NCPA - National Center for Policy Analysis


September 14, 2006

Berlin has three opera houses, the same number of universities, modern architecture opposite expensively restored neoclassical buildings, Europe's biggest department store, über-cool bars -- the works.  Walk down Kurfürstendamm or through the trendy neighborhoods of Mitte and Prenzlauerberg and you would have no idea that Berlin is basically broke.  Leave the beaten tourist path, however, and you can see how the financial crisis is increasingly mirrored in social fraying and decline, says the Wall Street Journal.


  • Germany's capital city of 3.5 million inhabitants is €60 billion (about US $76.4 billion) in the red.
  • Like New York City did in the 1970s, Berlin's mayor asked the federal government for help -- the first time back in 2002.
  • The response, from the previous Red-Green government to today's Christian/Social Democratic Coalition, was also similar to the U.S. government's in 1970 -- no bailout.

Instead of trying to pull itself up by its own bootstraps, however, Berlin sued the federal government in 2003 for even more money.  The German welfare state not only tries to erase economic differences between individuals, says the Journal.  It also guarantees "equivalent" living standards in all German Länder, or states. 

  • Berlin already receives some €6 billion (about US $7.6 billion) in subsidies each year; not enough, says Mayor Klaus Wowereit. 
  • Federal states can claim additional aid if their financial situation differs "significantly" from other states.

But here's the hitch for Berlin.  Empty state coffers have become the norm across the entire country.  This leads to a paradox, which the presiding judge in the ongoing constitutional court case, Lerke Osterloh, spelled out in a hearing last April: The worse the general budget situation, the fewer cases of plight there are.  Berlin, it seems, truly is the symbol of the new Germany, says the Journal.

Source: Daniel Schwammenthal, "Ich Bin Ein Poor Berliner," Wall Street Journal, September 14, 2006.

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