and making Africa a major net creditor to the world. But those assets are in the hands of a few wealthy people, protected by offshore secrecy, while the debts are shouldered by broad African populations.

Yet rich countries suffer too: in the recent global financial crisis, European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion.

Secrecy jurisdictions – a term we often use as an alternative to the more widely used term tax havens – use secrecy to attract illicit and illegitimate or abusive financial flows.

A global industry has developed involving the world’s biggest banks, law practices and accounting firms which not only provide secretive offshore structures to their tax- and law-dodging clients, but aggressively market them. ‘Competition’ between jurisdictions to provide secrecy facilities has, particularly since the era of financial globalisation took off in the 1980s, become a central feature of global financial markets.

The problems go far beyond tax. In providing secrecy, the offshore world corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency. The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax evasion and aggressive tax avoidance, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more. It provides multiple facilities for insiders to extract wealth at the expense of societies elsewhere, creating political impunity and undermining the healthy ‘no taxation without representation’ bargain that has underpinned the growth of accountable modern nation states. Instead of depending on tax, many countries are forced to depend on foreign aid.

This is not just a ‘developing country’ issue either: it hurts citizens of rich and poor countries alike.

Click here for the full 2013 ranking

What is the significance of this index?

In identifying the providers of international financial secrecy, the Financial Secrecy Index reveals that the traditional stereotype of tax havens is misconceived. The world’s most important providers of financial secrecy are not small, palm-fringed islands as many suppose, but some of the world’s biggest and wealthiest countries.

It shows that the illicit financial flows that keep developing nations poor are predominantly enabled by rich OECD member countries and their satellites, which are the main recipients of or conduits for these illicit flows. The trillion-dollar figure for annual illicit financial flows out of developing countries, above, compares with just US$130 billion or so in global foreign aid. So for every dollar of aid provided by OECD countries to developing nations, ten dollars or so flow back, under the table, towards OECD nations and their offshore satellites.

The implications for global power politics are clearly enormous, and help explain why widely heralded international efforts to crack down on tax havens and financial secrecy have been rather ineffective, despite many fine words from G20 and OECD countries: for it is these countries — which receive these gigantic inflows — that set the rules of the game.

Although there have been some positive changes since our last index in 2011, the infrastructure of global financial secrecy remains alive and well.

For too long, governments and campaigners concerned with cross-border finance focused on narrow problems such as terrorist financing and on certain kinds of money laundering, while ignoring much bigger flows involving tax evasion, abusive trade pricing and a range of other crimes and abuses. These larger problems operate through, and perpetuate, exactly the same mechanisms of offshore financial secrecy that facilitate cross-border flows of terrorist and drug financing. Tackling the smaller issues, while ignoring the bigger ones, cannot work.

The only realistic way to address these problems comprehensively is to tackle them at root: by directly confronting offshore secrecy and the global infrastructure that creates it. A first step towards this goal is to identify as accurately as possible the jurisdictions that make it their business to provide offshore secrecy.

This is what the FSI does. It is the product of years of detailed research by a dedicated team, and there is nothing else like it out there.

 

http://www.financialsecrecyindex.com/

Anne, who lived in hiding between 1942 and 1944, was eventually discovered by the occupiers, becoming yet another Jewish victim of the Nazi onslaught after she succumbed to typhus at the Bergen-Belsen concentration camp. She was 15 when she died, yet her diary, discovered by her father after the war, has become one of the most celebrated works of the 20th century, documenting two years of the teenagers life under the persecution of National Socialism.

© NIOD / Anne Frank House

© NIOD / Anne Frank House

© NIOD / Anne Frank House

© NIOD / Anne Frank House

© NIOD / Anne Frank House

© NIOD / Anne Frank House

© NIOD / Anne Frank House

Klaus Probst, president and CEO of Leoni AG, Europe’s largest supplier of cables and cable systems to the automotive industry, is a perfect blend of world citizen and self-centred industrialist. With his Hollywood looks and light Bavarian accent, he looks and sounds the part, too. The German model may be cracking at the seams, but he remains confident: “Our system really is a model for others. When we look at France and see how the unions react to job cuts, we realise the advantage we have in Germany, where we all manage to agree on a reasonable solution. The social partnership in our country seems very stable to me; I don’t see any threats on the horizon.”

