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 $700,000 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 a 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 Home-Grown 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 stop-gap measures that don’t offer any lasting remedy.