RAY SUAREZ: Late today, E.U. finance ministers said Greece would have to make even more cuts to receive the bailout money, even if there is a new government. The E.U. nation pressing hardest for austerity is its richest, Germany.
Margaret Warner reports tonight on how that country’s prosperous citizens are wary about paying bailout money to Greece and other debtor nations.
MARGARET WARNER: The aisles of Stuttgart’s Markthalle are stocked full, French cheeses, Italian prosciutto di parma, hand-stuffed German sausage, fresh-baked bread and pastries. And on a weekday morning, people are buying.
CHRISTINA PAPADOPOULOU, gourmet shop: All the people who come here, they’re doing well, so we don’t feel the crisis here.
MARGARET WARNER: The crisis, of course, is the European financial one. It sent borrowing rates soaring for the region’s most indebted countries, like Greece, Italy, and Spain. It threatens to drag down the European Union’s economy even for its strongest member, Germany.
Fruit and vegetable seller Michael Mayer senses a cautious mood among his customers, his barometer, tropical fruit sales.
MICHAEL MAYER, fruit and vegetable seller (through translator): The crisis has meant people have less money to buy daily luxuries, so they buy less, two mangoes instead of four. You buy just what you need.
MARGARET WARNER: Even with record low unemployment and an envied manufacturing base, Germans remain ever-careful with their money. Cash, not credit, is the coin of the realm.
That financial prudence is complicating matters for Chancellor Angela Merkel. Her fellow E.U. members, the IMF and the U.S., are urging her to devote more German money to bolster the E.U. bailout fund. But she must also listen to her own public.
KLAUS BLUMENAUER, realtor (through translator): Three hundred and fifty thousand. This one’s probably 450,000.
MARGARET WARNER: On a major purchase, like a home, Germans are especially prudent, says Klaus Blumenauer, a real estate agency owner in the Frankfurt suburb of Konigstein. Germany didn’t experience the recent real estate bubble or crash, he said, because Germans and their banks are so careful. Mortgages require a 30 percent down payment.
KLAUS BLUMENAUER (through translator): The Germans are conservative in regards to home and debt. Of course, there are always people who don’t have enough equity, or don’t earn enough, and still would like to buy a home. But the banks don’t play ball. They, in fact, protect the customers from wrong decisions.
MARGARET WARNER: And for those who do buy, their goal becomes to pay down the mortgage as quickly as possible.
KLAUS BLUMENAUER (through translator): The Germans don’t like debt so much. In real estate especially, most Germans have the goal to have the home free from debt. That’s more their philosophy than to say, let’s borrow money.
MARGARET WARNER: So it’s no wonder they bristle at being asked to bail out their freer-spending southern neighbors. Germans are still paying for the multitrillion-dollar reconstruction of East Germany over the past two decades.
And Germans note they voluntarily undertook painful austerity and economic reform more than a decade ago, while much of Europe embarked on a spending binge financed by the newly introduced euro.
Norbert Walter recently retired as chief economist at Deutsche Bank.
NORBERT WALTER, former chief economist, Deutsche Bank: We were characterized for a considerable period as the sick man of Europe. We were not the sick man of Europe. We were on therapy. The standard of living of Germans didn’t increase at all for actually a decade at a time when everybody else enjoyed a wonderful increase of the standard of living.
MARGARET WARNER: Germany’s therapy was a national project. Unions held down wage demands, industries retooled and political leaders tightened unemployment and other benefits.
It wasn’t easy for a country built on a generous social welfare compact, said Nils Schmid, finance minister for the prosperous state of Baden-Wurttemberg.
NILS SCHMID, finance minister, Baden-Wurttemberg: We raised the retirement age, or it will be raised step by step to the age of 67. We had to push this reform through, although it was very unpopular and still is.
MARGARET WARNER: The tough medicine paid off for Germany with greater productivity in its industry and lower unemployment and government deficits.
Now, before agreeing to add more to the E.U.’s bailout coffers, Merkel is insisting that debt-ridden countries like Greece and Italy enact their own tough reforms. Finance Minister Schmid, despite being a member of the opposition party, said Merkel is right to demand a quid pro quo. But he’d like to see quicker German action on the bailout front to stave off further market turmoil.
NILS SCHMID: I think that we need both. We need European solidarity. That means fixing the euro and helping other member states such as Greece or Portugal. But we — at the same time, we need very strict rules concerning budget discipline.
MARGARET WARNER: But public sentiment varies.
At the landmark Paulaner restaurant in Stuttgart, we found three young entrepreneurs who own and run small firms. Like most Germans, they say, they all took a hit in the ’08-’09 global financial crisis, but lived modestly, kept investing in their businesses, and bounced back stronger than ever.
Now they’re feeling anxious, and a bit ambivalent, about what Germany’s being called on to do.
Does the euro crisis worry you?
CARSTEN THEURER, software developer: Yes, for sure, because you never know what will happen at the end.
MARGARET WARNER: Carsten Theurer is a software developer. He says he and his friends pay high taxes, and they’re galled by reports that many wealthy Greeks, Italians and others don’t.
CARSTEN THEURER: No one is happy about those little stories about Greece, how they are doing, that they are not paying their taxes, that they are a little bit corrupt. But we are just interested in a functional and a surviving euro.
JAN CURRLE, welding technology supplier (through translator): This euphoria about the euro which we had at the beginning, we now have to face all the errors that were made, which means spending money so this doesn’t fall apart, because, if Greece falls, then maybe Portugal and Spain also fall. And then there’s a big mess.
MARGARET WARNER: Their annoyance doesn’t surprise Norbert Walter, but he says Germans should look to their own past before judging others as incapable of changing.
NORBERT WALTER: I believe if Germans have benefited so much from the Allied forces that accepted that the Germans could be different from what they were in the Third Reich, we shouldn’t allow ourselves to argue, the Greek have always cheated, they will cheat in the indefinite future, and, therefore, it is not worthwhile and we cannot even think of helping them.
MARGARET WARNER: But try telling that to Magdalena Beulshausen. The 77-year-old pensioner started saving as a girl, and never stopped.
MAGDALENA BEULSHAUSEN, pensioner (through translator): It wasn’t too hard for me or my husband, if you only limited yourself a bit.
MARGARET WARNER: Now she has little patience for, or confidence in, her indebted European siblings.
MAGDALENA BEULSHAUSEN (through translator): I think it’s like with an alcoholic, who you try to save, but you can’t until he’s all the way at the bottom. Now they don’t want to accept that they should save and reduce their spending, but they also don’t want for someone from Germany to come and say, okay, that’s how you have to do it.
MARGARET WARNER: Proving once again that, even in the 27-member European Union, all politics is local.
RAY SUAREZ: In her next report, Margaret looks at Italy’s response to the debt crisis.