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Germany's Unemployment Rate Reaches 12%

Germany's recession continued in 2003: for the previous three years, Europe's biggest economy had the lowest growth rate among EU countries. In Aug. 2003, Schröder unfurled an ambitious fiscal-reform package and called his proposal “the most significant set of structural reforms in the social history of Germany.” Schröder's reforms, however, did little to rejuvenate the economy and angered many Germans, accustomed to their country's generous social welfare programs. His reforms reduced national health insurance and cut unemployment benefits at a time when unemployment had reached an alarming 12%.

National elections in Sept. 2005 ended in a deadlock: the conservative CDU/CSU and its leader, Angela Merkel, received 35.2% and Gerhard Schröder's SPD garnered 34.3%. After weeks of wrangling to form a governing coalition, the first left-right “grand coalition” in Germany in 36 years was cobbled together, and on Nov. 22, Merkel became Germany's first female chancellor. During her first year, Merkel showed strong leadership in international relations, but her domestic economic reform agenda has stalled. Her first major initiative, reforming the health care system, was widely viewed as ineffectual.