Last year Leoni had sales of €3.8bn and earnings before tax of €236m. It is a leading member of the Bavarian Association of Metal Processing and Electrical Companies (VBM), which represents 600 companies with more than 700,000 employees. Probst says: “The VBM is quite a powerful organisation. It lobbies politicians on our behalf — Horst Seehofer, president of the state of Bavaria, and [Chancellor] Angela Merkel. We lobby on energy policy in particular, because the price of electricity is going up all the time, and that is a threat to some of our members.”

The lobbying aims to circumvent Germany’s Energiewende (energy transition) policy, which is supposed to promote alternative energy but has been diluted by amendments introduced under pressure from lobbyists. One passed in 2011 exempts more than 2,000 companies from an ecotax levied on major consumers of fossil fuels. It is estimated that these accommodations will cost the German treasury €4bn in 2013.

There are also cash donations. Between 2002 and 2011, VBM gave €4.16m to political parties, including €3.7m to Seehofer’s Christian Social Union (1). Only BMW and Deutsche Bank were more generous.

Living in a bubble

Given these figures, Germany’s low wages and lack of job security are outrageous. Between 2000 and 2010, Germany saw the biggest increase (after Bulgaria and Romania) in the gap between the richest 20% and the poorest 20% (2). This does not trouble Probst: “Even if several studies confirm what you are saying, I see nothing like that around me. Social security means that everyone in Germany can live decently. I have two children who are at university, and I am not worried about the society they are living in falling apart.”

Leoni was founded in the 19th century and has been listed on the stock exchange since 1923. During the Nazi era it benefited from the forced labour of deportees. The postwar German miracle and rapid expansion of the automotive sector brought more growth. The euphoria of the period, combined with a ban on “political strikes” and anti-communist policies that intensified with the erection of the Berlin Wall, led to a social consensus unique in Europe, and the Federal Republic of Germany was able to delegate the task of negotiating collective labour agreements to employers’ organisations.

The state refrained from interference and allowed employers to agree working conditions and pay with the unions; the employers undertook to involve employee representatives in the management of their companies. This system, known as “co-determination” (Mitbestimmung) gave unions half of the seats on a company’s governing body — the works council (Betriebsrat) in small and medium enterprises or the supervisory board (Aufsichtsrat) in those with more than 500 employees. The system really only gives equal representation in the metal processing sector: in all others, company directors have a majority of one that allows them to resolve deadlocks.

Though it is the envy of southern European employers, this system is collapsing. “On paper, everything is still fine, but in reality, the social partnership only survives in traditional industries,” says Jürgen Bothner, secretary-general of the union Ver.di for the state of Hesse. It is not relevant to the services sector, the growth of which is eroding the German model. In 2012 only 58% of German workers enjoyed collective labour agreements: 60% in the west of the country and 48% in the east, compared with 75% and 63% in 1997. And in sectors where the social partnership still applies, the delicate balance between the partners is being lost. “The links between the trade union federations and the employee representatives who sit on company boards are under strain, where they are not already broken,” says Bothner. “It is not unusual for representatives elected to defend the interests of the workers to collude with the employers.”

Probst praises the “sense of responsibility” of his social partners. They have been very accommodating: in 2000, and again between 2008 and 2010, workers’ representatives in the metal processing and electronics sector, to which the Leoni group belongs, accepted management demands for wage freezes without question. As a result, Probst says, Leoni “survived the crisis and is doing very well today, which is in everyone’s interest.” His own pay rose by 8.8% between 2008 and 2009 and he is currently the 55th best-paid manager in Germany, with a salary of €1.87m plus other rewards (3).

