Berlin shrugs off crisis

Bloomberg

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“I haven't felt a thing,” Pawlak, 54, said as cars roared down the route taken by tanks during May Day parades in East German times. “As far as I can tell, it's only people who own shares that are affected.”

“Poor but sexy” is how Berlin's mayor, Klaus Wowereit, once described his city of 3.4 million people, dominated by arty bars and street-corner galleries. With the financial crisis sweeping across the world, that now looks like no bad thing.   

As Paris restaurants file for bankruptcy and Londoners suffer the biggest drop in property prices for 16 years, Berliners had little to lose in the first place. Unemployment is twice the national average in a place where government is the main industry and the housing market never boomed. For Berlin, it is no-business as usual amid the credit crisis. 

“The impact has been relatively soft in Berlin,” said Tobias Just, an economist at Deutsche Bank in Frankfurt.
 
A turbulent past
Berlin trades on its turbulent past for its allure. During the 1920s, the city was home to cabaret artiste Marlene Dietrich and physics professor Albert Einstein, both of whom fled the onslaught of Nazism under Adolf Hitler.

In 1949, within four years of the defeat of Germany in World War II, the city took on its Cold War mantle as the buttress between capitalist West and communist East until the fall of the Berlin Wall in 1989.

Berlin's industrial base evaporated with the city's wartime destruction and subsequent division, never to be rebuilt. Today, not one of the 30 companies in Germany's benchmark DAX index is based in the capital.

Berlin's economic output per worker was equivalent to about 51,000 euros ($67,000) in 2005, compared with about 83,000 euros in Frankfurt, according to Frankfurt city council. The return of the apparatus of government from Bonn in 1999 has failed to stem an unemployment rate of 16.5 percent.

Berlin “wasn't great before the crisis and it's not great now,” said Sten Rasmussen, 48, who sells Scandinavian furniture in his store in the eastern district of Prenzlauer Berg. “If  you go to Hamburg or Munich you might see a little more difference. Berlin tends to attract creative people, not money people.”
 
High public debt
Analysts agree that the party can't go on for ever. The capital is saddled with public debt of 60 billion euros, about three times its level of public expenditure last year. Berlin's finance chief, Thilo Sarrazin, has said that services may suffer as the crisis unfolds.

“Berlin will in no way be able to decouple itself from the rest of the world,” said Deutsche Bank's Just. “That would be an illusion.”

For now, tourists flock to Berlin's 170 museums housing such treasures as ancient Babylon's Ishtar Gate and the bust of Egyptian queen Nefertiti, while international newspapers laud its street fashion, dingy clubs and low-brow culture.

The New York Times said in 2006 that Berlin was like New York in the 1980s, and the “air crackles with a creativity that comes only from a city in transition.”

Actors Brad Pitt and Angelina Jolie are Berlin fans, their visits to bars and restaurants picked over in Bild, Germany's biggest-selling newspaper, which moved its headquarters to Berlin from Hamburg earlier this year.

Tanja Gerken says the impact of the financial crisis hasn't reached her gallery in the central Mitte district, where she sells abstract sculptures and paintings by contemporary artists.

“I imagine that sales in galleries in New York are taking a hit,” Gerken said. “But we're not in New York, we're in Berlin. We're just not feeling it at the moment.”

Struggling artists, musicians and kindred spirits whose financial straits have kept them away from the front lines of global finance have made their home in Berlin.

If good beer fires their imagination, then cheap rents, a product of the oversupply of housing after reunification of East and West Berlin in 1990, allow them to stay. A two-bedroom apartment in Mitte costs as little as 600 euros ($770) a month, heating, water and electricity included, compared with about 1,200 pounds ($1,950) in London for rent alone.

Sitting behind a counter piled high with CDs, record shop owner Guillaume Siffert peers over his horn-rimmed glasses when mulling the impact of the crisis on his business.“We sell on the Internet as well and it's been sort of the same numbers,” said the Frenchman, a Berlin resident of five years. “I don't know how or whether it would affect us.”