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The German economy is faltering and many people believe euro membership adds to the problem.
Unemployment reached over 4 million in June, 9.8% of the workforce. And major companies like Babcock Borsig have collapsed putting 22,000 jobs at risk. Economic growth forecasts keep falling. And exports fell to �51 billion in May 2002, down from �54 billion in April. Some economists believe the Deutschmark was 20% overvalued when Germany entered the ERM. The country no longer controls important economic levers of power. Its central bank cannot cut interest rates and the government cannot raise government spending because euro zone members have promised to aim for a balanced budget by 2004. Other economists believe that the entire German economic model is unravelling. The workplace is hidebound by overbearing rules that stifle growth. And the high level of support for business from central government, the powerful regional Lander governments, the banks and insurance companies which has been a cornerstone of the German economic model will not survive into the new century. In the 1950s and 1960s the German economy achieved productivity (average economic output per worker) of 4% or 5% each year. Employment also expanded as guest-workers joined the workforce, so economic growth was 6% or 7% each year. Going forward productivity growth is unlikely to exceed 1% each year and the workforce is likely to fall. In this scenario Germany can only expect economic stagnation in the new century.
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