The Transition of the German Economy after Monetary Unification and the EU’s Economic Reform

Abstract

This paper examines the German economic system toward marketization and the relationship between the German and the EU economy after monetary unification in 1999. the German economy has recently recovered from a long depression due to a strict economic reform in line with widening and deepening a free trade system within the EU. Economic indicators such as a low unemployment rate, a stable economic growth and an excellent balance of current account represent flatly the strength of the German economy. On the other hand, the poverty rate has increased and therefore the gab of incomes has expanded in the German society. While a series of labor policies has succeeded in reducing unemployment and mobilizing a labor market, it has caused a low level of wages and an increase in non-regular workers, which have made the German society unstable and insecure.
“Social market economy” as a direction of the EU economy to achieve a fair and an equal society as well as a perfect employment and a stable economic growth was adopted under the Lisbon Treaty. The concept of “social market economy” should be related to conventional economic thoughts which have contributed to developing the German style of capitalism by justifying the interruption into transaction in the market and the deployment of social security and welfare policy. Therefore it can be said that the EU economic system should follow the traditional German economic system. However the marketizatioin of the German economy has started and conflicted after monetary unification and hence there is no more ideal model for the EU to embody “social market economy“.
I suggest that the fiscal unification which organizes “funds transfer system” and disperses the risk of economic fluctuations among the EU members does not play an important role in achieving a fair and an equal society as well as a perfect employment and a stable economic growth. In addition to this system, it is necessary to build an economic system in which a high productivity and competitiveness created by the members can be transferred and widespread to the EU members.