Europe’s German agenda

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Europe’s German agenda
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As Europe continues to fumble its way through its debt crisis, can Germany’s reforms from a decade ago really serve as an example for the rest of the Continent? The Local’s Marc Young looks back to see an agenda for the future.


The economy is in shambles, people are taking to the streets in angry protest, and the government is on the verge of collapse after passing unpopular yet necessary austerity measures.

But this is not Greece in 2012 – it was Germany a decade ago.

Contending with the worst economic downturn since 1993, former Chancellor Gerhard Schröder came up with a package of labour and welfare reforms he called Agenda 2010. Deeply disliked at the time, it’s now widely credited as the reason why Germany is in considerably better shape than the rest of Europe.

In particular, it helped increase Germany’s competitiveness by making its labour market more flexible and living on the dole less attractive. But the Greeks, Italians and Irish now railing against the supposedly callous Germans for living it up while demanding their neighbours implement tough austerity measures appear not to be aware of just what it was like here ten years ago.

Dubbed the “sick man of Europe” at the time, Germany’s economy stagnated as eurozone economies like Spain, Ireland and Greece flourished. While their fellow Europeans gorged on cheap credit which fuelled a building boom and property bubble, glum Germans took to the streets to protest against rising unemployment and welfare cuts. An estimated 100,000 people turned out in Berlin to demonstrate against the government's reforms in 2003.

Joblessness eventually peaked at 13 percent nationally a few years later, when a whopping fifth of all eastern Germans were out of work.

Socially, the reaction to Agenda 2010 was explosive. Many Germans feared welfare cuts, commonly known as Hartz IV, threatened to destroy their society’s much vaunted solidarity with the poor.

And even though most would admit they are now better off than they were ten years ago – unemployment has dropped to a post-reunification low and the economy remains robust despite the eurozone crisis – few Germans feel as if they’re living lives of luxury.

Some critics complain the Schröder’s reforms paved the way for more part-time and badly paid jobs in Germany. And while others would counter that any job is still better than living on the dole, an increasing number of those in employment have to take supplementary work to make ends meet.

But the political price was equally high for Schröder, who had to force through the reforms despite fierce opposition from his own centre-left coalition. His policies – now so eagerly being copied by French President Nicolas Sarkozy – gutted support for his Social Democrats (SPD) and helped give rise to the to a hard-line socialist party The Left.

After the SPD lost a key state stronghold in the spring of 2005, Schröder was forced to call an early federal election, which he narrowly lost to Angela Merkel.

So it’s not that Germans are unsympathetic to the plight of their fellow Europeans – it’s simply that they have recently been through wrenching social and economic changes without the prospect of an EU bailout.

Yet they shouldn’t allow themselves to become too smug about how they reformed their country a decade ago. Though Germans like to profess the virtues of austerity to their European partners these days, they were consistently flouting the eurozone’s deficit limit while they were agreeing to take their bitter Agenda 2010 medicine.

Marc Young

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