Tuesday, July 29, 2014

Welcome to Silicon Allee

You read it right. Berlin may finally be living up to its hopes of becoming Europe’s startup hub.

By Jason Overdorf
(GlobalPost, July 2014)

BERLIN, Germany — The low thrum of ambient electronica music pulses through a four-floor walkup in the hip central neighborhood of Prenzlauerberg as dozens of young programmers stick on nametags and swap stories.

Welcome to what locals are calling Germany’s Silicon Alley, where the code junkies have come for a Startup Grind event.

It's a pretty typical meet-and-geek. Software code is the primary topic of conversation. One young man with a ponytail shouts on his cell phone as another in a hoodie furtively dives into a spread of canapes before the buffet table is officially open. There are only a handful of women.

The big news is that this kind of event is taking place in the German capital almost every night.

Despite cheap rents and a reputation as one of the world's coolest cities, Berlin has so far failed to live up to its goal of becoming Europe's startup hub. But that may finally be changing thanks to a rapid growth in funding, a new drive to attract foreign talent and a burst of interest from industry giants like Google, say insiders like Marco Brenner, who moved here a year ago to found a startup.

“We need to grow some meaningful businesses in Berlin,” he says confidently, looking more like a PR executive dressed in his blazer instead of the usual hoodies or T-shirts. “Then the money will follow.”

Berlin's startup scene could create as many as 100,000 jobs by 2020, according to a recent report by the global consultancy McKinsey & Co.

Although the city still lags behind competitors like London when it comes to infrastructure — partly because Germany's conservative investors have long made it difficult to raise capital — the city has some of the right ingredients, including a low cost base and a hip image that helps attract top talent.

Earlier this month, Google unveiled a mammoth new startup incubator known as “Factory,” where veterans from Google for Entrepreneurs and Twitter will mentor company founders.

A 16,000 square foot space carved out of an abandoned brewery that will eventually employ around 500 people, it represents a big vote of confidence from the world's most successful internet company.

And while German venture capitalists remain more conservative than their counterparts in Silicon Valley, the amount of money available for startups has increased dramatically.

Over the past year, Berlin-based tech startups have raised over $650 million, more than three times the amount generated the previous year and more than six times the amount raised the year before that, according to venture capital database CB Insights.

Founders of some of the city's more promising startups — such as the audiofile sharing service SoundCloud, the academic social networking company ResearchGate and collaborative video-editing software maker FlavourSys — say Berlin's shortcomings can sometimes be advantages.

The city’s hip reputation attracts software engineers interested in the intersection of technology and creative projects at the heart of companies like SoundCloud. The lower level of activity here also makes it easier to afford and retain talented people than it would be in more advanced startup hubs.

Starting out here allowed FlavourSys to fly under the radar as the company developed collaborative software that enables television company video editors to work on files simultaneously from different locations.

Even though the company’s target market was always the US — which now accounts for 80 percent of its business — FlavourSys booked the National Geographic channel as its first customer before anyone in the software world had an inkling of what it was doing.

That happened at an industry convention in Las Vegas.

“It was amazing,” said FlavourSys co-founder Marco Stahl on the rooftop of the company's converted-apartment headquarters. “There were crowds of people, 20, 30, 40 people standing there watching demos. Then National Geographic came along and said, 'We want to buy this!'”

For a company that two weeks earlier had no website or printed business cards, that was a big deal.

ResearchGate co-founder and CEO Ijad Madisch has a similar story.

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Billed somewhat dismissively as “Facebook for scientists,” the company aims to break traditional boundaries that often keep academic research cloistered in ivory towers and exclude scientists from the developing world. When Madisch first came up with the idea six years ago, he found the world-weary capital of academia Boston too jaded to bite.

Berlin was different. When Madisch moved ResearchGate here in 2010, fifteen years after Jeff Bezos had launched Amazon, copycats had attracted programmers and created a nascent ecosystem for e-commerce startups, but little else. However, Madisch says it created a hunger to do something more interesting.

As a result, it was comparatively easy for ResearchGate to attract top developers, doctors and scientists.

“Everyone here is hungry to work on something big,” Madisch says. “That puts Berlin at an advantage to Silicon Valley.”


