German economy is mired in problems. Germany's labor laws that played an instrumental role in the post-war economic success are now stifling the growth of the country's economy.
Long
regarded as the engine of growth for European industry,
Germany is slipping into recession. In 2002, German
economy showed up one of the worst performances since
1990s. The Gross Domestic Product (GDP) increased by
paltry 0.2% and the forecasts for 2003 are also grim.
The high wages, rigid labor laws and rampant red tape
combined with the proposed new taxes by the government
prompted the exodus of many German companies to other
low-cost locations. That in turn aggravated the already
high level of unemployment at 9.7% of the workforce.
The
ruling coalition of Social Democrats led by Chancellor
Gerhard Schröder (Schröder) and the Greens is not able
to push through with much needed economic and labor
reforms. Schröder seems to be more adept at pleasing
the strong labor unions than fixing the plethora of
problems facing the German businesses. Agrees Simeon
Mitropolitski, Reviewer, International Real Estate
Digest, "the lack of will from the German
Government to make structural reforms will go against
the interests of the left electorate, which has brought
twice this coalition to power. Germany lacks the
economic dynamics due to highly bureaucratized social
structures."
The
roots of some of the problems that the country is facing
today can be traced back to the German unification
period. After 45 years of separation, the Federal
Republic of Germany (West Germany) and the German
Democratic Republic (East Germany) were unified in 1990.
The fast pace of unification came as a surprise to all
concerned. In the unification of Germany, not only the
political factors, but also the economic relations
between West Germany and East Germany played an
important role.
|