Offshoring over the last 20 years has also weakened the social partnership. Here too, Leoni has been a pioneer. Only 4,000 of its 60,000 employees work in Germany. “When the iron curtain fell in 1989,” says Probst, “we immediately decided to transfer part of our production operations to Hungary, Poland, Slovakia and the Czech Republic.”

It offshored more in the late 1990s to Ukraine and Romania, and in the 2000s to Tunisia, Morocco and Egypt. Have the Arab revolutions affected this competition strategy? “Not at all,” says Probst. “The maths is easy: in Germany, the cost of labour in the electronics sector is €25 an hour, including social security contributions; in Poland it’s €6 an hour and in Tunisia it’s only €2.” The 12,000 workers at Leoni’s Sousse site in Tunisia, mostly women earning €300 a month, do not enjoy the advantages of the German model. Probst sees hiring these workers as a “modern form of development aid”. “Germany is doing very well. We have never been so close to full employment,” he claims, although that is a surprising statement in a country where four million (12% of the economically active population) earn less than €7 an hour (4), and where an employment agency has published a brochure advising the unemployed to save money by drinking tap water rather than bottled water (5). Germany’s bosses are living in a bubble, increasingly isolated from the real world.

For the past six years, Markus Pohlmann, a professor of sociology at Heidelberg University, has been leading an ambitious study on the global economic elite. In Germany, his team has interviewed 82 top managers from two generations, those who were in charge during the 1980s and 90s, and those who are today, to “determine how far the principles of neoliberalism have permeated the thinking of the decision-makers, and they way they do business.”

According to Pohlmann, German bosses “devote body and soul to their company, far more than they did 20 years ago. They work an average of between 14 and 16 hours a day during the week, and 10 to 12 hours at weekends. They see society only through the filter of the company … For the older generation, there was a kind of social pact by which the search for a consensus tempered the overriding obligation to pursue profit. That concept has vanished. Today it is the principle of human capital that prevails, according to which every individual is responsible for his or her own fate. Those who do the least well — ‘lower-performing’ employees — are eliminated without scruple.”

‘Labour has a price, like pork’

You can hear this in what they say. Over the last few years, the top bosses have tended to be far more direct than their predecessors. In 2005 Walter Norbert, then chief economist for Deutsche Bank, said: “In Germany, we tend to think the head of a company has a duty to pay workers enough to keep their entire family. But that’s not possible in economic terms” (6). Also in 2005, Michael Rogowski, then president of the powerful Federation of German Industry (BDI), explained the workings of the labour market: “Labour has a price, just like pork. In the business cycle, prices are high when pork is hard to come by. When there is a lot of pork about, prices fall” (7). Rogowski has since worked as a consultant to US investment group Carlyle and presented a programme on a private German TV channel.

The greatest change, according to Pohlmann, has been in “ethical values”. The protestant restraint traditionally associated with German capitalism has been abandoned in the pursuit of material gain. “The top management of companies listed on the DAX [Frankfurt stock exchange index] earned four times and a half as much in 2010 as they did in 1995, with an average income of €2.9 million … In 2011 their income rose again substantially, to an average of €3.14 million per board member,” writes sociologist Michael Hartmann (8).

Tax fraud has increased, although this is not a recent phenomenon among major taxpayers: Albert Eickhoff, owner of a luxury fashion retailer targeted in a 2012 tax evasion probe along with several hundred other German millionaires, said that in the 1970s it was already considered “acceptable to hide money abroad” (9). What has changed, according to Pohlmann, is the way company bosses now openly admit their tolerance of the practice: in 2009, after Klaus Zumwinkel, the former CEO of Deutsche Post, was convicted of tax evasion, nearly everyone Pohlmann’s team talked to agreed that the €2-3m Zumwinkel had hidden in an account in Liechtenstein was nothing to make a fuss about.

