Empirically, the German unemployed – unlike others in Europe – do not respond to temporary sanctions on their unemployment benefits. Recent research suggests that the effectiveness of such sanction depends on attitudes towards risk. This may explain why benefit sanctions work in some countries but not in others.

Germany’s traditional specialisation in manufacturing makes China and India direct competitors. What happened to Italy as China moved up the technology ladder will happen to Germany. The key to growth lies in getting out of China’s way and finding alternative forms of high-value-added employment.

Germany has finally gotten aboard the train of labour market, supply-side oriented reforms initiated by Europe’s success stories -- Netherlands, Denmark, Ireland, and the UK. Italy and France would do well to follow suit

Seigniorage is generated when a central bank creates money and gives it to the private sector in exchange for interest-bearing assets. Under the Maastricht Treaty, the interest earnings are distributed according to country size, but given the dominant role of the DM before the euro, this allocation rule cost Germany about €30 billion.

Germany needs a radical cultural and economic revolution, one as courageous as – but not identical to – the one that occurred in Britain under Margaret Thatcher. After 50 years of progressive entanglement, Germany is ripe for this.

Using a data set that covers the entire German adult population, the authors of Policy Insight No. 4 show that income inequality in Germany has increased much more than previous studies suggest.

Detailed data on the complete German income distribution reveal growing inequality, especially at the high end.

Only four instruments have led to positive results in the form of increased integration into the labour market - (i) placement vouchers; (ii) training programmes; (iii) wage subsidies; and (iv) business start-up grants. This translates to only around 28%, or €4.2 billion, of the total expenditure on active labour market policies.

Germany’s government led by Angela Merkel is about to celebrate one year’s existence. The grand coalition is failing because the politicians still don’t agree on the correct solution to Germany’s problems. But this is not all their fault. Germany is a functioning democracy and deserves the leadership and policies it gets.

Written February 2006: the first 100 days of Angela Merkel has been something of a sensation. Yet, with her unheard-of approval rating of 80%, the party hasn’t even started. And it’s a race against time: grand coalitions tend to self-destruct as soon as the low-hanging fruit is gone.