History judges most fairly about people. It is only when many years have passed that it becomes clear who was a fool – and who promoted the good. These days, the Bundestag will adopt a supplementary budget of 156 billion euros, of which 122.5 billion euros will go to financial injections, loans and benefits for those affected by coronavirus. It is the largest aid package ever decided in Germany.
It is too early to judge the benefits and disadvantages of this package. But it’s not too early to shed light on the conditions that make it possible. The German economy is solid, unemployment low, until recently tax revenues have been gushing, and the budget has run out of new debt. There are two main reasons for this: firstly, the Schröder government’s Agenda 2010 reforms, and secondly, the strict austerity measures of the Merkel governments.
The sick man of Europe
When Gerhard Schröder took office as Chancellor in 1998, there were 5.3 million unemployed, 12.5 percent youth unemployment and 1.8 million long-term unemployed. Germany was considered the sick man of Europe. In addition, there were the consequences of globalization: The country’s competitiveness seemed to be increasingly at risk due to relatively expensive products and heavily burdened social systems.
In this situation, Schröder risked everything. He took up the struggle with his own party, advocated “promoting and demanding”, pushed through the Hartz IV reforms against massive resistance, which primarily affected the labor market.
The social Consequences – Monday demonstrations, secession from Oskar Lafontaine – cost Schröder the office. But economic development proved him right. Unemployment declined rapidly, everyone was amazed at the “German job miracle.” In many places, attempts were made to copy the reforms, for example in France. To this day, Germany is internationally envied.
Mocked as a “Swabian housewife”
About the pros and cons of Agenda 2010 entire libraries have been filled. The high low-wage sector, the poverty trap, the increased number of temporary workers, the fate of mini-jobbers and the constant fear of falling are all against this. However, according to the majority of economists, the predominance – the solidification of Germany as a business location.
Angela Merkel took hardly less beating than Schröder for her strict austerity measures after the financial and during the euro crisis. As a “Swabian housewife”, she was mocked and drawn with Hitler beard in highly indebted countries. Again and again Barack Obama demanded higher German government spending, the French government resisted “austerity dictates”, the “black zero” was turned into a fetish, rumbled it Opposition.
“… then you have in need”
Merkel’s answer was always the same. The reduction in Deficits are indispensable for sustainable growth, and saving means less interest payments “for our children and grandchildren.” The primary goal – as she linked to Schröder – must be to get people to work.
“Save time, then you will have it in need.” The truth of this saying is evident in the corona crisis: Germany’s Schröder reform and Merkel’s austerity policies enable it to think big and act big. To be proud of this is forbidden in the crisis, but relief and gratitude are allowed.