Gerhard Schröder: Caught in the Wrong Place at the Wrong Time

Tumbling right along with the markets this week were the German defense minister, a powerful CEO -- and maybe Chancellor Schröder's shot at reelection as well

What a rotten week it was to be the chancellor.

On Monday, the markets thumbed their noses at Gerd Tenzer, the candidate the German government had floated in the press all weekend as a possible replacement for Deutsche Telekom chief exec Ron Sommer. At a DT board meeting on Tuesday, Sommer handed in his resignation as expected and watched the government, which holds a 43 percent stake in DT, scramble for a replacement. "Interim" is about the kindest word with which you could bless the poor guy they yanked out of retirement to sit in Sommer's chair for half a year. Helmut Sihler, 72, a former vice-chairman of a Swiss drug company, will spend his days looking for someone who can actually run the ailing telecom.

It's no secret that countless other, more likely suits were approached and that none of them wanted the job. And who would? Deutsche Telekom is a European poster child for the havoc wreaked by the overhyped "new economy". When the former monopoly was privatized (sort of) in 1996, a massive ad campaign encouraged Germans to play the market, many of them for the first time, by buying shares at 14.32 euros a pop. When the boom peaked and those shares were valued at over 100 euros, there were few complaints, of course -- even as DT sank billions into UMTS licenses and hefty acquisitions.

Now that shares in DT have plunged below the initial offering price, complaints are loud and abundant. How could DT have racked up debts amounting to 67 billion euros? What the complainers are forgetting is that, during the frenzy of UMTS auctions, any telecom that didn't play along was out of the game. Period. Further, the acquisition of VoiceStream, the sixth largest mobile company in the US, may be responsible for 33 billion euros of that debt, but at the time (April 2001), the move was praised as a way for DT to expand its footprint into a undeniably vital market with seemingly limitless growth potential because the US was so far behind in mobile telephony.

All in all, it may seem odd in the current off-with-their-heads atmosphere to come to the defense of an ambitious CEO, but here goes: Ron Sommer wasn't any more irrationally exuberant than, say, Vodafone's Chris Gent or most others helming these overblown telecoms when the boom was at its boomingest; the problems DT faces aren't exclusive to DT and aren't exclusively of Sommer's making; and what's more, it's doubtful that replacing him will magically make it all better.

Nonetheless, Chancellor Gerhard Schröder had gladly linked his political fortune to Sommer's freewheeling star when it was on the rise. When it came tumbling down, Schröder decided it was time to get unhitched.

Even as Sommer was exiting (probably taking quite a golden parachute with him, too), news was breaking of another goof-up by Defense Minister Rudolf Scharping. He was caught accepting payments he shouldn't have, but long story short, within hours, that is, on Thursday, Schröder did what he should have done long, long ago: he fired Scharping.

Somewhat similar to the Sommer quandary, Schröder found himself in a lose-lose situation. Scharping is the eighth cabinet member to be replaced during his chancellorship (and the replacement, Peter Struck, makes about as much sense as naming a drug salesman to run a telecom). Had he excused Scharping, everyone's least favorite minister would have remained a political liability. Now that he's fired him just weeks away from national elections, though, it looks like political opportunism.

And then came Friday. The Dax in Frankfurt fell five percent in one day, about the same as most markets around the world. Since its post-9/11 peak in mid-May, the Dax has free-fallen nearly 20 percent; again, about the same, more or less, as all other major markets. Schröder, obviously, can't be blamed but the political fall-out will fall out on him nonetheless. He promised Germans that by "modernizing", by embracing the new hyper-neo-liberalism of the 90s, the could whip their greatest worry, unemployment. So they bought into the boom, but the ranks of the unemployed are as full as ever.

Elsewhere

The outstanding new issue of Senses of Cinema features a special section on Harun Farocki, introduced by Thomas Elsaesser, author of several landmark books on German cinema.

Summer's in full swing and your weekly reviewer is skipping the country for a few weeks. So I'm taking the liberty of pointing to a few articles that may be of interest at the newly launched GreenCine. Among the over two dozen so far are pieces on RAF chic, Billy Wilder, Alexander Jahrreiss, RW Fassbinder and a fit of foreboding in anticipation of Roland Emmerich's global warming extravaganza. See you next month for the final stretch of the campaign leading to the election in Germany on September 22.