Germany and the Euro Zone: The German Economic Growth Strategy and Euro Zone Cohesion

German economic performance in this recession period has regularly hit the headlines, comparing favourably with the relatively poor economic situation of France. However, one should not be deceived into thinking that adopting the German economic growth strategy would enable every country — and France, in particular — to restimulate its economy and move out of crisis. As Gilbert Cette shows in this article, Germany has held up well in the recession through very substantial wage restraint and temporary reductions in working hours. The heavy curb on wage and labour costs has stimulated competitiveness and external demand, but restrained the country’s internal demand. Such a strategy is not sustainable in the very long term, argues Gilbert Cette, either for Germany or its European partners, and if all the European nations adopted it, economic growth within the Euro zone would fall markedly.