Siegmar Kleinert, a member of the supervisory council of DZ Bank, Germany’s third largest financial institution with a capital stock of €11bn, is very angry about Germany being tainted by Berlusconi-style corruption. Since Gerhard Schröder began selling his contacts to Russian energy group Gazprom, Kleinert says: “The dykes have been breached and nobody is worried about conflicts of interest any more.” He mentions Wolfgang Clement, economy and labour minister under Schröder, who became an adviser to international staffing giant Adecco and banking firm Citigroup, and Peer Steinbrück, Social Democratic Party (SPD) leader and candidate for chancellor at the September general election, who gave 74 talks, for fees of €15,000-25,000 a time, to Deutsche Bank, Citigroup, BNP Paribas and JP Morgan, between 2009 and 2012.

Profiting from the losses of others

The ease with which secretaries of state (administrative heads of ministries) move from public office to the private sector shows the dividing line between politics and business is becoming blurred. According to Hartmann, only five of 20 secretaries of state at the finance ministry between 1949 and 1999 joined the private sector after leaving government, but seven of the eight who have held office since 2000 have gone on to a career in business or finance.

The revolving door allows movement in both directions. In 2003 the Frankfurt stock exchange recruited Axel Nawrath, a senior civil servant in Germany’s finance ministry and a member of the SPD, as public relations director. Two years later, he moved back to the civil service as secretary of state to finance minister Hans Eichel. Today he is a director of KfW, one of Germany’s biggest banks.

These links are advantageous to the financial sector. Heribert Zitzelsberger, once head of finance at Bayer, where he was responsible for tax optimisation strategies, was headhunted in 1999 by Schröder’s Red-Green government to be secretary of state at the finance ministry. “We have sent our best tax expert to Bonn. I hope he has been sufficiently infiltrated by Bayer and will make the necessary reforms,” Bayer’s chairman Manfred Schneider told a meeting of shareholders (10).

Zitzelsberger’s reform reduced corporation tax from 34% to 25% and exempted profits made by listed companies on the disposal of shares. After these “competitiveness support measures”, which cost the state €23bn, were announced, the DAX index jumped 4.5%. Bayer got a tax refund of €250m in 2001, which it passed on to its shareholders. When Zitzelsberger died in 2003, German bosses paid tribute to the man who had made them “the greatest gift of all time” (11).

Berthold von Freyberg is grateful to Schröder too. He was born into an influential aristocratic family (his brother Ernst is head of the Vatican Bank), and is a co-founder of the venture capital fund Target Partners, which invests its clients’ money in high-tech startups. He complains about the unfair treatment of his sector: “If you invest 100 million [euros], you get an annual commission of 2.2% or 2.2 million — for five years. But for the last 12 months, German investment funds have had to pay tax at 19% on this. Germany is the only country in Europe to have put such a measure in place; even France is more liberal. It damages the whole sector by discouraging investors. We absorb this tax, which means we lose 19% of our profits. We have to tighten our belts.”

Von Freyberg believes Schröder would not have done anything so insensitive: “Schröder created the conditions for wealth that we enjoy today. We owe him far more than we do Merkel. I don’t criticise her for defending the euro, but she hasn’t done even a quarter of what her predecessor achieved in terms of structural reforms of the labour market.”

Yet, according to a study by management consultancy Kienbaum, 78% of German entrepreneurs support Merkel’s Christian Democratic Union (CDU). German bosses are grateful to the left, but vote rightwing: German single-mindedness is weakening.

The same survey also indicates that 66% of the heads of companies still have full confidence in the euro, which they believe is beneficial to Germany. Hans-Olaf Henkel, former head of the BDI, who is campaigning against the euro alongside the Alternative for Germany (AfD) party, has a hard time convincing his colleagues: only 1% of German entrepreneurs would like a return to the deutschmark. “The euro has been a great success for German companies. In spite of the uncertainty, they have confidence in the single currency and in the Merkel government’s rescue policy,” says a senior executive at Kienbaum (12).

