Partying Like It's 2008.(International Edition; WORLD AFFAIRS)(Germany)

Byline: Stefan Theil

Germany is one of the worst-hit economies in the developed world. So why is everybody so calm?

The economic crisis has taken its toll in Europe. Governments in the Czech Republic, Hungary and Latvia have collapsed. Violent street protests have erupted in France and Britain. Yet Germany remains unfazed. While its economy is forecast to contract by 5.3 percent this year--compared with 4 percent in the U.S., 3.7 in Britain and 3.3 in France--Germans are remarkably angst-free about their prospects.

When spring temperatures finally arrived in late March, Berlin's sidewalk restaurants were packed. Its roads were choked with shiny convertibles tanked up on newly cheap gasoline. Consumer spending has held up; March auto sales were up 40 percent over last year, thanks to the [euro]2,500 government trade-in incentive that came with Germany's fiscal-stimulus plan. Only 13 percent of Germans tell pollsters their personal finances might be affected by the crisis. A long-planned protest in Berlin in late March managed to attract only a few thousand antiglobalization activists and left-wing fringe types. "Why Is It Still So Quiet?" the Frankfurter Allgemeine newspaper asked in a recent headline, intrigued by the idea that the country's citizens might be sitting out the grimmest recession in 60 years.

The main reason that most Germansahave yet to feel affected by the crisisais, to put it simply, that they haven't been affected. Unemployment, at 8.6 percent in March,aonly began to creep up in December when it was at 7.4 percent, and is still near lows last seen in the early 1980s. German banksawere among the biggest speculators in toxic U.S. assets, but that has had few repercussionsafor ordinary Germans. They saw neither aabubble in real-estate prices (in fact, they're a nation of renters)anor a boom in credit-fueled consumer spending, the implosionaof which is now hurting the United States, Britain, Ireland and Spain. Though Germanastocks are down 41 percent from their 52-week highs (versus 39 percent for the Dow Jones), it affects few private households, as few Germans own stocks directly. For their retirement they depend on state pensions and life-insurance policies, whose returns (and risks) don't show up on monthly statements.

What's more, most Germans seem to be enjoying aasweet spot they haven't seen in decades. Even with the recent jump,ajoblessness is still far belowaits 2005 peak ofa12.6 percent. ...