ABSTRACT
This chapter identifies the causal mechanisms linking public policy developments in Germany to the broader political economic environment of the Eurozone. The authors argue that Germany’s bold internal devaluation approach prepared the ground for the ongoing crisis of the EMU by triggering a mutual reinforcement of unsustainable growth models, pitting a surplus core against a deficit periphery. They show that the comparatively positive economic and labour market developments in Germany since 2009 are not to be attributed to “Agenda 2010,” but to more strategic efforts within manufacturing companies and on the labour market to strengthen product-based (rather than price-based) competitiveness, as well as to more recent efforts, promoted primarily by the trade unions, aimed at limiting the damage caused by the above-mentioned devaluation approach. While the German “success story” is used to justify the dominant austerity approach in the EU, the authors suggest that the stabilization of the Eurozone depends on reorienting Germany’s socio-economic model towards strengthening its domestic market based on massive public investment in infrastructure and social services. This will give more leeway for progressive actors in other countries to push for alternative approaches aimed at reforming their productive basis and welfare state in a more sustainable fashion.
