Ireland shakes off 'Wild West' reputation in Germany

Europe's largest economy is giving the State credit for facing up to the crisis, writes DEREK SCALLYin Berlin

THERE HAVE been times in the last three years when you’d have thought the only Irish event in Germany that would attract a crowd was the kind involving tar and feathers.

Decades of German goodwill towards Ireland began to go up in smoke at the same rate as the IFSC burned through German capital. By last year, with reports in the German media of Ireland’s collapsing banks and a crumbling economy, the State was on its way to becoming a German synonym for basket case.

On St Stephen’s Green, alarm bells began to ring at the Department of Foreign Affairs.

“We realised there was a problem, and created a special section devoted to monitoring and responding to threats to Ireland’s reputation,” said a senior department source.

The department wasn’t alone in perceiving the danger of being a laughing stock in the eyes of Europe’s largest economy. “Starting last summer, it became much more difficult to attract German companies to Ireland. They all said ‘That’s the Wild West’,” said Ralf Lissek, head of the German-Irish Chamber of Business and Commerce (AHK). “The situation was serious and created a dynamic where everyone, from the IDA to the Department of Foreign Affairs, proved very willing to work together.”

The AHK organised a roadshow that has pulled in large crowds of businesspeople in recent months in Düsseldorf, Hamburg and Munich, with further dates to follow. The aim: to explain what went wrong in Ireland, and what is being done to put things right. Parallel to the public roadshow is an ongoing Government campaign to retool Ireland’s reputation in Germany. For years it was clear that brand Ireland was in need of an overhaul here. A crusty, decades-old coat of green gloss paint – based on Germans’ romantic notion of their favourite wild “Green Isle” on the edge of Europe – sat uncomfortably with the go-faster stripes of the Celtic Tiger economy. But as long as things weren’t broken, no one saw a need for a fix. An unholy trinity of events changed that, beginning in September 2007.

After years of record returns, Saxony’s Sachsen LB state bank realised its Dublin-based subsidiaries had been gambling off the balance sheet and needed €17 billion overnight to save the entire group from collapse. A second pile of debts worth €600 million were subsequently uncovered.

A whip-around from Germany’s banks saved the day, and a fellow state bank eventually bought the Saxon operation. But the near-disaster meant years of gossip about the IFSC in Germany turned into open speculation about the veracity of Dublin’s reputation as a serious financial marketplace.

Then in June 2008 the Irish rejected the Lisbon Treaty, a document the average German had never read or heard of. No matter: the No was perceived here as a slap in the face from Irish ingrates to generous Germans, a view which, when fixed, was impossible to shift.

Four months after Lisbon, Ireland was back in the German headlines after the IFSC-based Depfa bank, a subsidiary of Munich’s Hypo Real Estate (HRE) property lender, ran out of funding and required a package of emergency loans and guarantees that would eventually top €100 billion. Amid a huge political scandal in Germany, HRE was finally nationalised.

By the time Ireland’s property market collapsed, amid the worldwide financial crisis, a decades-old groundswell of sympathy for Ireland in Germany had drained away, and only a bitter whiff of Schadenfreude remained. Ireland was ordered with Portugal, Greece, Spain and Italy into the quarantine labelled PIIGS.

These days in the German press, though, the quarantine’s title has just one “I”, and they’re not referring to Ireland.

At Munich’s Hilton Hotel, more than 120 Bavarian businesspeople have come to the AHK roadshow. Pragmatic and practical, they want to know whether Ireland is once again open for business. The answer from the panel, which included Irish Ambassador Dan Mulhall, is a resounding “yes”.

The audience asks questions about Nama, the property market and the Government’s economic forecasts, and seems satisfied that the economy is on its way back to normality.

“Ireland never was Greece, although during the heated part of the crisis a lot of countries were thrown into one pot,” said Walter Hirmer of Commerzbank’s corporate banking division, after the event. “The banks are seeing countries in a more differentiated way now.”

Germany’s own recent economic difficulties have softened its severe attitude to some of its sinning neighbours, suggests Ulla Rüdenholz, vice-president of the Bavarian branch of the European Movement.

“Whose reputation hasn’t suffered in the last year?” she asked. “Amid all the finger-pointing at other countries in the EU about sticking to the rules, people have been reminded that France and Germany were the first to break the stability pact. Slowly we’re realising we all broke financial rules.”

Views such as Rüdenholz's are not restricted to Irish events, where a more Irish-friendly bias might be expected. In the Düsseldorf editorial offices of the Handelsblattbusiness daily, chief economist Dirk Heilmann says the mood towards Ireland has improved because Dublin got one key thing very right early on, when markets were in turmoil over every rumour and scare story.

“Ireland acted very quickly on cuts before the big wave and was almost half crossed off the danger list by experts by the time Greece came along,” said Heilmann, who was based in London for four years until 2009, and also covered Ireland. Unlike Greece, says Heilmann, Ireland projected an air that it was in touch with the new reality and didn’t need a prod from European neighbours.

“Having done that, it seems from Germany that Ireland has benefited from being in the slipstream of other countries,” he said. “That said, the people who know their stuff are still concerned about deflation and a downward spiral in Ireland. But people do trust the Irish budget more than other countries’, and the relative few public protests despite the tough course taken gives the impression that Ireland isn’t gripped by mistrust right now.”

Perhaps most crucial to the opinion-shaping effort by the Department of Foreign Affairs has been the time spent by leading Irish Ministers in Germany in recent months. Visits by Micheál Martin and Mary Coughlan, which included keynote speeches, company visits and talks with leading newspaper editors, generated a wave of positive feedback and widespread, remarkably fair media coverage.

In just six months, Handelsblattheadlines shifted from "EU trembles over Ireland" (October) to "Ireland can make it alone", a quote from a March interview with Mary Coughlan. In April, the newspaper commented: "Just a year ago, Ireland, not Greece, was considered the sick man of Europe. A drastic austerity programme turned things around. Now Ireland is considered an example for others."

The roadshow participants say they are happy with the fruits of their efforts. The AHK says initial inquiries have led to visits to Ireland by German managers. Ambassador Dan Mulhall is complimentary of the format’s ability to reach out to managers and opinion shapers.

“In Germany, Ireland is being given considerable credit for facing up to our economic problems in a timely and determined manner,” he said. “There is also a recognition here of the longer-term advantages of the Irish economy because of our strengths as an exporter.”

But the need for sustained work in Germany cannot be overestimated. Despite the size of Germany’s media companies, only one small daily newspaper has a full-time Ireland-based correspondent, and no broadcaster has one.

Most reports about Ireland in the German media are by journalists based in London whose reports are highly influenced by the British media. Some only file reports at the dramatic times, if at all. To reach German managers, journalists and, in the end, the German public, there is no alternative to the investment of air miles, shoe leather and face time.

“I think the Government needs to do more to focus on Germany rather than just tick a box and move on to France and Italy,” says Lissek of the German-Irish Chamber of Commerce. “And when they do come, Ministers need to talk to people in Stuttgart and Munich, where business is really happening, and not just with ministers in Berlin.”