Introduction

Abstract

At the beginning of the twenty-first century the Federal Republic of Germany seems to be suffering from a serious disease. Low growth, high unemployment and a swelling budget deficit are said to be the most obvious symptoms. Commentators say Germany’s over-regulated labour market and its over-expanded welfare state, which is financed primarily by social insurance contributions, are the root causes. Politicians and social scientists argue that countries that have been more successful in terms of employment and growth over the past decade, such as the Netherlands, the United Kingdom or the United States of America, have performed better because of their innovative approaches and might therefore serve as models for an overhaul of the German political economy. But despite the presence of potential models, a cure for the German ‘disease’ seems at best elusive. This is because Germany is allegedly caught up in a political blockade and is unable to change.¹ The presence of a large number of ‘veto players’ (Tsebelis 2002) within the German political system is often given as the major reason for Germany’s political gridlock. These veto players strengthen policy stability and prevent the government from pursuing a policy of ‘necessary’ reform.