Red tape puts the squeeze on life in the city

Dateline: Berlin, Germany

THE OLD man's face glows with child-like delight as he shows off the plans of his new house. Everything is meticulously illustrated, down to the two pianos that will stand in the middle of the living-room.

The old music teacher had bought the plot in a very desirable neighbourhood of west Berlin. Soon the builders will begin and the old man will finally move into his dream home. But if you ask him how long it has taken, his face will turn bright red, and he will launch into a rant about the "most bureaucratic place on Earth".

That is probably grossly unfair. There must be other cities on the planet where it takes three years to receive planning permission for an ordinary house - albeit one with two pianos - in a normal residential district.

The plethora of bylaws, regulations and special commissions that intrudes into the daily lives of Berliners cannot be more pervasive than those inflicted in some of the more notorious corners of the developing world. But no palm needs to be greased in Berlin. All you need is patience, a lot of it.

It is difficult to fathom what life in Germany's new capital must seem like for those arriving from abroad. For even those of us already shorn of a bit of our humanity and remoulded into passable citizens in Bonn are standing bemused and defenceless in the Kafkaesque world of the Berlin bureaucracy.

The little green residence permits that allowed our spouses to work are lost in space. The kids are refused medical treatment because local doctors will not recognise health insurance vouchers valid throughout the federal republic. "We have our own laws, you know," the administrators guarding doctors' surgeries say proudly as they show you the door. Wherever we go, there are always forms to fill out, usually the wrong ones in the end.

Berlin does have its own laws. As one of the 16 federal Lander the city-state boasts a legislative assembly and a government, named the Senate, which consists of Christian Democrats and Social Democrats. In other words, city politics are in a complete stalemate, a situation the political class tries to cover with legislative hyper-activity. That means lots of new bylaws are rolling off the conveyor belt, to the residents' great chagrin. Everything that can be regulated is regulated, from the location of waste bins in restaurants to the nuances of the curricula of local schools which, by the way, are reputed to be the worst in the country.

Inevitably, all this regulatory zeal takes its toll. Berlin is constantly hovering on the verge of bankruptcy, has an unemployment rate of 15 per cent, and despite gargantuan efforts to attract outside investment, precious little is coming in. French companies poured in vast amounts of money after re-unification. Almost all their enterprises have gone under or are ticking over with losses.

The Japanese moved here for a while, and then beat a hasty retreat back to Dusseldorf. The Germans never even bothered. Of the top 30 German companies registered on the Frankfurt Stock Exchange, only one, the pharmaceutics firm Schering, is based here.

There is, of course, one industry that should have fared well after reunification and the government's move. Berlin is the city of cranes, the biggest construction site in Europe, the place where the streets are paved with gold. They arealso bedecked with red tape.

Much of the building work is financed from the public purse, so public servants have a choice of weapons against construction companies. To withhold planning permission is one thing, affecting only those working for the private sector. It makes little sense to keep building workers waiting for three years for a permit when 40 per cent of them are already on the dole.

But greater tribulations are in store for those who land a public contract. The local government forces them to sign up for all kinds of conditions at work, such as the stipulated minimum wage of DM18 (pounds 6.20) an hour, which could easily be undercut by foreign workers. And upon completion comes the big surprise: the city does not pay up.

The city does not shirk its responsibilities every time, only in 76 per cent of cases. Invariably, the bureaucrats cite the companies' failure to fill out the forms properly as the reason for non-payment on time. In reality, the procedure has more to do with Berlin's rickety finances than with accounting techniques. "I have a feeling that they are constantly juggling with these bills, settling only those that are the most urgent," says Rolf Sterzel, manager of Fachgemeinschaft Bau, the lobby group for the construction sector. "There is a sour mood in the industry."

Most of the firms will not sue, because they are afraid of losing future contracts. But many go under, adding up to 10,000 workers a month to the dole queues. Some 350 construction companies go bust every quarter, squeezed by lack of liquidity and banks' demands for ever-higher interest premiums. Building is an activity fraught with risks, and the banks will not shoulder them alone.

Some of the city's destructive interventions are not pre-meditated. Essentially, the problem is that the administrators are not very good at administering. Berlin is a chimera with a strange history, of two halves being fused artificially in haste at the end of the Cold War.

In the east had reigned bureaucrats versed in the Communist school, and weaned off common sense at a tender age to ensure complete alienation from the human race. West Berlin was also a weird creature, an entity kept afloat by subsidies from West Germany, condemned to a sham prosperity by the political interests of the Free World.

After reunification, the groups of administrators were forged together, discarding only those who had worked for the Communist secret police. You meet remnants of this jolly band when you try to register as a foreigner. The relevant office is in the east, staffed by people who have not heard of the EU, and do not seem to appreciate that not all foreigners are without rights. The other lot are little better. "One hears, though I have no proof of this, that second-rate bureaucrats poured into Berlin from the West because of the vacancies after re-unification," says Mr Sterzel.

Wherever they are from, we are stuck with them. The good news is that they are learning as they go along. "Bureaucracy in Berlin has improved a lot in recent years," says Klaus Rogge, head of a construction firm employing 250. But not fast enough.

Two large multi-nationals, Daimler-Benz and Sony, rushed into the empty centre of Berlin after the Wall fell, to build headquarters on the legendary Potsdamer Platz. Their shopping arcades, hotels and cinemas, are almost complete. The transport links - roads and underground railway lines - will not be ready for a long time.