After months of grim economic news when Europe's powerhouse economy seemed to have run out of steam, German industrialists are starting to look cheerful again. Order books are full, the country has regained its share of the world export market and economic growth looks set to leap from last year's 1.4 per cent to 2.4 per cent by the end of 1997.
There is already talk of a boom and some optimistic souls are even predicting that the recovery would be strong enough to keep Germany's deficit below the crucial 3 per cent of GDP laid down for membership of Economic and Monetary Union (EMU).
The recovery is driven by a surge in exports, expected to increase by 8 per cent this year, caused by the recent weakness of the deutschmark in relation to the dollar. The German currency lost 20 per cent of its value in relation to the dollar in just 12 months, making its products much more competitive on the world market.
Everyone from car manufacturers to pharmaceutical companies is reporting record profits and the DAX index of the Frankfurt stock exchange reaches a new high almost every week.
But this cheerful picture does not tell Germany's entire economic story and there is little optimism to be found among those who form Germany's lengthening dole queues. Unemployment, officially standing at 4.7 million, is at its highest level since Hitler came to power and the Federal Employment Office admitted last week that there was no sign of a significant improvement.
High unemployment not only places a massive burden on the state's finances; it also engenders a sense of financial insecurity, depressing consumer spending. The surge in exports has not been matched by an equivalent rise in domestic demand, with consumer spending expected to rise by just one per cent this year.
The export boom could itself grind to a sudden halt if the Bundesbank grows impatient with the weakness of the deutschmark and raises interest rates significantly.
Bundesbank president Mr Hans Tietmeyer has already expressed concern that German inflation has crept up to 2 per cent and he said last week that he wanted to see the deutschmark returning to a level of about $1.70. "Insofar as interest rate rises have an effect on economic performance, I would say in general that long-term interest rates are more important for investment decisions that the short-term money market rates," he said.
The Chancellor, Dr Helmut Kohl, may see things differently, particularly in view of the fact that he has a tough battle ahead as he seeks a record fifth term in office next year. After 15 years in power, Dr. Kohl badly needs an economic feel-good factor as he enters the campaign. He is also determined to launch the euro successfully and on time, a goal which limits his room for economic manoeuvre.
The Chancellor is famously uninterested in economics, preferring to devote his energies to enhancing Germany's presence on the world stage and promoting his pet project of European integration. The Finance Minister Mr Theo Waigel revealed last month that he too is tired of taking care of the German economy after nine years in which unemployment and public debt have risen to record levels.
The government blames the cost of German reunification and the blocking tactics of a bloody-minded opposition for the country's economic woes. But if Dr Kohl fails to reap the rewards of the current recovery, many observers would argue that this would be a just punishment for his failure to introduce reforms to make German industry more competitive.
His failure to introduce such reforms could even cause the recovery to falter if a stronger deutschmark robs exporters of their current advantage. The tax system is especially in need of an overhaul to remove current impediments to taking on new employees and rigid work practices need to be made more flexible.
The opposition Social Democrats promise to make the necessary changes and business leaders have already started cuddling up to the party's most likely challenger to Dr Kohl, Lower Saxony's popular prime minister Mr Gerhard Schroeder.
While Dr Kohl was urging young people last week to become self-employed rather than waiting for someone to give them a job, Mr Schroeder was calling for a reduction in the added costs of employing people imposed by the government.
"It is clear that the continuing loss of real earnings damages the economy as well as causing social hardship. It would certainly be wrong to expect wage increases in excess of increases in productivity. Firms must remain competitive.
"But a reduction in wage costs puts more money in the hand of the employee and would invigorate consumer demand," he said. The export boom has brought smiles to the faces of Germany's industrialists but the public is likely to remain gloomy until the benefits start trickling downwards - right down to the dole queues.
