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The Marketplace Report: German Vote and Business Reforms
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The Marketplace Report: German Vote and Business Reforms

Politics

The Marketplace Report: German Vote and Business Reforms

The Marketplace Report: German Vote and Business Reforms
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German elections this weekend produced no clear winner — Chancellor Gerhard Schröder and challenger Angela Merkel are both claiming a mandate. Alex Chadwick talks to Stephen Beard of Marketplace about the political impasse and the German business community's moves to continue reforms in spite of the uncertain future of the government.

ALEX CHADWICK, host:

Back now with DAY TO DAY. I'm Alex Chadwick.

Germany's two biggest political parties will meet for talks on Thursday. After the inconclusive election results yesterday, there seems little prospect of a political coalition taking shape for the next term. But investors don't seem too worried; they're taking a less-pessimistic view of Germany's political deadlock than many pundits have. Joining us from the MARKETPLACE European desk is Stephen Beard.

Stephen, we have no idea who's going to form the next government in Berlin, but the stock market was moving higher today.

STEPHEN BEARD reporting:

Yes, it certainly was. It moved up fairly smartly. The main market index, the DAX, is, in fact, now only about 1 percent down on its high for the year, which is not quite the reaction you'd expect after a major political debacle like the election, which really has left the country's political future in so much doubt. But yeah, investors are still fairly optimistic.

CHADWICK: Yesterday, we spoke with a German journalist, the editor Josef Joffe of the magazine Die Zeit in Hamburg, and he said that German businesses are just kind of going ahead on their own and ignoring the government. Is that how you see it?

BEARD: Well, yes. I mean, certainly big business. I mean--and big business is doing pretty well in Germany. Germany is now the world's biggest exporter, ahead of the US and China, and big German firms have cut their costs, they have negotiated some very flexible deals with the labor unions. They've shifted quite a lot of production into eastern Europe, where it can operate far more cheaply than in Germany. So, yeah, German industry, big industry, is in good shape.

CHADWICK: They don't need a reformist government; they're reforming themselves.

BEARD: Well, that is the feeling, and especially in the stock market, which explains the market's relatively benign reaction to the election result. But stock markets, of course, don't tell the whole story. All they tell you is that companies are making decent profits. The fact is that Germany still has almost five million of its citizens unemployed. It has low growth. It has an incredibly generous welfare state which it can't afford for much longer. Economist Neil MacKinnon says the country is definitely in a mess.

Mr. NEIL MacKINNON (Economist): Economic growth in Germany is effectively stagnant. Unemployment is a massive problem. So there's a lot to be done to get the German economy back on track.

BEARD: And, he says, the reforms needed to reduce, for example, the tax burden on small businesses and to shrink the welfare state can only be delivered by a strong government. But a strong government seems unlikely after last week's election.

And on the subject of elections, coming up later today on "Marketplace," they're still counting the votes in Afghanistan, but that country's leaders are working hard to make it a more attractive place for foreign investors.

CHADWICK: Thank you, Stephen Beard of "Marketplace" from American Public Media.

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