German Firms' Success Isn't Trickling Down

Job Fears Hurt Consumer Spending

HAMBURG -- The view across the bustling port of this northern German city suggests that Europe's largest economy must be growing more prosperous. Cranes load and unload shipping containers, part of a flow of commerce that has made Germany the world's leading exporter, amassing a $200 billion trade surplus. Large German companies are counting strong profits.

But national unemployment sits above 10 percent, and the economy will have grown by only 1 percent this year, according to German research institutes. Consumer spending still accounts for nearly two-thirds of the economy, but Germans are feeling too anxious about the future to spend. Private consumption is expected to slide this year by 0.2 percent, according to the Organization for Economic Cooperation and Development.

"We're really afraid," said Simone Geue, whose family has opted to increase its pension savings instead of going out to eat and renovating a bathroom, even though her husband earns the U.S. equivalent of more than $110,000 per year as an executive at one of Germany's fastest-growing companies. They are hanging on to their 10-year-old Volvo. "You see so many people who have lost their jobs, who are not able to afford so many things, and you think about that. It makes you insecure. You never know what is coming."

The increasing German reluctance to spend affects the rest of the global economy, as well. Historically, Germany buys as much as one-fifth of French and Italian exports, so tight-fisted shoppers in Germany hurt profits and job growth in those countries, in turn diminishing the European appetite for the wares of the world, including those from the United States.

"Germany has become a problem for all of Europe," said Alfred Steinherr, head of macroeconomic analysis at the German Institute for Economic Research in Berlin.

The disconnect between the strong performance of German companies and the weakness of the domestic economy is particularly pronounced in Hamburg, a lakefront city of about 2 million people that has long been a monument to opulence.

Income per capita here is 10 percent higher than the national average. Brick mansions dominate the banks of the Elbe River in the city that has one of the largest collections of billionaires in Europe. Downtown boulevards are lined with luxury shops such as Prada and Hugo Boss, and cafes are full of fur-hatted people nibbling chocolate pastries. An old block of warehouses is being redeveloped into airy, glass-fronted apartments. A new philharmonic concert hall is under construction, funded in part by private largesse. Mercedes-Benz sedans make up the taxi fleet.

The city has carefully positioned itself to exploit a changing world economy. With exports the engine of the German economy, Hamburg's port is handling more container-shipping traffic bound for China than any other European city. Trade volume is growing by better than 10 percent annually at the port, with more than 6,000 jobs added over the past four years. Airbus, the pan-European aircraft manufacturer, is using its Hamburg factory to build key pieces of its new long-haul, ultra-wide-body jet, the A380. The city hopes next year to secure direct air links with Shanghai, its sister city.

"Hamburg is the winner from globalization," boasted the city's mayor, Ole von Beust, as he sat in his office at City Hall, a fairy-tale building of soaring spires and elaborate statuary.

But if Hamburg's status as a portal to global trade is a source of pride for the mayor, the basic force of capital flowing eastward in search of lower-cost labor is deepening unease among local workers.

"Here, all the developments are seen as negative things to be frightened of, not new opportunities," said Thomas Straubhaar, director of the Hamburg Institute of International Economics. "People are very hesitant, afraid about whether they can manage the future."

In many respects, their anxiety is rational. Hamburg's most successful companies illustrate how well many German firms are doing but also how much of this success is happening overseas, producing more profits for shareholders than jobs at home.