Probst confirms this: “Obviously, the depreciation of the euro against the dollar, following the poor economic performance of our European neighbours, has stimulated our exports and enhanced our competitiveness on the global market. If Germany returned to the deutschmark, it would trigger an appreciation of our currency that would be disastrous for German industry. We must recognise that the financial pressure on the EU at the moment is keeping the euro at an artificially low level, which is advantageous to us.”

Profiting from the losses of others seems to be the new German model. Lothar Reininger and his brother run Reininger AG, a Mittelstand company (medium-sized business, traditionally associated with values of integrity, hard work and perseverance). They import medical equipment and supplies: wheelchairs from China, beds from Poland, personal hygiene products from Thailand, and employ 190 people, but Lothar Reininger doesn’t like to be called an entrepreneur. He used to work for Triumph-Adler, but lost his job in 1994 after a protest strike over the restructuring of the group by a US investment fund. Since 2006 he has represented leftwing party Die Linke on the Frankfurt city council.

He is familiar with the Mittelstand contradictions: “In our sector, there are many precarious workers — ‘independents’ — who earn five to six euros an hour doing deliveries or cleaning work that our competitors contract out to them. At Reininger, our own employees do that work, and earn a minimum of 10 euros an hour. No matter what employers’ organisations say, it is still possible, even in the face of fierce competition, to pay people a decent wage and treat them fairly. But for how long? The only way to end social dumping would be to set a federal minimum wage of 9 or 10 euros. By refusing to do that, the Merkel government is threatening the survival of the few employers who want to do an honest job.” In 2012 Reininger AG made a profit of €414,000, which it redistributed to its employee shareholders — “the equivalent of two week’s pay per employee: not enough to go to the Bahamas.” The company may not be able to repeat that performance in 2013.

by Olivier Cyran

Olivier Cyran is a journalist.

(1) Official figures published by the Bundestag.

(2) Source: Eurostat. Quoted by Michael Dauderstädt inEuropas unterschätzte Ungleichheit (Europe’s Underestimated Inequality), Friedrich-Ebert Foundation, Berlin, 2010.

(3) Annual ranking of executive pay published byManager Magazin Online.

(4) Source: Institut Arbeit und Qualifikation (Institute for Work, Skills and Training), University of Duisburg-Essen. Quoted by Michael Hartmann in Soziale Ungleichheit, Kein Thema für Eliten? (Social Inequality: no Theme for the Elite?), Campus, Frankfurt, 2013.

(5) “Gehen Sie nie hungrig einkaufen” (Never go shopping when you’re hungry), Die Süddeutsche Zeitung, Munich, 19 July 2013.

(6) Interview with the daily Volksstimme, Magdeburg, 11 February 2005.

(7) Quoted by Norbert Blüm, former conservative labour minister, in Ehrliche Arbeit, ein Angriff auf den Finanzkapitalismus und seine Raffgier (Honest work: an attack on financial capitalism and its rapacity), Gütersloher Verlagshaus, Gütersloh, 2011.

(8) Michael Hartmann, Soziale Ungleichheit, op cit.

(9) Interview with Bild Zeitung, Berlin, 13 November 2012.

(10) Quoted by Hans Weiss and Ernst Schmiederer inAsoziale Marktwirtschaft (Unsocial Market Economy), Kepenheuer and Witsch, Cologne, 2005.

(11) “Das grösste Geschenk aller Zeiten” (The Greatest Gift of All Time), Die Zeit, Hamburg, 8 September 2005.

(12) “Deutsche Unternehmen vertrauen dem Euro” (German Entrepreneurs Trust the Euro), Kienbaum, Berlin, 26 July 2013.

Source: http://mondediplo.com/2013/10/06germany

Two German military contractors have been raided amid a probe into alleged bribes paid to Greek officials to land submarine business, prosecutors say.

A spokesman for prosecutors in Bremen told Deutsche Welle Friday the offices of Rheinmetall Defense Electronics and Atlas Elektronik were searched by police seeking evidence in connection with bribery and tax evasion allegations.

