A Healthy Embarrassment

Even though the election is only one month away, the campaigns seem to have difficulties getting into full swing. Instead of discussing differing plans for how the next government wants to lead Germany to higher employment and growth rates, two issues dominate the domestic policy debate in these days: One circles around the wasteful spending of a few thousand Euros through the potential misuse of the government chauffeur service and air fleet and a birthday party in the chancellery for the head of Deutsche Bank. The other focuses on saving Opel, the struggling German subsidiary of GM, for a couple billion Euros.

It seemed that the Opel story was already over (or at least postponed until after the elections) when the grand coalition backed the Canadian-Austrian maker of car parts MAGNA and the Russian SBERBANK offer with a 4.5 billion Euro state guarantee. The reason for this early commitment by the grand coalition was obviously to have this topic off the election agenda. By doing so they killed the competition for the best solution for Opel, the German car manufacturing industry, and the German taxpayers. Merkel and Steinmeier turned down the offer from RHJI - a financial investor - who asked for only 3 to 3.8 billion Euros in state guarantees and completely ignored the possibility of a structured bankruptcy that was briefly supported by the Minister of Economics Karl-Theodor zu Guttenberg. If nothing else, these alternatives would have saved the taxpayer a lot of money. But the wannabe entrepreneurs in the federal government were persuaded that the MAGNA/SBERBANK solution would save more jobs at Opel and they bet the people's money on it. By doing so, they join the casino capitalists that they publically despise.

It is no surprise that both Merkel (CDU) and Steinmeier (SPD) are furious about GM's refusal to quickly execute what they believe is right. And it fits in their past actions that they seem to believe it would help to call President Obama or Secretary Clinton in this matter to settle things out. Surprisingly, the German voter does not seem to care much about Opel's future. Therefore the FDP and the Green Party are the lucky winners in this since they (as well as the Minister of Economics Guttenberg) warned early on about the state's intervention and the early commitment to one bidder.

The fact that the grand coalition feels humiliated by GM's action might turn out to save Germans a lot of money if only for the reason that it postpones the decision about Opel's fate until after the election. Maybe with a cooler head and without the fear of losing a few thousand votes from Opel employees the new government will be able to re-evaluate this deal. This would make the developments of the last few days a very healthy slap on the wrists for the grand coalition.

--Tim Stuchtey