Thursday, July 24, 2014

The Grand Budapest Hotel is actually a department store in Germany, and it’s about to become much grander

A German entrepreneur aims to revitalize a moribund town in the former East by renovating an Art Nouveau icon.
By Jason Overdorf
(GlobalPost, July 2014)

GOERLITZ, Germany — Standing on a ladder, workman Roland Freund dips his trowel into a bucket of mortar and carefully smoothes a wall under a molding. The work is painstaking and the air choked with dust, but he’s happy to be here.

That’s because he’s taking part in a project locals hope will herald the revival of their town in the former East Germany, which industrial decline and an exodus of people has left depopulated and depressed since German reunification in 1990.

Expectations are high because this is no ordinary construction project.

Recently made famous as the setting for Wes Anderson's film “The Grand Budapest Hotel,” the Goerlitz department store is a majestic, airy structure with a beautiful leaded glass dome over the atrium, striking brass chandeliers and a grand staircase leading to the balconied terraces of the upper floors. When it opened in 1913, the Art Nouveau establishment rivaled London's Selfridges and Berlin's Kaufhaus Des Westens (KaDeWe).

Recently facing a battle for survival, however, the store is now in the midst of a $30-million facelift financed by entrepreneur Winfried Stoecker, the founder of a multimillion-dollar medical technology company based in nearby Luebeck.

He wants to leverage Goerlitz's growing reputation as a movie-shooting location to help rejuvenate the town, which is among the poorest in Germany.

“This is crucial for the revitalization of the downtown. But it is also a beacon of hope for the entire city of Goerlitz,” says Rainer Mueller, chairman of an earlier citizens' initiative to attract a buyer for the site. “With the planned for October 2015 re-opening of the store, the dead heart of the city will begin to beat again.”

After escaping World War II unscathed, the Goerlitz department store had been closed for years when Anderson chose it for “The Grand Budapest Hotel.”

Even though Goerlitz had managed to attract a steady flow of film crews from Hollywood and Germany's Babelsberg over the years, featuring in “The Reader,” “The Book Thief,” and “Inglourious Basterds,” among other films, the town itself was slowly dying.

Like others in former East Germany, it lost many of its young people to the more vibrant West in the years following the fall of the Berlin Wall in 1989. Although Siemens and the Canadian aircraft manufacturer Bombardier still operate facilities here, unemployment ranges around 12 percent.

The elderly outnumber the young and the town ranks dead last among German cities in purchasing power, according to a recent study by Germany's Association for Consumer Research.

Many are optimistic the renovation will change that, says Corinna Schneider, the area manager for the German Parfumerie Thiemann, the last company to operate a boutique in the department store.

“Many people came to Goerlitz especially to see the Kaufhaus,” she said, seated at a nearby cafe. “They all said they'd be back when it opens.”

Still, it's hard to make the potential foot traffic numbers add up for retailers, even though locals like Mueller say the time of outward migration is over and tourism figures are up, thanks to the so-called Goerliwood phenomenon.

On a sunny summer day at least, tables are packed at the swish outdoor restaurants near the Hotel Boerse, where Anderson and actors Jude Law and Ralph Fiennes stayed during the filming of “Grand Budapest.”

“Everyone says this is a pensioners' town, but suddenly stores and kindergartens are opening, so something is definitely happening,” says Stefanie Eggers, spokeswoman for the renovation project who notes that 4,000 people turned up for the project's recent open house.

As Stoecker's team works to attract international brands and smaller boutiques to fill the store's 70,000-square-foot space, new trends emerging at the end of the European economic crisis present some advantages, says project manager Juergen Friedel.

Across the Neisse River from Poland, Goerlitz's local boutiques are already attracting Czech and Polish shoppers, whose purchasing power and thirst for Western products is growing faster than their hometowns can satisfy. Moreover, the picturesque town lies directly on the route from Poland to the larger city of Dresden, the current shopping Mecca for wealthy Poles.

“On the motorway, the first exit across the German border from Poland is Goerlitz,” Friedel says. “We'd like to make sure the Polish people take that exit and don't go to Dresden.”

The key to success, however, will be turning the Kaufhaus into a “destination store” that customers are willing to make the centerpiece of a day trip. In the US, that has mostly worked for megamalls or specialty stores such as Cabela's outfitters, which incorporates attractions like a simulated trout stream where anglers can test-drive fly rods.

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Friedel says Garhammer — a 65,000-square-foot, family-owned fashion boutique located 60 miles from Munich — proves that the right package of top products and personalized service can work in Germany, too.

