Moaning and Groaning

Listening to most people talking about the state of the German economy, one might think the apocalypse were fast approaching. But in reality, 2004 was a fairly respectable year: The economy grew, not amazingly, but it finally woke up from a three-year slumber; the German stock market index, the DAX, reported slow but steady growth; and exporters reported record surpluses, beating analysts' expectations.

So why all the glum faces? Perhaps there's something in Germans' genes that causes them to see the glass half empty.

Or perhaps it's that despite the good news on several fronts, developments around issues that hit consumers directly were often less than encouraging. Here's a look at several of the salient economic matters of 2004.

DAX doing well, but mistrusted

While the DAX has performed well for at least a year and a half, there is still a reluctance by a large swath of the German public to invest money in the market. Germans tend to be more risk averse than some nationalities, and a string of well-publicized initial public offerings (IPOs) in 2004 that didn't go well increased market shyness.

"People were watching developments very, very carefully," according to Klaus Nieding of the German Association for the Protection of Small Shareholders. "One phrase that might apply to the stock market these days is: 'It's cool to be stingy.'"

That philosophy was helped along by the experience of those holding stocks in the internet service provider T-Online. It's parent company, Deutsche Telekom, now wants to bring it back into the fold and is offering shareholders just under €9 ($11.86) per share, exactly one third of that the stock cost when it was first offered in early 2000.

The consumer blues

While Germans aren't pouring their money into the stock market, they also aren't pouring it into retailers' cash registers. The retail industry was one of the biggest complainers in 2004, but that's nothing new. For years, its goes on binges bemoaning Germans' tight-fisted ways. But the dirge provided a near constant background hum throughout 2004.

"Private spending remains the Achilles' heel of the German economy," said Gustav Horn of the German Institute for Economic Research (DIW). "And the rise in household income is too weak to expect a real upturn in spending."

Economists say the fundaments of a real economic recovery are there, it's just the consumer is not playing along, therefore dragging the recovery down.

"We've passed through the Valley of Tears," said Economic Minister Wolfgang Clement, sounding something like a preacher trying to convince a doubtful congregation. "Germany is moving, in an upward direction. I'm telling you, things are going well again in Germany."

Export explosion

The reason for the rosier-than-lately economic picture in Germany can basically be ascribed to one thing: exports. Exports have always been an important component of Germany's economic engine, but in 2004, they were pretty much the sole power source.

Exporters enjoyed a record surplus this year of €160 billion ($212 billion).

"We have an very strong export-driven economy right now, better than expected," said Martin Rogowski, president of the German Federation of Industry. Exports this year were strong enough to make up for the nation's stagnant construction sector and poor domestic demand.

But the export party can only last so long, the DIW's Horn wrote in a recent report. Most analysts predict German exports will lose steam because the global economy will grow less robustly than it did this year.

Others worry that the strength the euro will hurt exporters if it continues its meteoric rise in value, since it makes German goods abroad more expensive. The European common currency has hit record highs against the dollar in the last week, reaching over $1.34. The market looks determined the drive the dollar down further in the near future and exporters are starting to feel the pinch.

Work longer, or don't work

Many Germans have been grumbling due to the debate this year about extending the number of hours worked in a week in several sectors.

Employees in some branches, such as manufacturing, had contracts stipulating 35-hour work weeks. But industry leaders have been saying that in order to stay competitive, German employers need to work longer -- 40 hours or perhaps more, and often with no concomitant rise in pay.

"If the normal working week were 40 hours instead of 35, that would mean a difference of 15 percent in personnel costs," said Rogowski.

Low-wage countries in Asia and even next door in eastern Europe have put pressure on employees and their unions to agree to employers' demands. Industry leaders have been eager to play the wage card -- either make concessions regarding hours or wages, or production will be shifted from Stuttgart to Slovakia, from Essen to Estonia.

Now that's something to grumble about.