Job losses The Economics of Xenophobia

Economists fear the recent wave of anti-foreigner violence in Saxony and other parts of former East Germany could seriously damage local economies.
Onlookers cheered the fire in the building in Bautzen that was intended to house refugees.

Leading economists are warning of dire economic consequences from the recent wave of anti-foreigner violence in the eastern German state of Saxony, saying the incidents could eventually hurt Germany as a whole.

“Xenophobic violence can cause massive economic damage; it is already hurting the economy of the entire state of Saxony,” Marcel Fratzscher, the president of the German Institute of Economic Research, told Handelsblatt. “Saxony will pay a heavy economic price for the anti-foreigner attitudes of some of its population.”

Last week, in Clausnitz near the Czech border, an angry mob blocked a bus from bringing asylum seekers to a residential center. Police were criticized after manhandling frightened refugees out of the bus. In Bautzen, onlookers cheered as a building intended to house refugees burned to the ground in a suspected arson attack.

The incidents were the latest in a series of violent anti-migrant protests in the eastern state, whose capital is Dresden. In the most serious incident, in August of last year, right-wing radicals laid siege to a building housing migrants, attacking police with stones and fireworks.

The cities of Dresden, Freiberg and Meerane have seen comparable attacks.

While anti-migrant violence has surged across Germany, Saxony seems particularly badly hit. According to the research group Media Service Integration, 20 percent of all attacks in 2015 took place in Saxony, which has a population of 4.3 million.

Many good jobs in Saxony are at risk. Xenophobia stops people moving to the region for work. Worse, it scares away companies. Marcel Fratzscher, president, German Institute of Economic Research

Mr. Fratzscher said “many good jobs” in eastern Germany are now at risk. “Xenophobia scares people away from moving to the region for work - worse, it scares away companies," he said. "German firms, even more than their foreign competitors, depend on inward migration, openness and tolerance.”

Saxony, he added, could expect to see lower investment, slower growth and increased unemployment, unless “political leaders intervene quickly and decisively against xenophobia.”

Michael Hüther, director of the Institute for the German Economy, said universities and research institutes in Saxony already found it difficult to recruit highly qualified experts and staff. “The more the impression takes hold that the state and civil society in Saxony are too weak to hold back the tide of extremism, the worse the consequences will be,” he added.

Mr. Fratzscher pointed to another factor. Eastern Germany, particularly in rural areas, has a rapidly aging population. Even before the anti-migrant incidents, this has acted as a brake on investment. States like Saxony desperately need inward migration, he said, to counteract a growing shortage of skilled workers.

Referring to the protestors’ slogan, he said, “The mob can shout ‘We are the people’ all they like. But they are only reinforcing trends towards de-industrialization and poverty.”

Quelle: Getty Images
Ms. Klöckner and Ms. Merkel can put on a good show when they need to.


The slogan “We are the people” was famously used in the mass protests that helped bring down the East German communist regime in 1989, and has recently been adopted by right-wing anti-refugee protests.

Other German states will also disapprove of the racism, according to Mr. Fratzscher, noting that in Germany’s federal system, wealthier states subsidize poorer ones like Saxony. “Who is going to want to make federal transfer payments to people like that?" he said. "They are sawing off the branch they are sitting on."

Political figures echoed the economists’ warnings. In an interview with Handelsblatt, Iris Gleicke, the federal government’s Commissioner for the New Federal States, who has responsibility for the former East Germany, voiced her concerns.

“This endangers Saxony’s reputation, at home and abroad; in fact, it puts all eastern states at risk," she said. "Falling tourist numbers in Dresden should be warning enough. So we all have to take a clear stand against these Nazis. And that includes people who thus far have looked on and done nothing."

The federal government was quick to condemn the attacks in Saxony. Angela Merkel’s spokesperson, Steffen Seibert, called them “profoundly shameful.”

Federal justice minister Heiko Maas, of the center-left Social Democrats, demanded that politicians and society as a whole develop “a new culture of opposition to racism and xenophobia.” Otherwise, the consequences could be fatal: “We can’t wait until people are killed,” he told the Funke media group.

Right-wing extremism in eastern Germany has been systematically downplayed. Iris Gleicke, German Commissioner for the New Federal States

Like many observers, Ms. Gierke criticized the prevailing political culture of the former communist federal states. “Right-wing extremism in eastern Germany has been systematically downplayed," she said. "People calling attention to the problem have been accused of damaging the region. This paved the way for today’s situation, with mobs on the streets and buses blockaded. That has to change."

A few political steps are already being taken. The head of the Clausnitz refugee hostel, a member of the far-right Alternative for Germany party, has been fired. Stanislaw Tillich, Saxony’s state premier, announced an intensified campaign against xenophobia. Opposition parties in Berlin are pushing the federal government, with the socialist Left Party demanding a statement from Chancellor Merkel, and the Green Party calling a parliamentary debate on the issue.

But politicians may struggle to find quick answers. Xenophobia in Saxony is widespread, with links to deep local pride in the state and its regional culture.

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“That is why a lot of people in Saxony react strongly if they feel they are being forced into a multi-ethnic, multi-cultural society,” said Werner Patzelt, a Dresden-based political scientist. “If peaceful protest seems to have no impact, anger can grow. Then all you need is a few criminals or hotheads and violence can crystallize."

Although mainstream parties may unite against right-wing violence, the refugee question continues to foster deep political divisions in Germany. And three key state elections are looming on March 13. In all three, Ms. Merkel’s party, the Christian Democrats, is under pressure from the burgeoning right-wing populist AfD party.

Her party co-chairman, Julia Klöckner, is running for premier against the incumbant Social Democrat Malu Dreyer in the state of Rheinland-Palatinate. Concerned about the AfD grabbing votes with its anti-refugee rhetoric, she has called for a daily quota on refugees, similar to the one that Austria has already imposed.

The Christian Democrat Guido Wolf, who is seeking to head the government of Baden-Württemberg, has jumped on the same bandwagen.

The move by Ms. Klöckner and Mr. Wolf appears to have ruffled some feathers in the right-left coalition government. "Those are internal issues that indeed need to be discussed within the party," government spokesman Steffen Seibert said.

In Bavaria, one of Germany's largest and richest states, which is also bearing the brunt of refugee arrivals, the Christian Social Union – Ms. Merkel’s coalition partner and sister party to her Christian Democrats – is on the verge of open revolt. Horst Seehofer, the Bavarian state premier, is threatening to take a case to the country’s constitutional court in March, in an attempt to force Ms. Merkel’s government to secure national borders and stem the flow of refugees.


Dietmar Neuerer covers domestic politics for Handelsblatt from Berlin. Dana Heide is a correspondent for Handelsblatt in Berlin, focusing on energy policies, small and medium-sized companies and innovation. Daniel Delhaes reports on politics, transport and airlines from Handelsblatt's Berlin office. To contact the authors:,,

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