Gourmet restaurants, espresso and Prosecco bars and other signature features are planned for every floor, and the team has sketched out ideas for festivals and events to recapture the sense of the department store as a center of sophistication and culture — as dramatized in the popular ITV series “Mr. Selfridge.”

Still, it’s a battle to get potential vendors to come look at the place, Friedel says. But if he can get them into town, he adds, most of them bite.

“Once they see the building and the town,” he says, “they can imagine how nice it will be.”


Violence and anti-Semitism are shifting the Middle East debate in Europe

With more protests against Israel’s Gaza campaign expected on Friday, Palestinian supporters are worried their message is being drowned out.
By Jason Overdorf (GlobalPost, July 24, 2014)

BERLIN, Germany — Mention Israel’s military campaign in Gaza to the Arab customers and stylists at Salon Balbaak in the predominantly immigrant neighborhood of Neukoelln and the response is sighs of disgust.

“It's not just us Palestinians,” says Mustafa, a young man with wavy hair. “Every free-thinking person in Berlin is angry. You only have to see the children being killed.”

He may be exaggerating, but not by much.

Even as the United States continues its staunch support of Israeli policy, opposition to Israel’s actions is growingacross Europe as the death toll mounts in Gaza.

However, demonstrations against the military offensive have been marred by racist slogans and violence that is shifting the focus of the debate here from the plight of the Palestinians in Gaza toward the extent of anti-Semitism in Europe.

A court in France jailed three men on Thursday for rioting after a pro-Palestinian rally in a Paris suburb turned into anti-Semitic violence.

In several German cities, protestors have attacked pro-Israeli counter-demonstrators and chanted anti-Semitic slogans.

Mustafa, who asked to be identified by a pseudonym, decries the damage such actions is inflicting on the protest effort.

“The protests have nothing to do with anti-Semitism,” he says. “We are not against the Jews. We are against the Israeli government.”

More than half of Germans believe Israel and Hamas bear equal responsibility for the fighting and 86 percent say Germany shouldn’t publicly support Israel, according to a recent survey.

However, Jewish groups argue that the racial slurs and anti-Semitic slogans suggest the protests are rooted in ethnic hatred rather than politics.

"We are experiencing an explosion of evil and violent hatred of Jews,” said Dieter Graumann, president of the Central Council of Jews in Germany, in an official statement.

“All of us are shocked and dismayed that anti-Semitic slogans of the nastiest and most primitive type can be chanted openly on German streets.”

In Berlin last week, protesters chanted “Jew, Jew, cowardly bastard, come out and fight alone!” at a downtown rally against the military action in Gaza.

Earlier this month, police in the western German city of Essen arrested 14 people suspected of planning to attack an area synagogue.

Among other countries, protests have been particularly violent in France. In Paris, dozens looted shops and set a kosher grocery store on fire in a Jewish-dominated suburb over the weekend when a pro-Palestinian demonstration held in defiance of a French ban erupted into violence.

In Austria, pro-Palestinian protesters stormed onto the field at a soccer match, attacking players from Israel's Maccabi Haifa in town during a scrimmage against a French club.

In Berlin on Monday, 13 protesters were detained at a demonstration in front of the Israeli embassy for throwing stones at the police, who have prohibited specific slogans as a threat to public order after facing criticism for failing to silence earlier anti-Semitic chants.

“Especially in Germany, anti-Semitic protests have a very strong impact because of our history, and there always should be resistance to make clear that this is not what the public thinks,” Berlin police spokesman Stefan Redlich Redlich said.

“But for the police, we can only stop people from shouting slogans if the law says they are not allowed.”

However, the American Jewish Committee and other Jewish groups say they were disappointed by the initial police response. Diedre Berger, director of the American Jewish Committee office in Berlin, said it's difficult to understand how officers at the scene could have doubted that what they were hearing was hate speech.

“Free speech has nothing to do with threatening people and creating an atmosphere of physical violence,” she said.

In a joint statement issued Tuesday, the foreign ministers of Germany, France and Italy vowed to fight anti-Semitism, giving the issue equal prominence to remarks from the UN high commissioner for human rights suggesting that Israel's actions in Gaza may be classified as war crimes.

More demonstrations are expected on Friday, a holiday marking the end of Ramadan.

Opponents of the Israeli offensive worry that more violence will further mute their message.

