Germany’s “cash-for-clunkers” scheme expired on Wednesday with a last-minute surge in demand a full three weeks before the Sept. 27 election and much faster than anyone thought possible.

It was among the 81-billion euro basket of stimulus measures the government put together to soften the impact of the recession and was later copied in many other countries, including the United States.It started out as a 1.5-billion euro scheme but that had to be quickly topped up in the spring as a frenzy swept the country.

It gave the economy an important glimmer of hope as gross domestic product contracted by a post-war record 3.5 percent in the first quarter. The government’s heavy-handed intervention did, however, disrupt the free markets — hitting the market for used cars and causing problems for retailers as we pointed out in this story in April.  

My colleague Paul Carrel pointed out in an analysis today that the “cash-for-clunkers” scheme helped private consumption in Europe’s biggest economy grow by 0.1 percent in the first half and without the scheme it would have declined 1.0 pecent compared to the first half of 2008.    

 

The Social Democrats led by Vice Chancellor Frank-Walter Steinmeier — pictured here on the left inspecting a new car as it rolls along on the assembly line — have claimed credit for the Abwrackpraemie, saying it was their idea that helped the car industry in Germany and elsewhere with the generous subsidies for new cars for those to junk their older vehicles. That may be the case but voters don’t seem to care: the SPD still trails Chancellor Angela Merkel’s conservatives by about 12 points in opinion polls. 

The pressing question now is: What will happen to the car market now? Will demand for cars collapse? Did the “cash-for-clunkers” scheme simply encourage would-be car buyers to pull forward their purchases? Will the market be sucked dry? Or did it help stimulate genuinely new demand from people who otherwise would have held onto their ageing vehicles? Will it prove to be a “Strohfeuer“, a flash in the pan?

 

 

 

PHOTOS: Top: Junk cars piled up at a scrap yard in Offenbach near Frankfurt,  REUTERS/Kai Pfaffenbach (GERMANY)

Lower: Steinmeier (2ndL) talks to an employee about the A3 production line during a visit to the German car manufacturer Audi in Ingolstadt. REUTERS/Michaela Rehle

 

 

 

Having your car worth 93,000 euros ($132,000) stolen while you’re on holiday in Spain is bad enough.

But if you’re a German government minister whose party is already facing an uphill battle just two months before a federal election, it’s even worse.

All that misfortune can turn into a veritable nightmare when the German electorate only learns about your private use of the luxury government car on holiday as an unintentional consequence of the theft.

With a dearth of news during the summer doldrums, German media have pounced upon the revelation that Health Minister Ulla Schmidt’s Mercedes was stolen in Spain last week. They’re asking why on earth did the Social Democrat (SPD) minister need her armoured limo and its chauffeur in the Spanish resort - click for story here. The chauffeur drove the car 2,300 km from Berlin to Alicante while Schmidt flew there.

German government rules allow ministers to use their official cars privately but they are obliged to pay for the private use. Schmidt’s spokeswoman said she needed the limo in Spain because she has two business appointments there during her two-week holiday. Schmidt was tracked down by German television on Monday evening in Spain: “I use the official car at times on holiday and pay for that. I keep track of every private journey in a logbook,” Schmidt said. “I’ve been doing that for the last 8-1/2 years and there was never any fuss about it.”

So why all the fuss now?

Schmidt’s misfortune is really bad news for Frank-Walter Steinmeier, the SPD’s candidate for chancellor in the Sept. 27 federal election. His SPD is already trailing Chancellor Angela Merkel’s conservatives by more than 10 percentage points. Steinmeier returns to work from his own holiday in the Italian Alps on Wednesday and was hoping to jump-start his struggling campaign.

But the uproar over Schmidt’s use of her government car is an unneeded roadblock for Steinmeier.

(Photo: Foreign Minister Frank-Walter Steinmeier (L) and German Health Minister Ulla Schmidt in Berlin, Sept. 16, 2008.  Reuters/Johannes Eisele)

The streets of the Egyptian capital Cairo have been unusually quiet since the start of the month and cabbies say they now drive around in fear of the massive police presence, evident at all major intersections. The big junctions have a police “liwa” on duty — equivalent in rank to an army major-general — along with up to a dozen subordinates enforcing, or perhaps working out how to enforce, a draconian new traffic law.

The newspapers publish daily reports of the number of tickets they have given out the previous day — at least several thousand, for offences such as failing to wear seat belts or stopping beyond the white line at a junction.

On the first day some drivers were ticketed because they did not have the first aid kit which the new law requires them to carry, although the Interior Ministry had postponed that requirement for three months until pharmacies could stock up on them.

Egyptians assume that this unusual requirement is designed to benefit some businessman close to the government but no one has identified a suspect or produced any proof. With millions of vehicles on the road, many of them without working lights or brakes,let alone first aid kits, much money is at stake.

What has most put people on edge is the sudden shift away from tolerance of rock-bottom driving practices and vehicle maintenance standards. The trouble with the new system is its unpredictability.

One driver of a four-wheel-drive vehicle was stopped and had his licence seized because the vehicle had a metal crash bar attached to the front. When the driver argued that was how the cars rolled off the production line and came out of the showroom, his argument fell on deaf ears.

Drivers have warned me that I should have all the dents and scratches patched up on my car in case the police don’t like the look of it. But I’m happy to take my chances. After all, most cars are in worse shape and they can’t remove half the vehicles from the streets of Cairo without massive disruption.

Even since the new law came into effect, policemen have still been seen taking money from drivers, not a good omen for what the Interior Ministry billed as a fresh start. As long as those meant to enforce the law are taking bribes, there will be no law enforcement, as one taxi driver put it.