"HOW IS GERMANY COPING WITH THE FINANCIAL CRISIS", Oslo

Rede von Franz Thönnes, MdB und Parlamentarischer Staatssekretär im Bundesministerium für Arbeit und Soziales, mit dem Titel „HOW IS GERMANY COPING WITH THE FINANCIAL CRISIS“, anlässlich einer Veranstaltung der Deutsch-Norwegischen Handelkammer am 11. März 2009 in Oslo.

Today I would like to make some remarks on how Germany is coping with the financial crisis focussing in particular on the social situation. Germany and the rest of the world are experiencing the most severe economic and financial crisis in decades. Therefore we can not accept a paralyzed policy or a culture of standstill.

First of all it is very important to draw a realistic picture of the global crisis and remind us of our strong economic and social traditions and invite our citizens and the business community to join in a campaign for a better future. Let me outline that in my opinion government and its administration must – in cooperation with civil society and the enterprises – find reasonable ways to meet this crisis very soon. We have to develop instruments for those families who need help in finding jobs at a decent wage, we have to provide care where people cannot afford it and a retirement that is dignified.

What is necessary more than ever before? We must shape our societies with social safeguards. Our citizens are setting high hopes and voicing strong expectations. Not only in Iceland or the United States but in our two countries as well. In Germany the time is ripe for a process of rethinking and for a change of course. Both will require us to look back and reflect on proven and tested models: on the 60 years of success charted by the social-market economy, on the creative powers of a democratic society to shape policy, and on our society's basic values. The social state is one of the great assets in Germany's treasury of cultural memories – it has helped to forge my country's identity just as have the proud emblems "Made in Germany" and "Deutsche Mark". But unlike the "Deutsche Mark", the promises inherent in the concept of the social state are today highly topical and impossible to improve on.

These promises ensure 

- that life can become easier for people who apply themselves,

- that effort is worthwhile and performance pays,

- that no one in need of help is left alone,

- and that people beset by difficult circumstances have a legal entitlement to government aid and need not be ashamed when they utilize support measures.

The social state can fulfill these promises if it responds to today's needs with modern solutions. Germany's social state is not an immovable fortress. Rather, it has been given a constitutional mandate for flexible policy response. We can now see that the major institutions of Germany's social state – such as the pay-as-you-go national pension system – if further developed in a careful and prudent process, can continue to function well into the future. Indeed, in times of economic crisis, such institutions prove not only to be more stress-resistant but even act as stabilizing elements. However, underlying our model of social insurance is the idea that people's solidarity towards others gives them the right to demand a return of solidarity when they themselves need it. Such a system functions only if it is trusted, only if its reliability is not doubted.

The present crisis in particular shows us the important role that trust plays in our systems. I hardly need to remind you: the economic and labour market problems now facing us, and those that have yet to be felt, are not the outcomes of poor performance by companies and workers. Rather, they are the product of a deregulated system that in numerous banks and bourses has allowed gamblers to dissolve the trust in global financial networks that is a must if those networks are to function properly. The financial and economic crisis is primarily a crisis of trust. What we therefore most need in our present situation is a rebirth of trust. But trust is not something we can conjure into existence by rhetoric or legislative statute.

Nor does it appear upon request or demand. Quite the contrary: in the world of politics, nothing arouses more distrust than the constant appeal that it be freely given. Former German Chancellor Helmut Schmidt recently offered some inter- esting insights into how the politician can make or break trust: "Trust can develop from the way he acts or fails to act, the way he speaks, the way he listens. Whether it actually does develop is not up to him. For when he starts to focus on trust as his uppermost objective that very effort may well turn into opportunism." What then has to be done? How can we rebuild the trust that has been destroyed by carelessness? My answer is: by straightforwardness and competence, by providing leadership with a clear vision of what our society should look like, by a pragmatic policy that involves companies in responsibility and at the same time ensures that our countries emerge from the present crisis not only stronger but also more humane.

