Ask a German politician or pundit to account for the strength of Germany’s economy. I’ll bet you a plate of Nürnberger sausages that he or she will praise the labour market and welfare reforms adopted about 10 years ago by the government of Gerhard Schröder, Chancellor Angela Merkel’s predecessor.
The “Hartz reforms” tightened the terms on which unemployed Germans claim welfare benefits. They laid the emphasis on putting people quickly back into jobs, at lower pay if necessary. Nowadays German unemployment is remarkably low (5.1 per cent of the workforce in December 2013, according to Eurostat, versus 27.8 per cent in Greece, 25.8 per cent in Spain and 12.7 per cent in Italy).
However, some newly published research by four German economists challenges the argument that the Hartz reforms are the main cause of the nation’s economic recovery. Their carefully written study, entitled “From Sick Man of Europe to Economic Superstar: Germany’s Resurgent Economy”, should be required reading for everyone concerned with boosting the eurozone’s economic performance. Read more