“In several places there were raids in which more than 100 officers were deployed,” the spokesman said, confirming a report in the Suddeutsche Zeitung newspaper that each of the two companies are suspected of paying bribes totaling $24 million to Greek government officials to acquire U-boat contracts.

Files, computers and hard drives were seized during the searches, he said, but didn’t indicate how long it would take to evaluate the information.

A Rheinmetall Defense official rejected the accusations, telling the newspaper they were “baseless.”

Meanwhile, the parent companies of Atlas Elektronik — aviation and aerospace giant EADS and the industrial group ThyssenKrupp — confirmed a search of its Bremen offices had been carried out.

EADS and ThyssenKrupp purchased Atlas — one of the world’s leading suppliers of electronics for naval forces — in 2006 from the British defense contractor BAE.

But in addition to the specialized knowledge Atlas held, EADS and ThyssenKrupp may have also acquired some baggage: Prosecutors say the alleged bribes reach back for years.

The Bremen officials said Atlas Elektronik’s new owners first discovered the suspect operations during internal investigations carried out in 2010, when payments to a British post office box owned by a Greek company, POI information, were halted.

Atlas informed authorities about the situation at the time, but investigators initially weren’t interested, thinking it was out of their jurisdiction. Their interest in the case was rekindled, however, after a 2012 tax audit of Rheinmetall yielded additional information.

Corruption in Germany’s submarine business with Greece isn’t new — the Munich public prosecutor’s office for years has probed alleged kickbacks on the sale of German U-boats to Athens, Suddeutsche Zeitung reported.

The District Court of Munich in 2011 handed out suspended prison sentences to two former managers of the Essen, Germany, company Ferrostaal after both confessed that former subsidiary MAN Ferrostaal had bribed Greek officials. After the illegal activities were uncovered, Ferrostaal was forced to pay a $200 million fine.

With the millions paid to politicians and civil servants in Athens, Ferrostaal was able to sell two submarines to the Greek navy for more than $1 billion. The U-boats were built mainly in the shipyards of ThyssenKrupp AG.

The Bremen prosecutor told the newspaper he wasn’t ruling out the possibility that the alleged bribes from Atlas and Rheinmetall may have been paid within the same context.

There are “some similarities” to the Ferrostaal case, the Bremen prosecutor said.

The 2010 purchase of the subs was controversial in Greece at the time, coming amid deep slashes to non-military domestic spending in the wake of the country’s economic crisis and German-led demands for painful austerity measures.

Stelios Fenekos, a vice admiral in the Greek navy, resigned his position in protest, claiming the Greek defense minister’s decision to purchase the subs and other decisions were “politically motivated,” The Wall Street Journal reported.

Germany has profited from the euro crisis to the tune of 41 billion euros in reduced interest payments. Strong demand for its debt has cut yields and made it cheaper for Germany to borrow. Meanwhile, the crisis has only cost Germany a mere 599 million euros thus far.

SPIEGEL/cro

The southern German town of Schwaebisch Gmuend started the scheme on Monday for nine asylum seekers to help passengers get up a steep flight of metal steps erected at the station due to construction work.

The mayor originally said he hoped the program would help the integration of the town’s 250 asylum seekers, but pictures of the refugees, mostly from African nations, in bright red T-shirts and straw hats unleashed an outcry.

Complaints about the hourly rate – about eight times below the level German politicians cite for a minimum wage – poured into the mayor’s office and sparked a Facebook campaign.

“Having refugees as bag carriers is a shameless exploitation of the people’s situation,” said far-left Linke lawmaker Ulla Jelpke, who called it “colonial” behavior.

Deutsche Bahn said it had not been aware of the conditions and would pay its own employees their normal rate to do the job.

“The railway cannot support these conditions,” the railway said in a statement.

A spokesman for Schwaebisch Gmuend told Reuters the conservative mayor was disappointed at Deutsche Bahn’s decision and blamed misplaced political correctness.

