Tiptoeing through crisis? Re-evaluating the German social model in light of the global recession

Labelled ‘the sick economy of Europe’ during the late 1990s, it was suggested that the semi-sovereign German state and its specific type of corporatist governance was not fit to deal with adjusting its social and economic model adequately to the dual challenges of globalisation and the growing knowledge economy. This perception of Germany has changed in the light of the post-2007 crisis. Germany experienced a less severe recession than some of the other G20 nations and found itself on the road to recovery much quicker. So is the German social and economic model more resilient than previously suggested? Was the idea of a ‘badly adjusting’ Germany doing injustice to a process of incremental but purposeful adaptation? Drawing on key theoretical perspectives, this chapter explores the state of the German social and economic model at the start of the 2010s. Examining the policy responses prior to and during the financial crisis, it highlights some ongoing social divisions that are often overlooked by comparative analysts focusing on the economic successes of Germany. The chapter concludes that despite the short-term success in dealing with the immediate economic fallout of the global financial crisis, the longer-term structural pressures facing Germany have largely been unresolved.