“The protests are against the war, but of course there are some ignorant people who shout slogans against the Jews,” said Mohammed Barkat, editor of a magazine for Arabic speakers in Germany. “The problem is that the media in Europe is always on Israel's side — whether they're right or wrong.”

Online debates suggest some believe the shift is part of a deliberate Israeli public relations strategy.

Israel is “again hiding behind the anti-Semitism flag,” said a comment under an article in the Huffington Post.

“The greatest weapon of the Zionists is the term anti-Semitism,” added another.

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That perception may have been boosted by some ill-considered remarks by Israel's ambassador to Germany, whom the Daily Mail quoted as saying, “They pursue the Jews in the streets of Berlin… as if we were in 1938.

However, the American Jewish Committee’s Berger says the focus on anti-Semitism by the press here is natural given Germany's history and the recent advances made by far-right parties across Europe.

“The notion that concerns about anti-Semitism are raised to squash criticism of Israel is a pretty shocking assertion,” she says. “It’s a good way to deflect attention from very serious incidents of anti-Semitism.”


Thursday, July 17, 2014

This German program offers some of the world's best paid job training. So why is it struggling to attract workers?

Despite its great success, the country’s apprenticeship system is battling to keep young people interested.

By Jason Overdorf
(GlobalPost, July 2014)

BERLIN, Germany — When Hermann Oplanic failed to get into college three years ago, he was devastated.

Like a growing number of young people, the 25-year-old Berliner saw a university education as an essential pre-requisite for joining his country’s modern middle class.

But all was not lost. Thanks to an apprenticeship program that’s the envy of American manufacturers, he now believes circumstances forced him into making the right choice for his future.

“A friend of mine completed his studies first and then took an apprenticeship,” says Oplanic, a blond machinist dressed in blue overalls and a polo shirt who works for a company that produces gear-grinding equipment in the capital. “Now he thinks it would have been better to get some practical experience first.”

Run by companies mostly at their own expense, Germany's apprenticeship program is widely credited with producing the most highly skilled, hardest-working labor force in the world. But even as US President Barack Obama unveils a $100-million program aimed at emulating it, the German scheme is struggling to attract young people.

Officially integrated into the education system in 1969, Germany’s apprentice placements range from banking to butcher shops, administered by hundreds of chambers of commerce that set training standards and monitor how trainees are treated.

During apprenticeships that typically last three to three-and-a-half years, trainees spend four days a week working and one day at an academic “Berufschule,” or “career school,” earning salaries or hourly wages that match their level of experience.

For employers, the system provides a wellspring of employees trained to use the latest technologies, while state-run technical schools typically operate using factory and laboratory equipment as much as two decades out of date.

Being taught and evaluated by experienced workers who are possible future peers and colleagues helps instill a craftman's sense of pride that's harder to cultivate at community colleges and trade schools, say German executives like Martin Kapp, head of the German Machine Tool Builders' Assocation (VDW).

“Trained people will always find work in Germany,” says Kapp, who also owns the Kapp Group, which makes grinding machines and precision tools for the automobile, aerospace, and power generation industries. The company, where almost all top executives got their start as apprentices, employs around 50 apprentices at its headquarters in the central town of Coburg.

Although apprentice programs aren't unknown in the United States, they've traditionally remained the purview of the building trades and other union-dominated industries, and have mostly been eclipsed by community colleges and technical schools that students pay to attend. Only around 375,000 Americans were enrolled in apprenticeship programs at the beginning of this year, compared with 1.4 million in much smaller Germany.

But even as the Obama administration announces that its own drive to expand on-the-job training has resulted in the creation of 10,000 new apprenticeship programs in the US since January, trouble is brewing in the manufacturers' paradise.

A record low number of young Germans signed on as apprentices in 2013, due to demographic and social changes that mean ever fewer young people are joining the workforce as more are opting for university degrees, according to a new report from the Federal Statistics Office.

Even though Germany faces a looming shortage of skilled workers in key occupations, the government has until recently been trying to push more students into higher education, according to one of Germany's workers' guilds.

Oplanic, the machinist apprentice, says three quarters of his friends are studying at universities.

“The German system is very good,” he says. “But they want someone who can build a rocket for a job cleaning toilets.”

Where policymakers once promoted higher education in a bid to improve social mobility, the apprenticeship system is now credited with helping Germany achieve the EU's lowest rate of youth unemployment during the economic crisis, Kapp says.

