ABSTRACT
This chapter presents and reviews some of the latest empirical evidence on the highly contradictory socio-economic pressures the German welfare state has been exposed to since the 1980s. It as has been argued that, the newly evolving socio-economic context of permanent austerity restricts the policy choice of democratically elected governments, while at the same time governments face highly contradictory demands for adjustment. Although employment in Germany's industrial sector declined at a slower pace than in most other OECD countries, it followed the general trend and decreased considerably. Growing employment in the public or private service sector could not sufficiently compensate for the declining labor demand in the industrial sector. As illustrated by the current global financial crisis, both economic and monetary integration virtually remove the Keynesian monetary and fiscal toolkit from the hands of nation states, further increasing the pressures of fiscal austerity.
