Germany reunified only a few years before you started working in Europe. What are the most striking changes you’ve seen in the country’s economy?
When I arrived in Frankfurt in 1994, Germany still had incredibly strict retail blue laws that effectively closed all stores on Saturdays at 1:30 p.m. Consumption was effectively penalized and weekend shopping was incredibly stressful, as you might imagine. Credit cards were viewed with suspicion. Ikea for example only took cash back then. I remember watching people count out thousands of deutsche marks for a sofa or living room set. But over the last two decades, Germany has morphed from a producer economy into a consumer economy, more like the U.S. Store closing laws have been largely abolished, and not surprisingly, consumers have responded like Americans. Consumption is now driving the German economy, much more so than in the past. Beyond consumer behavior, Germany’s economic strength is still its so-called “Mittelstand’’ layer of SMEs, typically family-owned producers that still make hard goods. The country’s financial sector – largely Deutsche Bank and the No. 2, Commerzbank –is in crisis, which is a threat. But on a macro level, the German economy is doing well. Unemployment in September 2016 was at a post-reunification low, even lower than in the United States. Even after taking in an estimated 1.1 million Syrian and Iraqi refugees over the last year, GDP may dip only slightly moving forward, but remain steady. The European economies typically don’t grow as fast as the U.S. economy, but they aren’t as prone to big setbacks either. The euro’s recent declines against the dollar will only help Germany, the world’s No. 2 exporter after the U.S.
Since the U.K voted to leave the European Union, some other countries have threatened similar referenda. What’s the prevailing view of Brexit in Germany, and has Brexit changed how Germany sees the EU?
The Brexit vote surprised Britons and, truth be told, Germans and others on the Continent. Most thought the British would do the prudent right thing they always do and step back from the brink. But this time they didn’t. Support for the E.U. remains strong in Germany and across the continent, according to a recent survey by YouGov, a British pollster. There has also been no slackening in the British wish to leave the E.U., so the negotiations moving forward with the E.U. are likely to be difficult. There is little support on the Continent to give Britain an access deal to the E.U. that is as good as they have now – otherwise, the 27 other E.U. countries would demand to leave and get the same deal. So at this point, I think we are in for a period of brinkmanship.
Germany is an economic powerhouse that is generally seen as having weathered recent financial storms better than most. What do you see as the economy’s biggest challenge?
The biggest economic challenges to growth as I see them are the usual suspects: the public sector’s outsized role in the economy, and in the private sector. The government is still prone to intervening, regardless of political party, to save jobs at companies to prevent them from going under, or falling into foreign hands. The taxpayer ultimately foots the bill. Demographic risk will be an issue for Germany. Too few babies are being born and there are parts of former east Germany neary Poland and the Czech Republic that are being depopulated. Political risk is also reemerging as an economic factor. The rise of the right-wing Alternative for Germany (AfD) Party, which has fed on resentment over Germany’s open-door refugee policies, threatens Angela Merkel’s bid for a fourth term in 2017. The same global frustration fueling Donald Trump’s presidential bid and the Brexit movement in Britain is also at work in Germany – there is a growing segment of the mainstream that feels cut off from the halls of power, and increasingly willing to take a gamble on untried political movements and leaders. The fragile state of the country’s financial sector – I speak here of Deutsche Bank and Commerzbank in particular – are also risks for the economy. Without a strong “national champion,’’ German exporters will find less favorable terms to keep their trade levels up.
You’ve worked for newspapers throughout the rise of the internet. As publications take various approaches to monetizing their online content, do you see a clear way forward emerging yet? How do you see the future of the industry?
It’s no secret the newspaper industry is fighting for relevance and survival. I think in part the industry itself is to blame. Newspapers, especially publicly traded chains like ones I worked for in the States, were run primarily by journalists, not business people. They were operated much like an electric utility – milking relative monopolies in single-paper or joint-operating-agreement markets but unwilling to innovate and stay ahead of market forces. In the 1980s, my employer at the time – a newspaper chain that no longer exists – told us they were working on an “electronic screen’’ in which news would appear every day, like magic, eliminating the need for paper. Of course, it was the software geniuses in Silicon Valley who had the knowledge, not the content people. The industry was hit by a digital tsunami, and responded at first by giving away all of its news for free in a desperate bid to chase readers. That was a big mistake and now the industry is paying the price.
I think newspapers may need to morph into a sort of combined newspaper/debate forum/access club/interest group organization to stay alive. Revenue streams have to be diversified away from the classic news business, without compromising editorial independence. The millennials are fairly resistant to paying for news they can get in rudimentary form for free on the web. Business publications and others that offer unique information with defined market value will probably survive, if they can connect with their target audience and meet their ever-changing needs. General interest newspapers, especially at the regional level, face the greatest threat, as general news, even political news, becomes a commodity. But even national papers are struggling to develop profitable business models built around the web, while managing the inevitable decline of their print businesses and their disappearing readers.
That’s why it’s great to be working at Handelsblatt Global, where we believe we are finding a way forward. We’re a little more than two years old and belong to Germany’s leading financial publisher, which allows us to leverage the best business journalism from Europe’s largest economy. We are the newest English-language voice from the European continent, and the first of consequence not owned by a U.S. or U.K. media house. Since September 2014, our news, analysis and videos now reach nearly a half million people each month, and about half of those are in the United States. Of course, that’s nothing compared to our bigger rivals, but it shows there is demand for quality journalism and a new, fresh perspective on global events. I think many people are overwhelmed by the flood of digital information, but equally frustrated because many are low-quality and unreliable. The Web made possible limitless channels of information; unfortunately, there’s not enough quality content to fill them all. Truth be told, I think many people are getting a little bored with the web as a source of good information. We’re trying to add to the mix in our own way, through our online news website and our quarterly print magazine, Handelsblatt Global, as well as two free email newsletters.