“There was a time when everybody just looked at the statistics and saw that Germany had a lower number of people going to university,” he says.

That blinkered view ignored strengths of the German system that have been built up over decades and may prove more difficult than expected for the US to duplicate, Kapp says.

At his company's US manufacturing facility in Colorado, he tried again and again to set up an apprenticeship program based on the German model. But he found that American workers weren't willing to make long-term commitments to training programs — at least with machinists in hot demand. Moreover, American engineering graduates had no interest in getting their hands dirty on the shop floor — an essential component of Germany's reputation for excellence.

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A similar effort to build an apprenticeship system in the UK has run into trouble because Britain lacks the management infrastructure of powerful trade bodies that control standards in Germany. Many of the new programs are too short to be much use and the range of programs is too diverse for the qualifications to have value, the Economist recentlycomplained.

Whatever the benefits for society at large, the German model means that companies, not the government or the students themselves, absorb most of the cost of job training.

Kapp says his total investment easily adds up to more than $1 million over five years. That’s something businesses in other countries may not be willing to sacrifice.


Monday, July 14, 2014

How Germany’s World Cup victory symbolizes its leading role in Europe

As Germans fight off hangovers after a night of extravagant partying, their team’s history-making win represents a decade of reforms in economics as well as soccer.
By Jason Overdorf
(GlobalPost, July 2014)

BERLIN, Germany — When the scoreless World Cup soccer final went into extra time late Sunday night, Berlin’s streets and subways were deserted.

With the match commentary blaring from open windows and doors, however, you could walk from the neighborhoods of central Mitte to nearby Kreuzberg without losing track of the game. On every corner, fans spilled out of bars, cafes and restaurants, jostling for a glimpse of the action on television screens.

When substitute Mario Goetze chested a clean pass onto his left foot and volleyed the ball past Argentine goalkeeper Sergio Romero to finally give Germany the lead with 113 minutes gone, a roar of exhilaration erupted across the city.

Crowds outside the Turkish cafes of the immigrant-dominated neighborhoods Kreuzberg and Neukoelln burst firecrackers and beat drums.

When the final whistle blew minutes later, the denizens of the hard-core German dives known as “local smokers” broke out into choruses of “Olé, olé, olé, all Germans, sing Olé!” — an announcement that the all-night party had begun.

“We're the World Champions!” shouted a group of men draped in German flags as the celebration moved to the street.

Unlike in Argentina, where at least 70 people were injured as disappointed fans smashed shop windows and vandalized cars, across Germany, virtually the only casualties were brain cells as the drinking continued into the early morning.

Nearly a quarter million people watched the match on the so-called “fan mile” created around Berlin's iconic Brandenburg Gate, which police had to close off before the game started to prevent overcrowding.

Police estimated that another 15,000 took to the famous Kurfuerstendamm shopping avenue in former West Berlin after the final whistle.

As the sun rose this morning, thousands were still at it, judging from the occasional blare of car horns and the sound of drunken singing.

German astronaut Alexander Gerst congratulated the team from space.

Chancellor Angela Merkel posed for a selfie with striker Lukas Podolski.

US coach Juergen Klinsmann — who helped Germany win the cup as a player in 1990 but failed as coach for the national side in 2006 — echoed widespread opinion, saying, “The best team won the 2014 World Cup.”

For coach Joachim Loew and the German players — a dream team of veterans who had largely stayed together since winning the Under-21 UEFA championships in 2009 — the victory was a major vindication. Perennial bridesmaids, “Der Mannschaft” had been to the semifinals or finals in every World Cup since 2002 without bringing home the hardware.

After a dismal performance in the 2004 European Championships, the team launched a decade of reform under then-coach Klinsmann. For Low, who continued the regime after he took over two years later, another loss may have meant losing his last World Cup chance.

For the country at large, the win also represents a historic and symbolic victory — and the peaceful jubilation made for a fitting end to a dream performance.

Although the former West Germany won the World Cup three times, most recently in 1990, Sunday's match marked the first victory for the unified country.

Germany’s World Cup victories have also represented the country’s economic fortunes. Stunning the world in 1954, the first win symbolized Germans’ emergence from devastation in World War II.

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Sunday’s win now marks Germany’s position as Europe’s economic and political powerhouse, after a decade of reforms enabled it to drop its image as the sick man of Europe.

