Sunday 28th July 2013
Germany & Angela needs a dose of their own medicine
Beneath the impressive headline numbers there is a darker side to Germany’s success.
While the rest of Europe heads to the coast, German politicians are heading to their constituencies to prepare for September’s elections. The campaign is shaping up to be a lackluster affair: The economy has performed well, living standards are rising and Chancellor Angela Merkel has a commanding lead in the polls.
At the same time, Ms. Merkel’s habit of appropriating popular issues such as the introduction of a minimum wage has denied other parties political space. Although there is a mathematical possibility that the Social Democrats and Greens win enough seats to cobble together a coalition, senior opposition politicians privately expect Ms. Merkel will re-emerge as chancellor, possibly of an unchanged coalition.
Neighbors can only look on with envy, marvelling at Germany’s transformation in less than a decade from the “Sick Man of Europe” into the Continent’s economic powerhouse.
Foreign governments have beaten a path to Berlin, eager to learn the secrets of Germany’s success. The number of visits by U.K. ministers and officials has quadrupled since 2010 to 140 in 2014, according to a Foreign Office source.
Even Boris Johnson, the mayor of London who has made his career pandering to the xenophobic wing of his Conservative party, recently expressed himself amazed to find that Germans weren’t “clicking their heels or restraining their arms from performing a Strangelovian fascist salute.” Instead, he declared Berlin to be “hip” and encouraged Britons to look at Germany as a role model.
But nothing is ever quite what it seems. Beneath the impressive headline numbers there is a darker side to Germany’s success. Germany may have enjoyed robust growth in 2010 and 2011 on the back of booming Chinese and emerging-market demand, but since 1999 and the introduction of the euro, Germany has in fact experienced among the slowest growth of any euro-zone country—and that’s despite the recession in the periphery.
More worrying, Germany’s longer-term growth potential may not be as strong as often supposed without some structural reforms of its own. The economy risks being held back by low investment rates, weak labor productivity and a shrinking population. With already close to full employment, delivering non-inflationary growth may be challenging.
Some of these challenges are the flip side of Germany’s recent success. The Agenda 2010 reforms introduced a decade ago by former Chancellor Gerhard Schröder, frequently held up by Berlin as a model of successful structural reform, were hardly the exercise in radical new-Thatcherism that is sometimes supposed.
But they did overhaul the social-security system in a way that created incentives for the unemployed to return to work. The result was to increase the supply of labor, keeping wages down, reducing unit labor costs relative to the euro zone and boosting German competitiveness.
But the reforms also encouraged German firms to hire more workers rather than invest, with consequences that are only now starting to become apparent. Germany now has the largest low-cost labor sector in Europe.
“In 2008, almost seven million Germans, or almost 20% of all employees, worked for low wages, defined as wages below €9 [$11.95] per hour. The lower quintiles saw their real wages fall between 2000 and 2006,” says Sebastian Dullien, senior policy fellow at the European Council on Foreign Relations.
But the corollary is that German labor productivity growth over the past decade has been among the weakest in the euro zone while public- and private-sector investment—the key to future growth—have been among the lowest among industrialized countries, according to Marcel Fratzscher, president of the think tank DIW Berlin.
“In 1999, [the investment rate] was approximately 20% and today the rate is only just under 17%,” Mr. Fratzscher argued in a recent report. “Since 1999, Germany has generated an average annual investment shortfall of three percentage points, which corresponds to over 40% of the country’s GDP.”
Indeed, the situation is getting worse: Gross-fixed-capital formation has declined for five consecutive quarters, resulting in a level of investment spending that is almost 5% lower than at the end of 2011, notes Huw Pill, chief European economist at Goldman Sachs.
This is particularly troubling for a country whose economy depends to such large degree on research-intensive industries. Instead of using the country’s vast private-sector savings surplus to fund domestic investment, the German financial system has tended to invest overseas—typically with disastrous results.
“From 2006 to 2012 alone, losses [on foreign assets] were as high as approximately €600 billion, which is 22% of the country’s GDP,” says Mr. Fratzscher. “If these had been domestic investments, German annual economic growth per capita could have been up to one percentage point higher.”
Of course, some of the recent investment weakness may be cyclical, notes Mr. Pill. Economic conditions are currently favorable for investment spending, given that borrowing costs are very low and corporate balance sheets are healthy. But some spending may be being held back amid concerns over the euro crisis or until the domestic political landscape becomes clearer: the Green party and SPD are both threatening tax rises.
Even so, Berlin can’t afford to be complacent. Germany needs to update its economic money to encourage much higher investment growth to boost productivity and create the conditions for faster growth. And with government debt currently at 90% of GDP, this investment must necessarily come primarily from the private rather than public sector. But it will be up to the government to put in place the tax and regulatory policies to encourage the private sector to take long-term bets on the country’s future.
