From a bulwark of eurosclerosis to a flexibility champion?

Abstract

"It is only a decade or so that Germany was described as the sick man of Europe in the international media. For almost a decade starting in the mid-1990s the German economy was characterized by low GDP growth rates and stubbornly high unemployment. However, the roots of the problems pre-dated this period. At the heart of Germany's labour market problems was the steady deterioration in labour market performance since the early seventies. Since then, the unemployment rate at cyclical peaks showed a monotonous upward trend. Indicating a growing mismatch, the Beveridge curve markedly shifted outwards. Problems were aggravated by illdesigned economic strategies following German reunification and the fiscal consequences of the restructuring of the East German economy and modernization of its infrastructure. It is remarkable that a social-democratic chancellor, Gerhard Schröder, and not a conservative, initiated what Michael Burda has dubbed the 'teutonic turnaround'. The Schröder reforms undoubtedly marked a historical departure for Germany.<br> However, looking at macroeconomic data reveals that some deep structural changes started as early as the mid-nineties. Economic key variable such as wages or skill premia clearly indicated structural changes compared to previous trends." (Text excerpt, IAB-Doku) ((en))

Cite article

Möller, J. (2012): From a bulwark of eurosclerosis to a flexibility champion? Why did the German economy and the labor market do so well during and after the Great Recession? In: CESifo DICE report, Vol. 10, No. 2, p. 14-19.