With five prominent players who were born abroad or eligible to play for other countries, the team also represents a new, increasingly immigrant-friendly country confident in its role in the world.

Goetze, the player who pounded in the winning goal, hadn’t even been born when the Berlin Wall came down in 1989 — perhaps the last time this city saw a party of this magnitude.


Saturday, July 12, 2014

Germany goes for World Cup history. No pressure.

Second-best just won't cut it for Germany anymore.

By Jason Overdorf
(GlobalPost, July 2014)

BERLIN, Germany — Across Berlin this week, German flags droop from apartment balconies, flutter from the windows of passing cars and festoon the fronts of driving schools, kebab shops, party stores and bars.

It's a rare release for Germany's pent-up patriotism following their 7-1 drubbing ofBrazil and going into Sunday's World Cup final against Argentina.

But the uncharacteristic expressions of national pride have put even more pressure on the German side to make history.

In every World Cup since 2002, Germany has at least made it to the semifinals, but has yet to bring home the trophy.

“When a team comes so close to the title so many times, the desire for a victory gets stronger and stronger,” said Rafael Wieczorek, director of Coerver Coaching in Germany and Austria.

“At the same time, this team is considered by fans and experts to be the best German team since 1990, perhaps since 1972. So the expectations are very high.”

A favorite to win the tournament from the beginning, by trouncing Brazil, Germany convinced virtually everyone that the final is in the bag.

Yet as press reports this week revealed that the German team had made a halftime pact not to embarrass Brazil too badly after going up 5-0, German coach Joachim Löw and company have strived to emphasize “focus” and “concentration” — perhaps fearing that the blowout may already have turned high expectations into hubris.

Symbolism only heightens those expectations further. Though the former West Germany has won the tournament three times, most recently in 1990, a win by Löw's side would mark the first victory for unified Germany in history.

With immigrant stars like Mesut Özil and Sami Khedira, among others, the team represents an unified, multicultural Germany where the foreign-born are no longer considered outsiders. Five prominent players on the national squad were either born abroad or would be eligible to play for another nation — mirroring Germany's broader effort to attract, rather than exclude, immigrants with measures like a liberal dual citizenship policy.

Moreover, in a country where hanging the flag would normally get you labeled a “right winger,” if not worse, the match comes as the nation finally seems ready to slough off the memory of World War II and demand to be treated as a “normal country” — with political might and military responsibilities to match its economic importance.

In recent months, Germany's president and defense minister have each pushed for a greater German military role in foreign conflicts, even as Germany's role in the Ukraine crisis cements Chancellor Angela Merkel's position as the de facto leader of Europe.

At “Zur Traube,” a neighborhood bar in the heart of Berlin, confidence is running particularly high. Ordinarily, the joint supports one of the Bundesliga teams, with free shots of liquor for every goal. But like every other bar in the city, this week it is draped with the black, red and yellow of the national flag.

“If Germany wins, this place will explode with joy,” says bartender Gerd Hettenhausen. “Everybody drinks more when Germany wins.”

In that case, there will be a victory parade in front of Berlin's Brandenburg Gate, where the so-called “Fan Mile” is already draped with symbols of national pride.

But if the team loses — making it five losses out of eight trips to the finals — there won't be a reception at all, according to off-field manager Oliver Bierhoff.

In other words, second-best won't cut it for Germany anymore — and that pressure could make winning just a wee bit harder.


Tuesday, July 08, 2014

Germany is angry with the US but can’t do much about it — for now at least

However, the latest spy scandal rocking relations between the two countries may affect longer-term attitudes toward Washington.
By Jason Overdorf
(GlobalPost, July 2014)

BERLIN, Germany — Although allegations that the CIA actively worked to recruit a double agent in Germany's top spy agency is prompting renewed outrage from German officials on Tuesday, experts say the government has little scope for much more than issuing strong words.

“There will be a lot of castigation but the two governments will continue to cooperate on the wide range of issues where their interests overlap,” says James Davis of the University of St. Gallen.

Still, the latest espionage scandal to hit relations between the two countries is strengthening calls for Germany to offer support, possibly even asylum, to NSA whistleblower Edward Snowden, and prompting new demands for the government to launch its own espionage program directed against the US.

However, the largest casualty may be a major EU-US free trade agreement that’s enjoyed the support of Chancellor Angela Merkel.