For example, Germany needs to spend up to €38 billion a year on energy infrastructure if it is to complete its switch away from nuclear power and meet ambitious renewable energy targets, estimates Mr. Fratzscher. But that will require regulatory clarity after years of shifting policy priorities.
Germany also needs to spend about €11 billion ($14.6 billion) a year to upgrade its neglected transport network. Housing and education have also suffered from years of underinvestment. At the same time, further deregulation of the services sector, long resisted by Berlin, would help boost productivity.
Of course, this requires Germany to take its own dose of the economic medicine it has been prescribing for others.
If it does, the boost to growth would be good for Germany and good for Europe. And if it doesn’t, how long before Germany falls sick again?
Spent Irish bogs and disused railways have huge eco-tourism potential
Ireland’s largest landowners are Bord na Mona and Irish Rail. Between them they own hundreds of thousands of acres – much of which has been lying idle and disused for years.
However, an ambitious project to restore Ireland’s boglands will transform large tracts of Ireland into a wetland Savannah-like wonderland and attract hundreds of thousands of eco-tourists.
Elsewhere, Irish Rail owns almost 1,000 miles of disused tracks and railway embankments – which at one stage linked every town in the country – and is keen to transform the old lines into grass-covered cycle and rambler ways.
Together, both eco-tourism initiatives will bring millions of euro to parts of the country where a tourist seldom sets foot.
Bord na Mona has concluded a successful trial run in Mayo, where it converted a dead, barren landscape into a Garden of Eden.
Bord na Mona and the Environmental Protection Agency now plan to breathe new life into 150,000 acres of severely degraded cut-away boglands, which are totally devoid of any life.
Bord na Mona manages a staggering 200,000 acres of bogland, three-quarters of which has become spent and lifeless due to the industrial harvesting of peat.
However, over 90,000 acres of land may be available for rewetting and restoration over the coming years with more lands coming on stream as time goes on.
At one stage, almost 13 per cent of Ireland’s landmass consisted of bogs, which, in their original pristine condition, were teeming with birds, exotic plants and insect life.
The pilot project on a rewetted industrial cutaway bog in Bellacorick, in northwest Co Mayo, has shown that over time, birds and plants and wildlife flourish if the bogs are left to fill up with water naturally.
For years, the 16,000-acre Bellacorick bog near Belmullet was dead and barren and resembled a post-apocalyptic landscape. Now, however, the pilot scheme resembles the Florida Everglades and is teeming with life.
Biologist and water chemist Dr David Wilson, who was part of the UCD end of the research, has seen first-hand what can be achieved by rewetting industrial scarred boglands.
“It went from a desert with nothing growing on it to a wetland in a really short space of time.
“When the Sphagnum mosses appear the wetland plants start growing, then everything else starts to come in, from spiders and mites to butterflies.
“The important thing is to maintain drainage and to keep the water table as high as possible. Sphagnum mosses are the building blocks of the bog, they are like sponges and they hold up the water table. They also protect the bogs in dry periods by holding on to the water.”
Bord na Mona botanist and zoologist Dr Catherine Farrell, who oversaw the restoration project, says that Bellacorick is only the beginning.
“The area is now like the landscape that existed in Ireland 8,000 years ago; we call it teenage peat land – it has been a fantastic story and we are delighted. We have 75,000 acres (30,000 hectares) along the Shannon that will be rewetted and turned into a blue fen wetland habitat teeming with wildlife.
“We have also identified bogs in the midlands, which we plan to restore as part of a five-year plan,” explains Dr Farrell.
Restoring spent bogs costs practically nothing and works out at roughly €150 per acre.
Eco-tourism, which attracts walkers and cyclists, has become a major niche market in Ireland. A key ingredient are green routes that are way off the main roads – and that is where Irish Rail comes in.
The Department of Transport, South Kerry Partnership and Kerry County Council have commissioned a feasibility study into creating a 26km cycleway between Glenbeigh and Renard using the old abandoned railway line.
The project is a win-win for everyone, with a disused line being converted into a profitable rambler and cycle way.
Typically, it costs roughly €25,000 a mile to convert a route into a green rambler way with full payback within six years. A study by Trinity College into the 42km-long Great Western Greenway, which runs from Westport to Achill, showed it was found to generate €1.1m for the local economy every year.
If the paths were rolled out across all the old disused railway routes, it would unlock the entire country, enabling ramblers and cyclists to travel from, say, Dublin city to remotest Achill Island without ever meeting a car.
