Presented by Steffen Lehndorff in Toronto 25 April 2012.

1. „Europe speaks German now!“
A triumph of failed ideas: European models of capitalism in the crisis
Toronto
25 April 2012
Steffen Lehndorff
IAQ / University of
Duisburg-Essen

2. Unemployment rates in Europe (12/2011)
Source: Eurostat

3. Source: IMK

4. Source: IMK

5. Source: IMK

6. Current account of Germany with Eurozone (bn €)
Source: Deutsche Bundesbank (own calculation)

7. Nominal wages as agreed in collective bargaining*
* West Germany, 2000 - 2010
Source: Bispinck, WSI Report 6, 2011

8. The rise of the low wage sector, Germany 2000/2006*
* Wage brackets as per cent of all workers; Source: Thorsten Kalina / IAQ (SOEP)

9. What is behind ‚wage moderation‘?
• Breakup of pattern bargaining –> widening gap mfg-services
• Drop in bargaining impact due to
• Drop in coverage (East and West)
• De-facto abolition of extension mechanism
• Local derogations from industry standards
• Fragmentation of bargaining structures due to
• Outsourcing
• Soaring temp agency labour
• Privatisation
• Break-up of bargaining structures of public employers
• ‚Labour market reforms‘ -> push towards dualisation of LM
• ‚Mini jobs‘
• pressure on wages

10. Labour and capital income, by business cycle
Source: Brenke DIW-WB 8/2011

11. Internal flexibility in the crisis
Index 2000 = 100
Source: IAB

12. The victim is declared guilty ...

13. The medicine is killing the patient
Quelle: IMF (Ball/Leigh/Loungani 2011)

14. Beware the German Model
„It is not just the austerity measures
that are crucial. The structural
reforms are equally important for
me. For example, the labour market
reforms in Germany, known as
„Hartz IV“, have lead to massive
improvements on the labour
market.“
Angela Merkel
World Economic Forum, Davos
25/01/2012

15. Structural reforms to boost competitiveness:
„There has been much more progress recently than we have seen
for many years “ (Angela Merkel)
Greece: Spain:
Weakening of dismissal Weakening of dismissal
protection protection
Precedence of firm-level over Precedence of firm-level over
sector collective agreements sector collective agreements
Suspension of extension of No more limits for consecutive
collective agreements temporary contracts
Reduction of overtime pay Freeze of minimum wage in
Greater leeway for temporary private sector
contracts Pension age at 67
Reduction of minimum wage ...
...
Source: Karamessini (2012), Banyuls and Recio (2012)

16. http://www.etui.org/Publications2/Books/A-triumph-of-failed-ideas-European-models-of-capitalism-in-the-crisis