Just as in other countries, we have focused our initial efforts on the sector where the crisis began: the financial markets. When people no longer trust one another, they stop lending money. It then becomes impossible to invest and create jobs. That was the situation facing us. And that was why we first acted to stabilize the banks in Germany – as you did here in Norway with your banking fund. By providing a supportive platform for Germany as a site for financial activities we are making sure that loans once again begin to flow from banks to companies – and that the bank deposits of individual savers are secure. Our supportive platform encompasses guarantees in the amount of 480 billion Euros. It is important to stress that these are guarantees, not funds allotted in the budget. With our supportive platform we have avoided an economic scenario in which people lose their jobs overnight. It is a measure that benefits our citizens. Institutions requesting the platform's support have to meet rigorous conditions that include items such as salary and bonus waivers and the elimination of severance packages and dividends. Another important condition is the stipu- lation that loans for small and midsized business continue to be granted.

A second supportive platform is being offered to safeguard jobs. That package amounts to a total of some 31 billion Euros for the years 2009 and 2010. To prevent lay-offs during the economic slump, the period of eligibility for short-time work-allowance is being increased to 18 months. And social insurance contri- butions to be borne by the companies are reimbursed by the Federal Employment Agency at the rate of 50 percent of the total amount. The rate will become 100 % if short-time-workis combined with activities pf qualification and training for the employees. The message to companies is: Hold on to your employees! And qualify them!

I also want to mention that 5,000 additional placement officers have been enlisted to work at the government's local employment agencies to help people find jobs paying appropriate wages and salaries. Companies and workers are being given relief in the area of taxes and levies. For example, the rate for contributions to unemployment insurance is being lowered from 3.3 to 2.8 percent, and health insurance contributions will be tax-deductible beginning in the year 2010. To help strengthen the small business sector households will be able to write-off bills for home-maintenance and repair work done by professionals in the annual amount of 1,200 Euros rather than the 600 Euros that have been allowed up to now.

Last December, the economic crisis became significantly more severe. The decline is reflected by all of our indicators: growth forecasts, export figures, labour market statistics, the plunge in car sales, rising short-term work, etc. In January, we therefore set the wheels in motion for a second economic recovery package – amounting to some 50 billion Euros. That will be the largest of its kind in our country's history.

At the core of the package is a program for more and quicker investment. The measure will particularly benefit municipalities, where schools, roads, hospitals, and facilities such as train stations can be modernized and repaired. To stimulate consumption, persons who purchase a new car by the end of 2009 will receive a 2,500 Euro premium if they scrap the old car they are replacing, provided that the scrapped vehicle is at least nine years old. Large and small companies that, although healthy, are no longer being granted loans by banks simply because of the financial and economic crisis can now make use of loan-guarantees from the government. A total guarantee volume of 100 billion Euros is available for this purpose.

At the same time, we are putting reliable mechanisms in place to curb the growth of government debt; an amortization fund is being established to pay down public debt during every economic recovery phase. All of these measures in the economic recovery package combine economic imperatives with social equity and thereby help to safeguard existing jobs and create new jobs.

Ladies and Gentlemen, our measures to stabilize the economic trend also aim at benefiting our retirees. On the one hand, retirees naturally also profit from elements from the assistance package such as the scrapping of old cars and the modernization of infrastructure facilities in the municipalities. But on the other hand, our more than hundred-year-old system of statutory old-age pensions is based on the principle: pensions must follow the wage trend. Since the German government's economic policy measures help stabilize the wage trend, a positive impact is also felt in terms of pension adjustment. Moreover, statutory pensions in Germany are regularly adjusted to keep abreast of the wage trend of the respective two previous years. The next pension adjustment will, for example, be on July 1st. Account will then be taken of the wage trend from 2007 to 2008, which was not yet so strongly affected by the economic and financial crisis and the associated overall economic trend.

Ladies and Gentlemen, let me take us back to the heart of our topic: the social shaping of society. It is our view that social peace can be shaped in the long term only if the institutions of the social state are strong enough to provide for the meaningful needs of security and trust. I have tried to demonstrate this by outlining our perspective. For us, the social state involves society as a whole. In closing my input, let me just sum up one of my main points: Our economy can only be successful if we offer every single individual the full bunch of opportunities, not only because of charity reasons but because everyone has the right and the obligation to contribute to a sustainable society and its functioning economy.

We have to realise that also the economy requires social security, and that not only social security needs the economy. Thank you for your kind attention!