After centuries at debt's door, Berlin's €68bn tab is no surprise
A good case in point involves a Berliner by the name of Henry Strousberg who, in 1862, planned to get rich quick building railways across the expanding Prussian empire.
Rather than seek investors and start building, he created an elaborate pyramid scheme that eventually collapsed with debts of 74 million marks and ended in bankruptcy.
History repeated itself 150 years later when the city transport company BVG sold off hundreds of trams and trains to an American cross-border leasing (CBL) company.
It seemed a sweetheart deal for the perpetually broke BVG: €69 million upfront in exchange for leasing back the trains and trams from the Americans.
After the collapse of some banks managing the deal, the contract small print revealed that the transport company was liable for the entire risk of the transaction.
Its court challenge to overturn the contract is ongoing but the company has already set aside €150 million to cover the likely final cost.
The editors of Debts in Berlin suggest the root of Berlin’s debt problem is leaders who, through the centuries, have nursed a sense of entitlement outweighing their own financial means.
Three centuries ago, the Prussian duke Friedrich fell for the charms of the smooth-talking prime minister, Johann Kasimir Kolbe von Wartenberg, who promised to make Friedrich a big wheel in European monarchy league table.
To do so, Wartenberg borrowed heavily to have Friedrich upgraded from Duke to “King in Prussia” in 1701 in a coronation that cost twice the Prussian annual tax takings.
Taxes were imposed on everything from coffee to wigs, heels to hats and, when that failed to cover the gap, heavy borrowing followed.
Eventually, the king’s son, Friedrich Wilhelm, forced his father to fire his prime minister and end his profligate ways.
But he still left behind a bankrupt state with debts of 20 million talers.
The profligacy has continued to the present day, critics say, aided by Germany’s federal fiscal transfer system. Berlin is the biggest recipient – €3 billion annually – from a postwar subsidy system intended to even out internal structural weaknesses.
As in Greece, critics say the subsidies helped breed and underwrite both an incestuous ruling class and their incompetent mismanagement of public projects.
In keeping with this proud tradition, they say, is the unfolding disaster that is Berlin’s new airport.
Scheduled to open last month, Berliners are no longer certain when it will open, but they know it will cost at least an extra billion. €70 billion debt – straight ahead.
