German Model - Future of The German Model

Future of The German Model

Since the German reunification German prosperity has declined compared to pre-unification West German levels, and the German unemployment rate reached record levels: 12.6% (according to national definition) as of March 2, 2005, the highest rate since World War II. The failure of the German model to maintain standards of high performance has led experts to speculate about its demise, despite having been adopted successfully in other countries' corporations since its peak. Others see the relative decline as an unavoidable consequence of integrating the much less advanced GDR economy and 17 million new citizens, which necessitated a transfer of over 1.3 trillion Euros from west to east as of 2009.

Much of the political discourse regarding reforms in recent years revolved around the question of how to modify the German model (and the political conditions forming its framework) to sustain it in a globalised economy. Ex-Chancellor Gerhard Schröder's reforms, called "Agenda 2010", made some steps towards such a goal, but also brought with them much controversy. Nonetheless, after years of 'painful' reforms, the German economy seems to have gotten back on track. Unemployment has fallen below 10% (according to national definition) for the first time in years and economic growth reached 2.7% in 2006.

Whether this is an ongoing development is however a matter of continuing debate, as are further reforms.