German economic model
Just over ten years ago there was still a lot of criticism of the German economic model. Economic growth still
relied too much on heavy industry and the country was lagging behind in the areas of ICT and services, it was
argued.
The close ties between the government, the banks and the business sectors formed a major obstacle
to foreign investment and further growth. Germany’s recipe for success in overcoming these problems was
not a radical transformation of the economy, but a gradual adjustment. The most important elements of the
reforms were to introduce greater flexibility in the labour market and in wage negotiations and restructuring
in the business sector. German companies went through a period of debt reduction, wage moderation and
outsourcing to Central and Eastern Europe.
At the same time, companies and the government responded
alertly to positive trends and the demand for German products in Asia, particularly China.
EU Forecast
euf:ba18.c:130/nws-01