“At a first glance, pictures of black people carrying white peoples’ suitcases don’t look good and conjure up images of neo-colonialism and racism, but this is not the case – the asylum seekers want to do this,” said the spokesman.

He added that the 1.05 euros was not a wage as such, as asylum seekers are not allowed to be employed, but is the maximum amount it is possible to give them under the asylum seekers law.

The Bild newspaper quoted one asylum seeker from Gambia, Lamin G, as saying: “It was a good job, I could help people.”

(Reporting by Madeline Chambers; Editing by Sonya Hepinstall)

Source: http://www.reuters.com/article/2013/07/25/us-germany-asylumseekers-idUSBRE96O0N520130725

The Greek police has banned public protests in central Athens on Thursday for the duration of the visit of German Finance Minister Wolfgang Schaeuble, a decision the main opposition party Syriza described as “fascist and undemocratic”.

More than 4,000 police officers are on duty for the visit, which followsWednesday’s midnight vote in parliament that will allow the government sack public-sector workers for the fist time.

Police placed parliament and Syntagma Square off limits to protesters, in security measures that were more extensive than those reserved for heads of government. The city’s busiest metro stations were also closed for the day (see below), while traffic restrictions were imposed along the route from Athens airport into the centre.

Schaeuble is due to meet Prime Minister Antonis Samaras and other senior government officials on his long-anticipated trip – his first since the crisis broke out in late 2009.

A police statement issued on Wednesday said a cordon would be set up around the city centre in which “public gatherings and rallies” would be banned between 9am and 8pm.

The cordoned area includes parliament and Syntagma Square, focal points of scores of anti-austerity demonstrations.

Syriza leader Alexis Tsipras accused Samaras of trying to help his fellow conservatives in Germany ahead of the federal election in September.

“Mr Samaras is acting like a manager for the [German] Christian Democrat party, as Mr Schaeuble tours the countryside,” Tsipras said in parliament on Wednesday.

“He is coming here to support his catastrophic policies.”

“This action is fascist and undemocratic. It is inconceivable to have a demonstration and to exclude Syntagma Square. It is inconceivable for any European city,” Panos Skourletis, a Syriza spokesman told the AP.

“If we can’t go there, where are we supposed to go? Varkiza?” he added, referring to a seaside resort near Athens.

Schaeuble’s visit follows three days of massive protests against government plans for mass firings and transfers of public servants.

When Angela Merkel, Germany’s chancellor, visited Athens in October 2012, a much smaller security cordon was imposed.

The country’s two largest union federations said they had no plans to demonstrate Thursday, but Skourletis said members of his party would join protests if any take place.

Striking municipal workers are expected to hold an afternoon rally.

Public transport

Schaeuble’s visit will also affect public transport, with the following metro stations closed at these times:

* Syntagma 9.30am till late
* Evangelismos 9.30am till late
* Katehaki 9.30am-12.30pm and 6pm-midnight
* Megaro Mousikis 9.30am-12.30pm and 6pm-midnight

Trains will pass through these stations. In addition, the tram will not stop or depart from Syntama from 9.30am.

Source: http://www.enetenglish.gr/?i=news.en.politics&id=1284

The union is calling for wage hikes of up to 5.5 percent for some 3.7 million workers from May. It has so far rejected an offer from employers to increase wages by 2.3 percent from July following two months without a raise.

Unions are pushing for inflation-beating wage hikes, confident politicians courting votes for a federal election due in September will back their demands. Annual inflation was running at 1.2 percent in April, preliminary figures showed.

IG Metall and employers started a third round of negotiations in Baden-Wuerttemberg on Tuesday evening, but they were not expected to reach an agreement quickly.

Any deal reached in the state home to major carmakers such as Daimler (DAIGn.DE) and Porsche (VOWG_p.DE) as well as manufacturers such as printing machine maker Heidelberger Druck (HDDG.DE) would set the tone for wage hikes in the engineering sector nationwide.

Negotiations take place at a regional level before a deal made in one region is deemed a pilot agreement and generally adopted by the other regions.

