ABSTRACT
‘Europe has a problem – and its name is Germany,’ according to The Economist of January 19, 2002, in a leader titled ‘Germany isn’t working’. Why? In the decade up to 2000, German economic growth was below oecd average, and in 2001, as the world economy slowed down, German growth slowed to just over half a percent per year, the lowest rate in the eu. By 2002, Germany hardly grew, and growth forecasts were gloomy. Unemployment had risen past the politically important level of 4 million, business as well as consumer confidence was at record lows, and the popular economic outlook was generally pessimistic. Germany had turned from the engine of the European economy into the laggard. What explains this dismal situation?
