The Hartz reforms are fairly famous, yes. It’s mostly social dumping. Forced contraction of actual wages through reform of the benefits plans.
It’s important to note that they are overall poor reforms and should have been nullified by the German money value shifting due to the knock off effect on the saving rate. This didn’t happen because they were put in place at the same time as the Euro and the overall imbalance in the union allowed Germany to keep an undervalued currency. In effect, Germany robbed all the poorer members of the union to prop up its own economy something it has kept doing since.
> In effect, Germany robbed all the poorer members of the union to prop up its own economy something it has kept doing since.
Those who like to bully the poorer members of the Union on the grounds that they're being bankrolled by the the wealthier states would be wise to take note of this, and take a more intelligent and informed view of EU "subsidies". The idea that the wealthier member states are showering these countries with funds out of the disinterested goodness of their hearts is not only ignorant of how these cash flows actually work in the grander scheme of the movement of money, but also preposterously naive.
The power balance is shifting in Europe against this crypto-germanocentrism, however.
This sentiment is so common in Germany. Everyone blames the European "south" for Germany's problems as if Germany was some sort of hero doing all the work.
The Greek economic crisis is a classic example. German banks mess up when they lend too much money to Greece, Germany does a bailout for "Greece", the money actually goes back to German banks. Then people have this perception as if they somehow paid for all the social services bought with the borrowed money. No, Greece is still in debt. You might complain about forgone interest but that is on the lender, who is not doing his job properly.
Let's not absolve Greece of fault. They massively lied on their data to join the euro with a financial situation that was obviously not going to work in the long run. No way would Greece have gotten as much money in the 00s had they published their real data.
That said, the German opinion on Greece was(is?) pretty fucked yeah. Especially if you look at how often we ignore the situation for the average Greek in these discussions. A shitload of medically necessary operations were cancelled in the downsizing of the Greek state, even the democratic nature of the state itself was seized by the troika.
And Greece never really got a bail out, all they were ever offered were just bigger and bigger loans. (with austerity measures attached that pushed down demand, when lowered revenues, that made it harder to pay the loans)
It's important to note the other side of the medal: Today's inflation is to a large degree caused by the expansionist money policy that was necessary to prevent a Greece financial collapse (which would have undermined the Euro as a whole). Greece financial problems were, at least to a significant degree, caused by debt-financed social expenses that are unheard of in Germany. So the conclusion that German workers are financing Greek's early retirements is not completely bullocks.
It's very important to understand that Greek's government also played the "Germany is at fault" or "Germany has to pay" card very effectively, when Germany's government played the "Lazy Greeks" card to justify their own fiscal policy.
Why should the reforms be nullified by a change in saving rates?
Hartz IV reforms pushed unemployed people back to work by reducing long term unemployment benefits to 400 EUR + rent. This certainly reduced purchasing power first (by reducing available money) but also quickly freed up social spending as employment rates soared.
That’s a classical and expected corollary to social dumping reforms intended to boost competitiveness. There is less money invested inside your own economy (that’s what the saving rate is) as you have intentionally made people poorer which leads to an influx of foreign capital propping up your currency and nullifying the advantage you were expecting on the international market.
As mentioned before Germany whose economy is extremely unbalanced and wouldn’t be viable if it used its own currency was shielded at the cost of killing the competitiveness of the poorest union members.
The strategy Germany is following is to cut unit labor costs below Greece aka Germany is competing on price with Eastern European countries. This may get you the "Exportweltmeister" trophy but is is just that, a trophy. It doesn't actually benefit you that much.
"In 2003–05, Germany undertook extensive labor market reforms which were followed by a large and persistent decline in unemployment. Key elements of the reforms were a drastic cut in benefits for the long-term unemployed and tighter job search and acceptance obligations."
It’s important to note that they are overall poor reforms and should have been nullified by the German money value shifting due to the knock off effect on the saving rate. This didn’t happen because they were put in place at the same time as the Euro and the overall imbalance in the union allowed Germany to keep an undervalued currency. In effect, Germany robbed all the poorer members of the union to prop up its own economy something it has kept doing since.