BERLIN DIARY:A new books suggests the German capital's history can be written on the back of an IOU
GERMAN DOUBTS about bailouts don’t stem from Athens, but Berlin. New arrivals to this capital of 3.5 million people soon learn about the city’s staggering debt of €68 billion.
But when did Berlin buck the German culture of frugality to become a debt champion and basket-case economy?
Some point to the costs of the city’s cold war division, others go back to 1945 when big companies like Siemens fled the city with their machinery before the Red Army arrived.
A new book, Debts in Berlin, suggests that the city’s entire history can be written on the back of an IOU.
Published by Berlin’s City Museum, the book is a hilarious romp through centuries of debt-related scams, poems and songs, such as: “We’ll drink our granny’s house away/ with the first and second mortgage.”
The book contains a list of Berlin bars where you can still drink on credit; to sober up, the editors point out that Berlin’s annual debt interest of €2.5 billion would, if stacked in a pile of €100 notes, make a tower 97 times the height of the Brandenburg Gate.
Dozens of historical episodes reveal just how deeply ingrained debt has become in the Berlin mentality.
The first recorded Berliner in debt was Thilo von Hamelin in 1289, who bought 84 pieces of lumber on credit from a Hamburg businessman to rebuild houses destroyed in a Berlin fire. Within a few years, though, he was buying and selling debt like a modern-day financier.
The business of debt had well established itself by 1517 when the indulgence salesman Johann Tetzel spent a profitable few months in the city.
He was getting ready to move on when a Berlin man asked if it was possible to buy an indulgence not just to purge past sins but for future sins, such as highway robbery? For a small premium, Tetzel was happy to make the sale.
A few days later, leaving Berlin with his trunk of indulgence takings, Tetzel was confronted by masked highwaymen.
He told the bandits he was a man of God and implored them not to risk their mortal souls by robbing him, whereupon one of the men revealed his face and, waving his indulgence, relieved Tetzel of his trunk.
Pre-war wit Kurt Tucholsky once noted that business in Berlin was possible – not because of its businessmen but in spite of them.
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.
