A New Germany Rises

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Workers raise the cupola and gilded cross on Dresden's Church of Our Lady 59 years after it was destroyed in the Allied firebombing of World War II

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Klaus von Dohnanyi, a former mayor of Hamburg, headed a commission looking at the future of the former East that recommended the government switch to spending on "economic clusters" of local educational skills to help create jobs. That idea has proved a success in Dresden, where the state government has created a cluster devoted to computer chips. More than 20,000 people now work in the chip sector, helping reduce Dresden's unemployment rate to 13.5%. U.S. chipmaker Advanced Micro Devices (AMD) built a factory there in 1999 and completed another in June. The key was $663 million of federal and state assistance toward the $2.4 billion cost of the facility. But AMD says it wasn't only about money. "The people here are highly motivated, and some have experience of microelectronics from the former East German times," says Hans Deppe, general manager of AMD's Dresden operations. "The Dresden [factory] has proved itself very successful."

In 1991, after unification, there were 4,000 private enterprises in Dresden; now there are 240,000, of which 40,000 were launched in the past year. "We succeeded by building some economic lighthouses," says Mayor Ingolf Rossberg. Dresden is the scene of another dramatic rebirth: the reconstruction of the 18th century Frauenkirche, destroyed by Allied bombers in February 1945. The rebuilding has taken 10 years and $158 million so far, most of it private donations. "There is a feeling — not pride, not entirely joy — but a deep satisfaction linked to the knowledge that all of us have created something lasting," says Ludwig Guttler, a trumpeter who is leading the effort.

Another upbeat promoter of Germany is Wolfgang Grupp, CEO of leisure-clothing company Trigema, Germany's largest T-shirt manufacturer. Although many clothing firms have moved production to cheaper Asian factories, Grupp keeps all 1,200 of his employees in Germany, in the western town of Burladingen. "There is no reason to go abroad," Grupp maintains, saying his German work force allows him to produce orders within 48 hours of receiving them. It's an example of how Germany's high productivity can compete against lower wages abroad. "I need employees who are flexible, well trained and who think while they are working," Grupp says. "I can't get that if I produce in a country thousands of miles away."

At home, one of Germany's biggest dilemmas is how to cope with the economic consequences of an aging population. "You're going to face a problem in the social-security system, because you have fewer people paying in and more people taking money out," says Reiner Klingholz, director of the Berlin Institute for World Population and Global Development. Klingholz says the solution is to increase immigration. A new immigration law will allow some 200,000 immigrants — highly skilled economic migrants and asylum seekers — into the country each year.

But Germany's greatest challenge remains what Horst Kohler, the new President, describes as "the uncertainty" felt throughout society. "We need a new spirit of initiative," Kohler said in May. That spirit may be taking hold. One indication is all the do-it-yourself stores and how-to classes springing up across the country as people adapt to hard times. According to marketing company SevenOne Media, Germans spend $43.7 billion a year on home improvements, double the amount spent in Britain and France. The biggest beneficiary of this trend is OBI, the Home Depot of Europe, whose CEO, Sergio Giroldi, says the company sold $7.6 billion worth of tools, wood and home decorations last year. He expects 10% growth this year. That's a good sign, since Germans still have a lot of work to do if they want to turn their country around.

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