March 20, 2005


Why Germany can't create jobs: European Union leaders meet Tuesday in Brussels in a bid to revive Europe's stagnant economy. (William Boston, 3/21/05, The Christian Science Monitor)

When Chancellor Gerhard Schröder took office in 1998, 3.9 million Germans - 10.2 percent of the workforce - couldn't find jobs. Last month, that number reached 5.2 million - 12.6 percent.

Mr. Schröder's center-left government, which campaigned on a pledge to create jobs, has issued bold economic and social welfare changes, including tax cuts, expanded shopping hours, healthcare and pension reform, and a controversial cut in unemployment benefits intended to encourage people to get back to work. But none of those steps have improved Germany's chronic job crisis.

Fearing continued voter backlash in key state elections, the German government last week held a "jobs summit" with opposition leaders. It emerged with a plan to slash the corporate tax rate to 19 percent, from 25 percent. And it pledged relief for mid-sized companies and increased public investment in infrastructure and education.

The new set of proposals are motivated as much by politics as by economic reality. [...]

The problem, say analysts, is that the government, which is closely allied with labor unions, is unwilling to deregulate the labor market to the extent that economists say is necessary to boost investment and job growth. Because Schröder didn't seek further labor-market reform, response to job summit was muted.

So my first grade teacher was wrong--it turns out when you mix Red and Green you get a Depression.

Posted by Orrin Judd at March 20, 2005 6:30 PM

I work in financial services and am constantly hearing how the Euro is going to replace the dollar in the near future. I point to articles like this and argue the Euro won't even be around in 5 years. Somebody is going to be wrong bigtime.

Posted by: AWW at March 20, 2005 8:51 PM

Wonder if Milton Friedman reconsidered his prediction again?

Posted by: Sandy P at March 20, 2005 9:10 PM

German inability to create jobs is the direct result of the difficulty of starting up companies. There is a system of red tape and bureaucracy that is absolutely frightening, much of which is the kind of pseudo-nostalgic nonsense to protect 'small business' that the dim-witted, inbred paleo-cons would bring to America to fight evil Wal-Marts if they could.

Posted by: bart at March 21, 2005 6:41 AM