VZCZCXRO0172
PP RUEHIK
DE RUEHRL #0121/01 0281003
ZNR UUUUU ZZH
P 281003Z JAN 10
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC PRIORITY 6398
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHINGTON DC
RUCNMEM/EU MEMBER STATES
RUCNFRG/FRG COLLECTIVE

UNCLAS SECTION 01 OF 02 BERLIN 000121 
 
SENSITIVE 
 
SIPDIS 
 
STATE PASS TO DOC - SECRETARY LOCKE 
 
E.O. 12958: N/A 
TAGS: OVIP ECON ETRD EFIN GM
SUBJECT: SCENESETTER: GERMAN ECON MINISTER BRUEDERLE'S 
FIRST VISIT TO WASHINGTON, FEBRUARY 1-2 
 
REF: Berlin 85 
 
BERLIN 00000121  001.2 OF 002 
 
 
¶1. (SBU) SUMMARY: Germany's Minister for Economics and 
Technology, Rainer Bruederle (Free Democratic Party, 
FDP), will be the first senior German economic official 
to visit Washington since Germany's new coalition 
government assumed office in October 2009. Bruederle is a 
strong proponent of the free market, including tax cuts 
geared to entrepreneurs and the middle class. His policy 
agenda focuses on strengthening SMEs and fostering 
competition. He is the most outspoken critic in the new 
government on state aid to GM/Opel. In his meetings with 
senior Washington policy makers on February 1-2, 
Bruederle is likely to focus on transatlantic trade and 
investment, the future of the Transatlantic Economic 
Council (TEC), support for the "Mittelstand" (SMEs), 
prevention of protectionism ("Buy American"), the Doha 
international trade round, and global economic 
imbalances. END SUMMARY. 
 
¶2. (SBU) Bruederle served as the Economics Minister in 
the state of Rhineland Palatinate from 1987 to 1998 and 
has aspired to become Germany's Econ Minister since 
becoming a member of the German Bundestag in 1998. His 
instincts are "U.S. friendly," and he owns a home in 
Florida (see ref A for more bio details).  In Washington, 
Bruederle looks forward to his meetings with Secretary 
Geithner (confirmed), Secretary Locke (confirmed), USTR 
Kirk (confirmed) and Larry Summers (not confirmed). In 
addition, he will meet with the Congressional Study Group 
on Germany and with John Lipsky of the IMF and Donald 
Kohn at the Federal Reserve. 
 
Macroeconomic Outlook 
--------------------- 
 
¶3. (SBU) German GDP decreased by 5% in 2009, the largest 
decrease since the end of World War II. Economic recovery 
began in the third Quarter of 2009 and growth is forecast 
at 1.5% for 2010. While unemployment is still relatively 
low (8.1%), thanks to employment measures such as the 
government-sponsored short time work program (i.e., 
government-subsidized furloughs), unemployment is 
expected to increase markedly in 2010 as benefits begin 
to wind down. With the strong support of Minister 
Bruederle, the German government agreed to tax relief in 
December 2009 worth 8.5 billion euros in order to fuel 
economic recovery. Bruederle defends the tax cuts, even 
in the face of record high national debt, as 
indispensable. He maintains that there is no conflict 
between cutting taxes and consolidating the budget, since 
tax relief will boost growth and employment.  Bruederle 
also promises further tax reform which will result in 
additional cuts of 20 billion euros after 2011. (NOTE: On 
January 27, a senior official at the Chancellery told 
visiting Deputy Commerce Secretary Hightower that despite 
mounting public concern over exploding deficits, the 
coalition government will not be able to avoid the now 
unpopular tax cuts altogether because it was the FDP's 
major campaign promise and remains enshrined in the new 
government's Coalition Agreement.  The tax cuts, however, 
are likely to be spread out over more than one year and 
possibly cut, we heard.) 
 
 
The Future of the Transatlantic Economic Council (TEC) 
--------------------------------------------- --------- 
 
¶4. (SBU) The TEC was founded at the initiative of 
Chancellor Merkel in 2007 and the German government 
continues to strongly support the process. The Germans 
have pushed to include new issues, especially common 
standards on electro-mobility (e.g., recharging plugs for 
electric automobiles), in the TEC agenda. German 
officials, however, have expressed concern that U.S. 
interest in the TEC is waning and that the newly-formed 
US/EU Energy Council will shift attention away from the 
TEC. Bruederle's meetings provide an important 
opportunity to assure senior German government officials 
that the U.S. Administration remains supportive of the 
TEC and that the US/EU Energy Council is intended to 
complement rather than compete with the TEC.  It would 
also be constructive for both sides to exchange ideas on 
specific, achievable objectives in the TEC. 
 
 
BERLIN 00000121  002.2 OF 002 
 
 
 
Buy America: Worried about Protectionism 
---------------------------------------- 
 
¶5.  (U) In the first half of 2009, Buy America provisions 
in the U.S. stimulus package prompted strong official 
German reactions, public outcry and unfavorable press. 
German officials warn that these provisions may stoke 
protectionist tendencies worldwide, even though 
government and industry have not provided any specific 
examples of German companies being discriminated against 
because of Buy American regulations.  In the past few 
months the protests against Buy America have subsided 
although the lack of clarity on Buy American regulations 
continues to irritate German business and the government. 
Both continue to call for final implementing regulations 
for Buy American rules under the ARRA; these had been 
expected in the fall, but have not yet materialized. 
 
 
Doha: Germans Support Rapid Conclusion 
-------------------------------------- 
 
¶6. (U) Minister Bruederle and the German government fully 
concur with German industry in calling for a rapid 
conclusion of the Doha Round. They believe that the 
current Doha package is the best result that can be 
obtained under current circumstances. Although they do 
not disagree with American aspirations in the Doha Round, 
senior German government and industry officials have 
signaled that they consider U.S. demands for more market 
access in emerging economies to be unrealistic. The visit 
provides a useful opportunity to explain to Bruederle 
first hand the market concessions the U.S. needs from the 
emerging economies and to seek support from Germany in 
engaging such countries constructively. 
 
 
Support for Small and Medium-Sized Enterprises (SMEs) 
--------------------------------------------- -------- 
 
¶7.  (SBU) Bruederle likes being called "Mister 
Mittelstand" (Mr. SMEs), and his policy agenda puts a 
strong focus on creating a level playing field for SMEs 
as they compete with big multinationals. In his previous 
position as Economics Minster for the state of Rhineland 
Palatinate, he also put great emphasis on promoting SMEs. 
He will likely inquire about the current situation with 
U.S. SMEs, how they have been affected by the financial 
and economic crisis, and how the U.S. and Germany could 
work together on measures to support SMEs.  (Note: German 
State Secretary Pfaffenbach and Commerce Deputy Secretary 
Hightower spoke at length about this theme in a Berlin 
meeting on January 27.) 
 
 
Global Economic Imbalances 
-------------------------- 
 
¶8.  (SBU) The German government is uncomfortable with G- 
20 discussions on global imbalances that focus in part on 
Germany's surpluses, contending instead that China's 
currency manipulation is the greatest problem. MinEcon 
State Secretary Pfaffenbach told Commerce Deputy 
Secretary Hightower in a meeting on January 27 that 
Germany exports successfully due to product 
competitiveness and not government intervention through 
industrial policy or subsidies.  Officials also point out 
that Germany's current account surplus results primarily 
from surpluses within the EU. Bruederle's meetings will 
provide a good opportunity to remind the Germans that the 
U.S. cannot sustain its role as the "consumer of last 
resort," and that surplus countries such as Germany will 
need to find policy instruments to increase domestic 
consumption. 
 
 
MURPHY 
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