Germany has, at the moment, the reputation of an invincible powerhouse - although it was some 15 years ago seen to be somewhat sluggish. I have referred in recent posts to the various critiques which have surfaced in the past few years. Last week's Der Spiegel had a large feature on the decline of public investment - and the deterioration in public infrastructure.
This theme is picked up again in a publication by the European Council for Foreign Relations, entitled - a German Model for Europe? which
examines the reasons for the success of the German economy during the last decade. In particular, it describes the elements of the Agenda 2010 – essentially a set of labour market reforms implemented by Chancellor Gerhard Schröder from 2003 onwards – and explores their contribution to Germany’s macroeconomic performance. It points out some problematic elements of Germany’s economic performance during the last decade and concludes that Germany’s economic success is a product of a combination of nominal wage restraint, supported by labour market reforms which have brought down the reservation wage and put downward pressure on wages, and severe spending restraints on public investment as well as on research and development and education. On the whole, this cannot serve as a blueprint for Europe.