Europe
4:47 pm
Mon November 12, 2012

A German City With Debt Problems Of Its Own

Originally published on Mon November 12, 2012 7:31 pm

Germany, the economic engine of Europe, has been a key player in bailing out the Continent's most troubled economies.

Yet there are places in the former West Germany — like Oberhausen — that are struggling with their own debt problems, even as they pay hefty sums to revitalize former East German cities with transfers known as "Solidarity Pact" payments.

Borrowing To Stay Afloat — And Pay Out

On a recent gray afternoon, there are few shoppers strolling downtown Oberhausen. Those who are walking the streets pass discount outlets where trendy retailers and mom-and-pop stores once stood.

Jobs are scarce, and the number of people who live in this city, once known for its mining and steel operations, is dwindling.

But what Oberhausen lacks in employment, it makes up for in debt: the equivalent of $11,000 per capita — higher than anywhere else in Germany. Each day, the city borrows the equivalent of approximately $500,000 to stay afloat.

Despite its dire straits, Oberhausen must pay a hefty sum annually in Solidarity Pact payments. Taxpayers in western Germany have paid more than 1 trillion euros since reunification to beef up eastern Germany's infrastructure and industry.

Billions more euros will flow eastward through 2019, even though western cities like Oberhausen are badly in need of financial help themselves. Oberhausen's current tab, with interest, equals more than $350 million.

"At some point, it's got to be enough," says Oberhausen resident Christine Schmidt. A home health care worker, Schmidt, 50, wonders why her city should carry the burden for others when it can't take care of itself — a common sentiment in western Germany.

A Homegrown Austerity Program

Oberhausen's treasurer, Apostolos Tsalastras, is the son of Greek immigrants — an irony often reported in the German media, given the country's role in the planned bailout of Greece.

But the treasurer says Oberhausen is in much better shape than Greece, where government incomes and pensions have been cut by up to 25 percent.

Hannes Fritsche, an official with the city's opposition party, also dismisses any parallels. The standard of living is much higher in Oberhausen than in Greece, he says. Plus, he notes, the city has a functioning administration and a sound financial system.

Still, Fritsche and Tsalastras say it will be difficult to get Oberhausen into the black by 2016, as auditors are demanding.

Heavy industry here, Tsalastras explains, has been replaced with service sector jobs that provide lower incomes, less tax revenue — and a higher demand for welfare services.

"Asking us to pay 6.6 million more euros for the Solidarity Pact this year doesn't help," Tsalastras says. "Every euro that I give the east, I have to borrow."

Loan Offers From The East

Ironically, Tsalastras adds, Oberhausen is now receiving loan offers from some cities in eastern Germany.

But the city is pursuing its own austerity measures instead. Officials have closed five of the city's eight swimming pools, shut down its concert hall and plan to cut 10 percent of the municipal workforce.

Ten of Oberhausen's schools are also on the chopping block. Critics say the closures will increase the number of students per classroom by up to 50 percent.

Tackenberg elementary school just celebrated its centennial — and is now slated to be shut down by mid-2015. Principal Brigita Trzeczak says her teachers and parents will miss the school's small class sizes, which typically run around 18 students per classroom.

"The city is moving backwards," Trzeczak says. "And that's unfortunate for those of us who live here."

Trzeczak also objects to the continuing bailouts she and other German taxpayers are paying for. She dismisses them as stopgap measures that don't offer any lasting remedy.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

A lot of the money that will be used to bailout Greece and other struggling countries will have to come from the Germany. Germans aren't happy about it. In return for help, Chancellor Angela Merkel and her government have forced round after round of severe spending cuts.

As NPR's Soraya Sarhaddi Nelson reports, Germany's intransigence is rooted in its own economic rescue, one that's gone on for more than two decades. She recently traveled to Germany's most indebted city and sent us this story.

SORAYA SARHADDI NELSON, BYLINE: There are few shoppers here in downtown Oberhausen on this recent afternoon. They stroll past discount outlets that replaced more trendy retailers and mom-and-pop stores here. The number of people who live in this city - once known for its mining and steel operations - is dwindling as jobs are scarce.

What Oberhausen lacks in employment it makes up for in debt, the equivalent of $11,000 per capita, which is higher than anywhere else in Germany. Each day, the city borrows the equivalent of a half million dollars to stay afloat. Despite its dire straits, Oberhausen must pay a hefty sum annually to revitalize cities in what was once East Germany. So far, the city's tab with interest equals more than $350 million. That has Oberhausen resident Christine Schmidt seeing red.

CHRISTINE SCHMIDT: (Foreign language spoken)

NELSON: At some point it's got to be enough, Schmidt says. The 50-year-old health care worker asks why Oberhausen should carry the burden for others when it can't take care of itself.

Hers is a common sentiment in what was once West Germany. Taxpayers here have paid more than a trillion euros since reunification to beef up Eastern Germany's infrastructure and industry. Billions more euros will flow eastward in the, quote, "Solidarity Pact" payments through 2019, even though western cities like Oberhausen badly need help.

The city's treasurer is Apostolos Tsalastras. He is the son of Greek immigrants, an irony often reported by German media given Germany's role in the planned bailout of Greece.

APOSTOLOS TSALASTRAS: (Foreign language spoken)

NELSON: But the treasurer says Oberhausen is in much better shape than Greece, where government incomes and pensions have been cut by up to 25 percent. Hannes Fritsche, an official with Oberhausen's opposition party, also dismisses any parallels.

HANNES FRITSCHE: (Foreign language spoken)

NELSON: He says the standard of living here is much higher. Plus, the city has a functioning administration and a sound financial system. Still, he and the treasurer say it will be difficult to get Oberhausen into the black by 2016, as auditors are demanding.

TSALASTRAS: (Foreign language spoken)

NELSON: Tsalastras explains that heavy industry here has been replaced with service sector jobs, providing lower incomes and less tax revenue, and a greater demand for welfare services.

TSALASTRAS: (Through translator) Asking us to pay 6.6 million more euros for the Solidarity Pact this year doesn't help. Every euro that I give the east, I have to borrow.

NELSON: He adds that, ironically, Oberhausen is receiving loan offers from some cities in Eastern Germany. The city is instead pursuing its own austerity measures. Officials have closed five of the city's eight swimming pools, shut down its concert hall and plan to cut 10 percent of the municipal workforce.

Ten of Oberhausen's schools are also on the chopping block, which critics say will increase the number of students per classroom by up to 50 percent. One school that is closing is Tackenberg Elementary School, which just celebrated its centennial and will shut down by mid-2015.

(SOUNDBITE OF CLASSROOM)

NELSON: Eighteen students are in this fourth grade classroom, where the teacher tells the children to pull out their homework. The small class size is something Principal Brigita Trzeczak says her teachers and parents will miss.

BRIGITA TRZECZAK: (Foreign language spoken)

NELSON: She adds: The city is moving backwards and that's unfortunate for those of us who live here.

TRZECZAK: (Foreign language spoken)

NELSON: She also objects to the continuing bailouts she and other German taxpayers are paying for. She dismisses them as stop-gap measures that don't offer any lasting remedy.

Soraya Sarhaddi Nelson, NPR News. Transcript provided by NPR, Copyright NPR.

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