Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Here's a related voxEU piece from a couple of months ago.

Bottom line? It's the works councils, stupid:

Wendy Carlin and David Soskice: German recovery - it's the supply-side but not government labour market and welfare state reforms

Over the past decade or so, key changes have taken place in the export-oriented labour system. These have occurred outside the remit of government policy and have resulted from cooperation between company managers and their employees, through the medium of works councils. A major restructuring in organisation, training and in employment conditions has been negotiated. The result has been reflected in the strong performance of German companies in international markets based on improved price and non-price competitiveness.

The profitability of German firms has improved and this is reflected in the national accounts where the net profit share in both manufacturing and non-manufacturing business has staged a very impressive recovery. The deep disruption to the private sector of the German economy caused by unification has been overcome. The net profit share in manufacturing is now back to levels recorded in the early 1970s.

The real impact of policy "reforms" has been to further weaken consumption demand already weakened because of wage restraint:

. . . it is probable that the adoption by the German government of generic labour market reforms to increase the cost of unemployment has had the unintended consequence of raising precautionary savings . . . A second effect has occurred . . . wage restraint . . . reinforced the weakness of consumption by keeping real income growth low.
by TGeraghty on Thu Oct 18th, 2007 at 11:44:39 PM EST
What is this? Are we all Keynesians again?

We have met the enemy, and it is us — Pogo
by Carrie (migeru at eurotrib dot com) on Mon Oct 22nd, 2007 at 03:42:21 AM EST
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