June 4, 2012
I was only hit once with a leather in school. But it was worth it. Years ago, PelÃ© came to Ireland and trained in the grounds of our school. Four of us bunked off French to see the great man and get an autograph. What would you do: PelÃ© or French?
Apparently, this was a ‘mortaller’ and, for our punishment, a small, thick leather strap was produced from the drawer and a clattering was administered. But it didn’t matter because we had seen PelÃ©. Tragically for my throbbing hand, three days later, I went on a soccer trip with Dalkey Utd to Germany, and who was on the plane? PelÃ©. So I needn’t have suffered at all.
That week in Germany, I went to my first big football match to see Schalke 04. The fans were brilliant, full of colour, and Schalke at the time had the great Klaus Fischer – the master of the bicycle kick – playing up front for them. Many is the bruised arm was suffered on our road trying to emulate Fischer’s bicycle kick. Concrete isn’t the best surface for this one.
But since then, I have always had fond memories of the Bundesliga and German football. Two weeks ago, I was in Germany to watch football and got the chance to assess the great barometer of all things football and economics: the views of the local taxi driver.
When you travel to Germany and chat to the average bloke, it is surprising just how little he knows about what is going on on the periphery of Europe. Not that he should really care. The trip to Munich confirmed what we all know happens when things are going well. You take in your immediate environment and regard it as normal. After all, most of us trade with each other, buying and selling, so if all around you is going well, why worry?
The taxi driver couldn’t have been more courteous. We chatted about the upcoming game – Bayern v Chelsea – and then the state of the place. He told me that unemployment in Bavaria was less than 3 per cent, business was booming and life was good. I asked him about the rest of Europe and he shrugged his shoulders and said: “We don’t feel the crisis here.” He paused and then said: “Maybe there are a few more immigrants, but we don’t feel any problem here.”
This is the truth. Germany is booming. Unemployment is the lowest in a generation, exports to the rest of the world are booming, wages are rising, and so is property price inflation in the big cities of Hamburg, Frankfurt and Munich. In Hamburg last year, prices of apartments rose by 14 per cent and were up 12 per cent in Munich, year-on-year, in January.
In Cologne, prices of existing apartments rose 9 per cent. In the latest poll, 86 per cent of Germans said they were happy with their standard of living.
This week, that feelgood factor will have been reinforced by the news that people are now prepared to lend Germany money for nothing. The German government can now borrow at 0 per cent. This is because billions of euro are flowing right now out of the periphery, particularly from Spain to Germany, because investors and the average citizen believe there is a risk that Spain will leave the euro. In the first three months of this year, â‚¬97 billion has left the country. That is nearly 10 per cent of GDP, and that was before the crisis amplified in the past few weeks.
But interestingly, this meant that the Germans felt this in lower interest rates, allowing them to borrow more cheaply if they want to.
On this issue, my taxi driver took up the conversation and explained to me that German football, like the German economy, was better managed than any other. Unlike British teams, for example, German teams are not allowed go into debt. As we all know, football and how it is played, managed and followed tells you a lot about the culture of any country. The pair of us, like bar-room pseuds, warmed to the topic.
What he told me was fascinating.
First, all decisions of the club are taken by the members of the club, who hold 50 per cent plus 1 voting bloc. These are fans and other members of the club, not determined by the size of your wallet.
Every year, each club has to submit a set of financial documents to make sure the club is viable, is not in debt – which is banned – and is not over-spending.
Clubs must be financially accountable. A full set of documents has to be submitted each year before the licence to play is given, covering assets, receivables, cash and bank balances, liabilities and provisions, current overdraft facilities, loan commitments, projected and current profit/loss statements, and cash inflows and outflows.
These are judged by the German football league, and all clubs have to inject money into a fund to make sure that, if a club, even after all this scrutiny, does get into difficulty, it won’t go bust. No Bundesliga club has experienced an insolvency since the league’s creation in 1963 (there have been 92 in the top five divisions of English football since 1992).
Ticket prices are kept low, at around â‚¬10 a game. The fans feel real ownership, which was evident with the Bayern fans we met. The Bundesliga is the best attended of the big football leagues in Germany, with an average attendance of 45,726 in 2010/11 – 10,000 more than the Premiership.
This, he told me, was the secret to German success: good management and an aversion to debt. Not like the free-spending, profligate Chelsea.
He had a point, but only if German clubs want to play only against themselves. Without the free-spending, debt-financed English clubs or Spanish giants like Real Madrid or Barcelona, Bayern would have no one to play against. There would be no Champions League final in Munich and I wouldn’t be in his cab. Without the mental spending of the likes of Real, the Germans would have no competition to play in and no big names to play against.
Similarly, without the periphery buying their goods, the Germans would have no one to play economics with. Every creditor needs a debtor, every budget surplus needs a deficit to finance, every current account surplus needs a current account deficit. Similarly, every Bayern Munich needs a Chelsea, otherwise they can content themselves with trips to Leverkusen and Dortmund.
Similarly, if the Germans are not prepared to budge in Europe and think they can, in their own words, “do as much as necessary” (but actually do “as little as possible”) to save the system, then the system will crash.
Economics is not about morality lessons, but about trade and commerce. The creditor needs the debtor in the same way Bayern needs Chelsea, and Germany needs the rest of Europe. This demands flexibility in the way the euro crisis is now tackled. Otherwise the euro will collapse in chaos and Germany will have no one to play with.
Come to a state-of-the-nation debate entitled, “Is Ireland now a province of Germany?”, chaired with Teutonic efficiency by Barry Murphy (aka Gunter) at www.dalkeybookfestival.org on June 16.