Schröder Sells Economic Reforms for U.S. Investment

Throwing himself into the role of Germany’s top salesman, Chancellor Gerhard Schröder came to New York looking to strengthen U.S.-German business ties. And as any good salesman would, he remained optimistic halfway through his short trip, despite a looming transatlantic trade war and soaring euro against the U.S. dollar.

Speaking at the the American Institute for Contemporary German Studies, which was honoring Citigroup chief Sanford Weill, Schröder trumpeted his so-called “Agenda 2010” package of economic and welfare reforms as just what Germany needed to stay competitive in the 21st century.

“We want to get our country in shape for the challenges of this decade, this century, in order to be an equal partner,” Schröder said before an audience of 500 business leaders. “We’ve realized after a period of being satisfied with ourselves that something has to change.”

Schröder presented Germany as on the verge of becoming a motor for reform in Europe -- something that could be a hard sale on either side of the Atlantic, considering the country has been a drag on EU growth in recent years. But with Germany’s export-dependent economy growing only a meager 0.2 percent in the third quarter, Schröder knows how important it is to bolster trade relations with Germany’s second largest trading partner, the United States.

AMD picks Dresden

As if to underscore Schröder’s case, U.S. semiconductor giant AMD announced on Thursday that it would build a $2.4 billion (€2.0 billion) chip-making plant in the eastern city of Dresden. Lured by generous government subsides, the facility will create around 1,000 jobs and will secure the state of Saxony’s position as one of Europe’s leading high-tech regions.

The AMD decision to pick Dresden over East Fishkill, New York and Singapore will add to the estimated €100 billion that U.S. investors have poured into Germany. Realizing more U.S. investment could translate into more jobs for Germany, which suffers chronically high unemployment, Schröder will continue his business-boosting role during a lunch on Friday with 17 leading U.S. executives.

But the soaring euro, which has hit an all-time high against the U.S. dollar, could spoil the party for Schröder and German companies, which fear the stronger currency will make their goods more expensive on world markets. Perhaps aware the euro could threaten Germany’s export-led recovery, Schröder addressed the issue in New York.

“Both sides have an interest in advantageous exchange rates. Nobody has an interest in a weak dollar,” said Schröder, referring to the growing U.S. trade deficit, according to Bloomberg News. “I don’t think there is an intentional weak dollar policy.”