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Germany Becomes the Second Japan?

Posted February. 07, 2003 22:47,   


▽Does the ‘Sickness of Germany’ become chronic?=Last year, the economical growth rate of Germany was stayed at 0.2%. The number of unemployed people of the month of January marked to highest since the departure of the Gerhart Schroder Administration in 1998 with 4,540,000 people (unemployment rate of 11%). The growth rate of consumption and expenses, which has been dropped since 1999, will be predicted to mark a minus in 2002. The German Government predicted the growth rate of this year would be 1.5%; however, the result is questionable because of the Iraqi War and the strong Euro.

However, the counterplan of the Prime Minister Schroder, who said, “I will reform the labor market and the social welfare system, is not effective. The unemployment rate, which was the biggest task of the Government, is going up, and people`s opposition against the raise of various taxes and social welfare reduction policy is also fierce. As a result, the reigning Party recorded the worst defeat since the World War II in local elections in Niderzaxen State and Hessen State. According to the poll of the public opinion poll company Alensbach, 61% of the respondents replied about the prediction of this year, “It is doubtful, or it is questionable.”

▽Her status in the international society is also shaky=Her policy against war, which is supported by her own people, is losing its position outside of the country. Last week, 8 countries including the UK and Italy declared to support the Iraqi War, and 10 eastern European countries also took the US side. The Foreign Minister of her only ally France, Dominique de Villepin, changed his position and said, “If the inspection is cemented, we can consider using forces,” so there is a sign of ‘isolating’ Germany appearing.

▽The main problem is the strictness of the labor market=The Business Week counted the strict Labor Protection Law, which was not fixed for more than 50 years, as the biggest obstacle for the recovery of the German economy. Because of this law, the restructuring of human resources and contract employment are almost impossible. And companies also are limited in their operation because of the burden of social security allowances.

Since companies were selecting ‘transactions without data’ to avoid excessive taxes and burden of labor costs, the size of the black market in 2001 was up to 16% of the GDP. While companies are moving out of the country to overseas, where the labor costs are low and have less regulations, there is a worry of ‘leakage of national competitive power. However, the opposition parties, the Union of CDU-CDP as well as the Social Democratic Party, which has the labor unions as the biggest support group, cannot touch the Labor Law because of the votes from the labor unions.

This magazine reported that the expense for the reunification is another major factor for stress in finances. The expense for the reunification took 4% of the GDP since 1990, so total of 700 billion dollars (approximately 840 trillion won) have been spent; however, the rebuilding project of the East Germany is predicted to be finished as early as 2020. The pension, which is up to 70% of the average salary, and the unemployment allowance also need to be fixed.

The Business Week advised, “If Germany does not reform herself extensively to regain her power to grow, she will lose her fate of country that was once great.”