Birgit Breuel May Have The Toughest Job In Germany

Birgit Breuel is one tough lady. Six months ago, when she became deputy director of the Treuhandanstalt, eastern Germany's privatization agency, her first act was to fire 15 co-workers she considered incompetent. When the 53-year-old free-marketeer became the agency's chief executive on Apr. 13, she immediately nixed the next Sunday off so seven top executives could hold daylong strategy sessions.

Breuel's new job demands physical courage as well as tough-mindedness. It has already cost her predecessor, Detlev Rohwedder, his life. He was assassinated on Apr. 1 by leftist terrorists who wanted to whip up anti-Treuhand sentiments. The year-old agency is under intense attack for its efforts to sell off properties that include 8,000 companies worth about $400 billion.

Breuel alone can't turn around the east German economy after 40 years of Communist misrule. But as Rohwedder's deputy, she developed a clear vision of the Treuhand's goal. "It's the largest company in the world," she says, but she'll measure progress by how much smaller it gets. As the Treuhand does that, its debt load will balloon, since it will assume up to $60 billion of old east German company debt. Under Breuel, it's now set to become the largest borrower on the new German commercial paper market.

NO FREE LUNCH. As companies are privatized, Breuel expects to rekindle the long-dormant sense of competition in east Germany. She wants to create in the east a duplicate of west Germany's Mittelstand, the 2 million small- and medium-size companies that made west Germany an industrial and export powerhouse. Says Breuel, without blinking: "It won't be easy."

But neither were her first lessons in real-world economics. Her father, Alwin Munchmeyer, a powerful Hamburg private banker who played a key role in west Germany's postwar construction, insisted that she and her siblings account for every pfennig of their allowances. It's no wonder that the title of her first book, promoting market ideas, was Nothing in Life Comes Free.

That credo has stayed with her. During stints as both economics minister and finance minister in the state of Lower Saxony, she built a track record of espousing libertarian economic concepts. In the early 1970s, she rocked the Hamburg Parliament, her first elected office, by pushing such then-novel ideas as getting the government out of business by slashing subsidies and hacking away at bureaucracies.

Once, she proposed privatizing train service on the nationalized Bundesbahn railroad. She fought in vain to keep government cash and state agencies out of the effort to restructure the German steel industry. But her campaign bore fruit when private German consumer electronics maker Grundig was kept from falling into the hands of France's state-owned Thomson-Brandt. Grundig is now owned by Dutch giant Philips and private shareholders.

At the Treuhand, Breuel will wield a bigger ax. The Treuhand already has shuttered 300 deadbeat companies, despite the risk of higher unemployment and political unrest. The alternative may be even less attractive: subsidizing jobs in wobbly companies before trying to sell them off. Breuel insists: "Privatization is the best way of making these companies healthy."

UNDER PRESSURE. At the same time, Breuel seems dead set against letting business barons use privatization to create new monopolies. That could have been the case during her first sell-off as Treuhand chief executive. When 10 former Communist Party newspapers worth $485 million were sold on Apr. 15, they were't merely handed over on a platter to a powerful media group such as Springer or Bertelsmann. Instead, they were split up among 12 owners.

Still, determination alone won't get the job done. By the end of the year, east Germany's industrial output is expected to slide to half its level before reunification. Meanwhile, there are no signs the slump is over. Warns Breuel: "The danger is that all the talk of problems becomes a self-fulfilling prophecy."

For the moment, the shock of Rohwedder's assassination has calmed the political turmoil in both east and west Germany that came in the wake of reunification. But the new tolerance may not last long. And Breuel is under intense pressure to pull off a success to help bail out her fellow Christian Democrat, Chancellor Helmut Kohl. Kohl is facing increasing voter discontent after hiking taxes to pay ballooning costs of reunification. The only way to curb the political strife, says Breuel, is to produce "signs that things are improving." She'll have to move fast if she can spark real improvement. The Treuhand already has speeded up company sales after a slow start. But Breuel isn't in complete control of the privatization process. Plans to sell or close companies with more than 2,000 employees, for instance, have to be cleared by Bonn. And legal battles over ownership of 6 million acres of land up for sale have dampened inflows of private investment.

Given her knack for bold ideas and stamina in hacking through layers of bureaucracy, Breuel has a good chance of sparking the rebuilding of the east. If she can pull that off, she'll repeat what her father helped do for west Germany.

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