Merkel’s Spending Drive Thwarted by Bats, Lizards and Red Tape

Catherine Bosley and Andrew Blackman
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Merkel’s Spending Drive Thwarted by Bats, Lizards and Red Tape

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Visitors arriving by train in Stuttgart are met with a gaping hole that tells a sobering tale about Germany’s challenges in ramping up investment.

It’s an infamous railway construction project, dreamed up in the 1990s and now billions of euros over budget and at least four years behind schedule. Among the reasons for the delay to the roughly 8 billion-euro ($9 billion) Stuttgart 21 development are a cumbersome planning process and ecological rules protecting lizards.

That parable of red tape is a familiar one across Germany and underscores the problems facing the country as it risks stumbling into recession. Home to manufacturing powerhouses Daimler AG and Robert Bosch GmbH, Stuttgart should be a prime candidate for realizing the government stimulus economists are calling for. But it’s not that simple.

“Funds aren’t the issue,” said Detlef Kron, chief of Stuttgart’s planning department, as he unfurled a map of the town’s center strewn with numerous dark blue markers to represent new projects. Project paperwork can reach dozens of pages and environmental documentation can be triple that, he said.

The administrative headaches he describes -- including a process lasting as long as four years to sort out building permission -- raises the question of whether the country can tackle commonplace problems like malfunctioning trains, old bridges and patchy wireless coverage quickly enough for it to make a meaningful difference to the economy.

While critics charge Germany with being overzealous in its commitment to balanced budgets, Chancellor Angela Merkel insists that’s not the case. Germany has plenty of funds earmarked for investment, but the problem is “our planning and approval process is miserably slow,” she said at a union event in Nuremberg this month.

There are detailed and ever-evolving environmental, social and safety requirements -- such as public hearings, changes to the fire code or impact assessments for endangered species -- that sometimes force already approved plans to be modified. That’s not to mention delays caused by lawsuits winding their way through the courts.

Stuttgart 21 encroached on the habitat of protected lizards whose resettlement cost millions of euros. In the northern state of Schleswig-Holstein, the construction of a motorway got stymied because officials hadn’t been thorough enough investigating its impact on bats.

Planning requirements are one reason why a country synonymous with sophisticated engineering abroad has a track record on major infrastructure projects at home that borders on abysmal. In addition to Stuttgart 21, other quagmires include the Hamburg concert hall, a long-delayed overhaul of Berlin’s most prestigious opera house and the capital’s bungled airport.

“Difficult and time-consuming planning and approval processes increasingly mean that important infrastructure projects can only be completed with a delay, or don’t get completed at all,” said Michael Stomberg, chief executive officer of construction company Bauer AG.

The problem isn’t just limited to public projects. Germany ranks behind Serbia, France, Malaysia and Mongolia in a World Bank index for dealing with construction permits for commercial projects like warehouses.

Even after planning hurdles have been cleared, it’s a further struggle to find construction crews and equipment amid a building boom, including pent-up demand for housing in major urban centers such as Berlin.

“The construction industry is operating at full capacity, and that can present a challenge in terms of timing for everyone in the industry,” said Karl Wambach, executive vice president at Brookfield Properties Inc., which is redeveloping a shopping center at Potsdamer Platz, a symbolic location at the crossroads of former East and West Berlin.

Such constraints haven’t deterred calls for Germany to build more. International Monetary Fund officials “encouraged the authorities to continue to use the available fiscal space to bolster potential growth.” In their last assessment of the economy in July, they put infrastructure investment at the top of their wish list.

With low debt levels and negative interest rates meaning Germany would effectively be paid to sell bonds, the country has plenty of room to maneuver financially. But back in Stuttgart, where Kron’s department is struggling to find office space for planned new hires, that approach doesn’t make sense.

“Why should we raise debt?” he said. “We can’t even spend the money that we have.”

--With assistance from David Verbeek, Raymond Colitt and Leonard Kehnscherper.

To contact the reporters on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net;Andrew Blackman in Berlin at ablackman@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Craig Stirling, Chris Reiter

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