“That the Chancellor will have to be seen as representing the interests of a sovereign country seems clear, both from a foreign policy and domestic politics perspective,” Davis says of the Transatlantic Trade and Investment Partnership (TTIP).

“[Therefore] the episode will strengthen the hand of those who are against TTIP.”

When not stoking new anger against the US, the case has fascinated German observers because of the curious way it’s unfolded.

Unnamed US officials confirmed Monday that the CIA had indeed recruited an agent of Germany's foreign intelligence service, who was arrested by the German authorities last week on suspicion of being a double agent.

However, the authorities initially said they had detained the man in connection with an alleged offer to sell information to Russia. While in custody, he purportedly confessed to working with US agents as well, selling as many as 218 classified documents over a two-year period for a total of around $35,000, reports said.

His lawyer stopped short of confirming those details on Monday, but he told German television that “there are things in the media which are true.” Earlier reports by Der Spiegel and the Suddeutschezeitung suggested that the double agent had been tasked with gathering inside information about a German parliamentary committee's inquiry into the NSA's activities in Germany — including the tapping of the chancellor's mobile phone.

Alghough Merkel’s cellphone may have made the biggest headlines, ordinary Germans have been mainly concerned about Snowden's revelations about the NSA's massive data collection program. The latest revelations about US agents allegedly working to subvert the inquiry into that case adds a new layer of betrayal, says Jan Techau, director of Carnegie Europe.

“The goal was to spy on this [parliamentary investigative] committee and get secret documents on this committee's work,” he says. “This is what people have taken really hard.”

The public outrage has forced politicians to take stronger stances against the US, Techau adds. And while the new revelations may not result in any immediate consequences for US-German relations, he adds, growing popular disgust with Washington may have long-term implications.

Already, nearly two-thirds of Germans think their officials should act more independently from the US, according to a poll conducted by TNS Research for Der Spiegel. Some 69 percent said their confidence in America had fallen recently.

Visiting China with a trade delegation when the story broke, Merkel issued what some view as her strongest statement yet on the allegations of US spying, saying the case represents a “clear contradiction as to what I consider to be trusting cooperation between agencies and partners.”

President Joachim Gauck exploded on German TV, saying “enough is enough,” and Bild newspaper reported that Home Minister Thomas de Maiziere is pushing to step up spying on the US.

Although that actually taking place is unlikely, those comments and others like them reflect the growing pressure on policymakers from media and public opinion to take some kind of action, says Volker Perthes, director of the Institute for International and Security Affairs (SWP).

“Germany should and will probably improve its counter-intelligence activities, also with an eye on what our American allies are doing,” he says.

Intelligence cooperation between German intelligence agencies and their US counterparts could also be reduced, he adds. And German policymakers could add their voices to those in the European parliament calling for canceling the SWIFT agreement on exchanging banking data.

The growing public disenchantment with the US could have farther-reaching implications over the upcoming months and years.

Germany's orientation has increasingly tilted toward US foreign policy goals and economic ideals in recent years, illustrated by Merkel's toughening stance toward Russia. But growing skepticism about US intentions could slow or skew that tilt, especially if it begins to influence voters' attitudes toward American values.

Davis says the spying scandals are especially affecting the attitudes of younger Germans under 25.

“These revelations continue a long series of similar episodes that together leave the impression for many in Germany that the USA has lost its anchor.”


Thursday, July 03, 2014

Russia's pipeline politics are dividing the EU

The Kremlin is seeking to isolate Ukraine by strengthen Europe's dependence on Russian gas.

By Jason Overdorf
(GlobalPost, July 2014)

BERLIN, Germany — As the authorities in Ukraine step up assaults against separatists in the east of the country following the end of a tenuous ceasefire there, Russia is working hard behind the scenes elsewhere to dash their hopes of restoring some measure of stability.

Moscow is waging a propaganda campaign against the government in Kyiv in addition to apparently giving support to the pro-Russia rebels. But the Kremlin is showing its greatest depth in its moves to undermine unity among Ukraine’s Western supporters over sanctions and other measures that would punish Russia for meddling in the affairs of its southern neighbor.

For that, it’s relying on its most powerful trump card, a foreign policy tool it’s brandished for the last decade to stunning effect: energy.

German Chancellor Angela Merkel warned Moscow ahead of talks on Ukraine on Wednesday that economic sanctions remain an option if the Kremlin doesn't back peace efforts.