Negotiations are due to restart in the southeastern state of Bavaria, where BMW (BMWG.DE) has its headquarters, on Wednesday.

“IG Metall would be well advised to agree on a moderate deal with us as quickly as possible as times will certainly not get better,” said Rainer Dulger, head of employers’ association Gesamtmetall.

Data shows Germany’s private sector contracting, business and investor sentiment worsening, unemployment rising and engineering orders falling, although industrial orders and car sales have risen.

The union wants to vote on an unlimited strike if no agreement is reached by the Whitsun holiday, which takes place on May 19-20.

IG Metall head Berthold Huber said: “We only have just under 10 days left to reach an outcome at the negotiating table.”

An agreement is not expected this week. Further strikes are planned for Wednesday in Baden-Wuerttemberg, Bavaria and North Rhine-Westphalia.

(Reporting by Ilona Wissenbach in Stuttgart, Andreas Rinke in Berlin and Jan C. Schwartz in Hamburg; Writing by Michelle Martin; Editing by Alison Williams)

Source: http://uk.reuters.com/article/2013/05/07/uk-germany-strike-idUKBRE9460TH20130507

               Associated Press  German flags wave in front of the Reichstag building in Berlin.

FRANKFURT—Immigration to Germany hit a 17-year high last year as Southern Europeans flocked north to escape economic recession and search for jobs, fueling the debate over the consequences of immigration for the German economy.

In all, 1.08 million people moved to Germany last year, or 13% more than in 2011, Germany’s statistics office said Tuesday, indicating that the euro zone’s debt crisis is reshaping the fabric of European society as well as the economy. The biggest increases came from people moving from the stricken economies of Spain, Greece, Portugal and Italy.

“Until recently, Germany was an emigration country, but now people are flocking to Germany in search of work, as their home countries are mired in recession,” said Wolfgang Nagl, a labor market expert at Germany’s Ifo institute.

The number of people moving to Germany from Spain jumped 45% in 2012 from a year earlier, excluding German expatriates, to 30,000. About 42,000 people moved to Germany from Italy, marking an increase of 40%, while the number of immigrants to Germany from Greece and Portugal rose 43% for each country in 2012, highlighting an acceleration of a trend that began in 2010 after the Greek crisis erupted.

While some German cities, such as Duisburg in North Rhine-Westphalia, are reportedly struggling to cope with the influx of poorer Roma families from Bulgaria and Romania who often don’t speak German and whose children need to be quickly integrated into schools and apprentice schemes, most economists believe that Germany is benefiting from the immigration boom.

They argue that the influx of foreign workers will help alleviate shortages of skilled labor in some sectors of the economy—such as engineering, information technology and health care—as unemployment in Germany remains near its lowest level since reunification in 1990.

“Germany certainly benefits from the recent rise in immigration,” Mr. Nagl said. “The Greeks, Spaniards and other people moving to Germany contribute to economic activity—they rent out flats, they go to the shops to purchase food and other things, they pay taxes and generally contribute to the social security system.”

According to the Expert Council of German Foundations on Integration and Migration, or SVR, immigrants are on average 10 years younger than Germany’s native population and are also more likely to have a university degree.

“Germany is reaping the measurable rewards of free movement thanks to skilled immigrants from other EU countries. This has received too little attention to date,” said SVR Chairwoman Christine Langenfeld.

Like in previous years, most immigrants in 2012 came from neighboring Poland, the statistics office said. Immigration from Slovenia was up 62% as the transition period toward free labor movement ended in May 2011. The number of Hungarians moving to Germany rose 31%.

Costanza Biavaschi, an economist at the Bonn-based IZA Institute for the Study of Labor, also dismissed concern that Southern Europeans move to Germany to live off its social welfare system. “It’s not true that immigrants have higher welfare takeup rates,” she said, adding that they “are usually well educated, young and ambitious and I don’t see compelling evidence that they are benefit scroungers.”