Germany under fire for laggardly reform

Germany under fire for laggardly reform

2014-10-14 05:00

The Hague - Germany has come under heavy fire after statistics showed last week that the country’s economic recovery is faltering.

The influential chairperson of the Eurogroup, Jeroen Dijsselbloem, criticised the German government for not following through on the reforms it began a decade ago. Dijsselbloem is also the Dutch minister of finance, but he spoke in his capacity as chairperson of the Eurogroup.

Dijsselbloem referred to the so-called Hartz reforms of 2004, when the centre-left coalition of chancellor Gerhard Schröder reformed the rigid socialist labour market, making it easier for employers to lay off workers. This also made it easier to employ people, and laid the foundation for a decade of healthy growth.

However, these reforms have not been followed up. The present Chancellor, Angela Merkel, is often reproached for sitting on her hands, economically speaking.

Dijsselbloem, who is a Social Democrat himself, told the Frankfurter Allgemeine Zeitung on the sidelines of the International Monetary Fund conference in Washington that structural reforms “are not something you do every ten or 20 years. Germany should be vigilant to remain competitive. You cannot look at the reforms from years ago satisfied with yourself. One has to look forward.”

Dijsselbloem’s warning also came on the eve of Monday's Eurogroup summit in Luxembourg, where he and his German counterpart, Wolfgang Schäuble, were to look each other in the eye.

Dijsselbloem praised smaller countries like the Baltic states, Spain, Portugal and Ireland, all of which have executed drastic reforms during the last few years, and all of which have returned to growth. However, some bigger countries have not carried out reforms.

“Conspicuous examples are France and Italy, but Germany also should think about how to keep its competitiveness,” he said.

At the same time Larry Summers, a former American minister of finance, told the German financial daily Handelsblatt that Germany needed to stimulate its economy, if needs be with borrowed money. “The interest rate of about 2% for Spain shows that the capital markets have a great willingness to make more finance available for Europe.”

He added that the return would be bigger that the cost. “To the extent that the Europeans conducted such investments, they improved their economic position. Debt is not always bad.”

 - Fin24

  • Sapper_Coetzee - 2014-10-14 05:36

    Interesting that the first world countries saw that highly socialistic labour laws restricts the economy. Wonder what the Unions have to say about that

  • Alfred Karius - 2014-10-14 05:36

    Reform, competitiveness, codewords for screw the workers. The kind of economic growth they are talking about will only benefit the rich, because they are not rich enough and need to be richer.

      AfricanWolf - 2014-10-14 06:01

      Did you ever try to start your own company? Do you know how much effort and hard work it takes to succeed? It is much easier to leech on someone else and complain. Get up and try to do it yourself, with the current labour laws.

  • laudenkirk - 2014-10-14 06:59

    I would imagine Germany has extremely strict laws in place that can stump growth. Unlike South Africa people do what they want the good the bad and ugly.

  • Stephen AndKathy Whiteley - 2014-10-14 06:59

    Dijsselbloem means more social welfare and State interference in the Private sector, precisely what no EU country wants. S

  • Barend Spies - 2014-10-14 08:14

    And Germany almost singlehandedly saved Eurozone from economic collapse the last couple of years. Where is the gratitude??

  • Bubu Deknat - 2014-10-14 10:47

    In my view, Germany is bankrupting itself with Hartz 4 and millions of Euros in funding asylum seekers who firstly don't want to work but are only there to benefit from handouts. I feel sorry for the German working class who are taxed to death and their hard earned money is spent on "humanitarian grants". See the millions of Euros poured into Namibia and a certain group of indigenous people carry on crying for repatriation and another group of colour and greed pocket with one hand, destroying with the other. But that's only my view ...

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