But a plan to build a major new pipeline that would pump Russian natural gas to Europe is helping drive a wedge between European countries that have so far united at least rhetorically against Russia's adventurism in Ukraine.

Moscow is hoping Austria, Bulgaria, Hungary and even Italy and France may soften their stances over Ukraine thanks to pressure from their own large energy conglomerates, which have signed very lucrative deals with Russia’s Gazprom natural gas monopoly.

That’s because any plans to reduce dependence on Russian supplies would hit so-called legacy European energy companies, such as Austria's OMV, Germany's RWE and Italy's Eni, as hard as Gazprom, says Andrew McKillop, former policy analyst at the European Commission's energy directorate.

“There's a legacy infrastructure problem for the European common energy market that is very difficult to reconcile,” he says.

Russia’s planned South Stream pipeline would have the capacity to pump 63 billion cubic meters of Russian gas a year directly into Southern Europe by way of the Black Sea. The route would enable the company to bypass Ukraine, where price disputes and unmonitored siphoning of gas has prompted two shutoffs that have affected supplies to Europe.

The North Stream pipeline, a similar 55-billion cubic meter conduit across the Baltic Sea that opened in 2012, has already cut the volume of gas that Russia sends through Ukraine by a quarter.

Ukraine has been able to use its role as a transit route for Europe-bound Russian gas to pressure European countries as well as the Kremlin.

But the addition of the South Stream would enable Russia to cut off supplies to Ukraine without hurting its own access to crucial European markets.

That would mean what happens in Kyiv or Crimea may no longer be of vital importance to countries like Germany that currently rely on Russian supplies for some 40 percent of their gas.

Russia’s success would probably embolden Moscow to continue using energy politics to influence events in other former Soviet republics such as Moldova, Georgia and Armenia, which are also seeking closer ties with Europe, says Carnegie Europe's Judy Dempsey.

“South Stream and North Stream actually consolidate Europe's dependence on Russian gas,” she says. “If South Stream goes ahead, that dependence will be set in a pipeline under the Black Sea, so to speak.”

The pipeline could prove even more important for Kremlin-controlled Gazprom as it races to beat a growing list of of liquefied natural gas (LNG) suppliers and other competitors to a quickly changing energy market.

Mushrooming LNG terminals will soon be able to supply the entire gas demand of countries like France — which also receives piped gas from Norway and Algeria. Meanwhile, gas consumption is falling across Europe, making a drop in gas prices virtually inevitable.

At the same time, plans for a common European energy market that the EU hopes will help make diversifying energy sources easier would force Gazprom and other energy conglomerates to allow new competitors to use pipelines and electricity distribution infrastructure they built — giving the new arrivals an inherent cost advantage.

“[Gazprom] has to finance its competitors and it's selling less gas. And the unit price of gas is falling,” McKillop says. “Can you imagine a worse situation than that?”

So far, the EU has attempted to use antitrust laws that prevent gas suppliers from owning distribution infrastructure to weaken Gazprom’s control over European energy supplies.

But South Stream represents the company's bid to show Europe there's no compelling reason to diversify its sources after all.

With Austria's OMV, Italy's Eni, France's EDF and Germany's BASF all involved in the project, there’s already evidence they’re forcing cracks in the European alliance, Dempsey says.

Already, Austria, Bulgaria and other countries are demanding exemptions from the antitrust rules, and more trouble looks to be brewing.

On Tuesday, Hungary's Prime Minister Viktor Orban confirmed that Hungary will go aheadwith building the section of South Stream that lies within its borders despite US and European objections.

The same day, Italy's state secretary for European affairs told Russia's state-owned news agency that his country, too, has “a strong interest in implementing it.”

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Earlier this week, energy experts speculated that rumors prompting a run on Bulgaria's largest banks and an EU move to shore up those institutions may have been salvos in a tussle over Bulgaria's section of the pipeline, which European officials ordered put on hold in early June.

Meanwhile, Austrian President Heinz Fischer invited Russian President Vladimir Putin to Vienna last week to put an official stamp on a deal to land the South Stream pipe at OMV's Baumgarten gas terminal — undermining EU warnings about the possibility of escalating sanctions against Russia.

“There is a basic economic role for Austria, an advantage for Austria, in supporting this project, so the political factors were sidelined,” McKillop says.

Moscow is surely hoping that logic will prevail in other European countries as the battle over Ukraine plays out in the months and years ahead.