Maynooth NUI achieves big breakthrough in fight against Crohns disease
Scientist says discovery represents a significant breakthrough against disease that affects 2 million people in Europe
Professor Paul Moynagh, who led the research team, says the identification of the protein Pellino3 may protect against the development of the incurable Crohn’s disease.
Professor Paul Moynagh, who led the research team, said the identification of the protein Pellino3 may protect against the development of the incurable Crohn’s disease.
“My hope is that we can build on these findings and use Pellino3 as a new diagnostic for Crohn’s disease and as atarget for new drug discovery,” Prof Moynagh said.
“Our aim at NUI Maynooth is to progress this research even further and we look forward to further advancements in the area of immunology in years to come.”
Prof Moynagh, head of the Department of Biology and Director of the Institute of Immunology at the university, said the research represents a significant breakthrough.
The team discovered that levels of Pellino3 are dramatically reduced in Crohn’s disease patients.
It will now use the protein as a basis for new diagnostic for Crohn’s and as a target in designing drugs to treat the illness.
More than two million people across Europe suffer from some form of inflammatory bowel disease.
Inflammation is the body’s response to disease-causing micro-organisms, which involves the movement of white blood cells from vessels in the infected tissue where invading micro-organisms are destroyed.
But this can result in chronic inflammatory diseases with the symptoms of the diseases being dependent on the inflammation area.
When chronic inflammation occurs in the intestine, this can lead to inflammatory bowel diseases — Crohn’s disease is a particularly debilitating strand of this.
Some symptoms of the illness include abdominal pain and diarrhea. Patients are also at an increased risk of developing gallstones.
The findings of the research, which had support from collaborators in Trinity College Dublin and University College Cork, have been accepted and published in the Nature Immunology journal.
NUI Maynooth president Professor Philip Nolan said research is about finding answers and solutions to major challenges.
“Immunology is an area of strength for Ireland and developments such as this will cement our position as one of the world’s leading nations in this field,” he added.
“The findings by Prof Moynagh and his team have the potential to impact positively on many lives.”
Woman airlifted after suffering serious injury on Croagh Patrick
A WOMAN has been airlifted off Croagh Patrick after suffering a serious head injury.
A total of 17 people were injured while carrying out the annual pilgrimage earlier today.
However, the vast majority of these suffered minor cuts and abrasions which could be treated on site.
The woman sustained the injury after falling near the summit of the mountain during the annual Reek Sunday climb.
She was airlifted by helicopter directly to Mayo General Hospital in Castlebar.
She was one of two casualties airlifted from the mountain earlier today.
The incident occurred shortly after 9am near the top of the mountain when the woman fell and sustained a serious head injury. The injury occurred on what is known as the cone of the mountain and she was carried by rescue workers to the summit in “a dazed state”, according to the Order of Malta.
A 67-year-old man who suffered a cardiac incident was also airlifted from the mountain and brought to the hospital by ambulance.
The man was a tourist who was holidaying in the area and took part in the climb.
The number of injuries sustained by pilgrims was down on previous years.
Last year, more than 20 people were injured with three airlifted from the mountain including an 83-year-old woman and a teenage boy.
A spokesperson for the Order of Malta said the number of injuries this year was “relatively low”.
“The dry weather has meant that the path is not as slippery as in previous years but people still need to take care. We need to get away from the idea of people going for a walk, they are not walking, they are climbing a mountain,” said Eamon Berry, duty manager with the Order of Malta.
Russian Cargo Ship Docks with Space Station
The Russian M-20M cargo spacecraft successfully docked with the International Space Station (ISS), less than six hours after being launched from the Baikonur cosmodrome in Kazakhstan on an express trip during which it orbited the Earth four times, NASA said.
The unmanned cargo rocket completed its automatic docking maneuver at 10:26 p.m. Eastern Time Saturday at a distance of 418 kilometers (259 miles) above the west coast of South America.
The craft, which docked with the Pirs module, which is one part of the Russian portion of the ISS, was placed into orbit aboard a Russian Soyuz-U rocket that lifted off at 12:45 a.m. Moscow time.
The M-20M is ferrying water, oxygen, food and fuel to the ISS, along with equipment for experiments being carried out by the current residents of the orbital platform.
The ship is also carrying space suit repair kits after Italian astronauts Luca Parmitano was put at risk during a spacewalk when his suit developed an internal water leak.
The last cargo ship sent to the ISS – the Progress M-19M – was launched in late April and burned up in the atmosphere last Friday at the end of its mission. On its flight into space, it took two days to dock with the ISS after it developed problems in deploying one of its approach and docking antennae.
Russian cosmonauts Pavel Vinogradov, Alexandr Misurkin and Fyodor Yurchikhin, American astronauts Chris Cassidy and Karen Nyberg, and Parmitano make up the current crew on board the ISS.