Germany: Which Way to Turn?

For many years, Germany was considered a model of economic and political stability. No longer. As Germans prepare to vote in a national election in September, they do so with less confidence in the future, uncertain as to the value of European institutions and weakened by the results of ten years of unification.

The World Today Published 1 August 2002 Updated 23 October 2020 6 minute READ

Stefan Collignon

Professor of European Political Economy, London School of Economics

Germany’s economic performance over the last ten years has been one of the least dynamic in Europe. With 0.6 percent economic growth last year, it lagged behind all other European Union (EU) member states.

Unemployment shot up in the early 1990s to European average levels, and it has only come down slowly from a peak of almost ten percent in 1997.

The consolidation of public finances with the aim of reaching a balanced budget seems a Herculean task and, despite some progress in recent years, the European Commission (EC) felt obliged to give Germany a formal warning in February that it must do more to set its house in order. After the long years of gridlock under Chancellor Helmut Kohl, the early years of the Schröder government – a coalition of Social Democrats and Greens – gave a new impulse for reforms, although over the last two years stagnation seems to have returned.

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