German economic growth is mainly driven by export surpluses while internal demand is low. This growth model has been consistently critizized by the IMK since its foundation in 2005. Here you can find its English publications on the topic.
The private investment share is very low in Germany when compared to other European countries. This is mainly due to low real estate investment after the burst of a real estate bubble at the end of the 1990s. Investment in equipment is low in historical perspective because demand is not sufficient and already existing capacity is not fully used. Contribution by Fabian Lindner for the Friedrich-Ebert-Foundation.
In the 2000s labour-market and welfare-state reforms in Germany reduced firms' costs from wages, social security contributions, and taxes. The aim was to increase incentives for job creation. But since appropriate demand-side policies were neglected, aggregate demand stagnated and depressed employment.
This report compares labour costs from a selection of European countries. Overall, the picture of a highly competitive German economy is confirmed. The authors also find that hourly labour costs in German private services are one fifth lower than in the manufacturing industry. In no other European country does the service sector lag manufacturing to such an extent.
In Germany, income inequality has increased noticeably in the first half of the new millennium. The authors find changes in the labor market, the increasing relevance of capital income as well as the decreasing effectiveness of income redistribution are the main explanatory factors for the rise of income inequality.
With the pension reforms of 2001 and 2004 the German pay-as-you-go system was severely curtailed and a subsidised voluntary capital funded system - the "Riester Pension" was introduced. However, the objective of higher yields and the long-term stability of the overall pension level have not materialised. This leads to a serious danger of wide spread old age poverty.