Germany has to change its social and economical thinking in order to free up financial resources for investment. Without radical changes the country will follow the gloomy example of another economic heavyweight Japan, which refuses to face the harsh reality of today's global economy. Everyone in Germany understands that need, but many in the country act as if they are living amid the "wirtshaftwunder" (economic miracle) of the 60's and 70's. It was the Chancellor Gerhard Schroeder, a politician far away from the free-market school of thinking, who these days again call on the Germans to face the truth and start thinking in terms of 21st century.

Germany is among the richest nations in the world and perhaps this fact is the major hurdle to the plans for reforms that have to revitalize the biggest European economy and to give new hopes to the business leaders all over the European Union. When you have a social and economic system that worked so remarkably well for some many decades till recently, it's difficult to understand why this system doesn't work anymore, and why the radical change is the only reasonable option left.

Consider these facts: Germany lost the last world war; its cities and industry were almost completely devastated; millions were killed, millions were forced to take refuge, millions were held as war-prisoners in Siberia till 1956; the political system was abolished; the inflation was immeasurable; the country was divided and occupied. The British wartime Prime Minister Winston Churchill joked he would like to move the remaining Germans somewhere in Africa.

And where Germany is now? It has become the third most developed industrial country just behind the United States and Japan; it's indisputably the most advanced country in Europe; its political system is remarkably stable and the power is shared uninterruptedly among moderate parties of the left and the right; the social system is generous but taking into account the personal contribution of everyone.

Why the social system isn't working? Why 3 years in a row the economy is in recession with no light at the end of the tunnel? The economic prescriptions that were viable in the 50's and 60's became obsolete. The population of young post-war baby-boomers gradually became leaned toward the third age with no sufficient generation replacement. The high incomes can no longer be supported given the tough competition by the newly industrialized nations and the so-called industrial platforms in the Third World. Germany is still the economic mastodon of Europe, but the country is gradually loosing positions outside its economic hinterland. There is no public opinion supporting massive immigration, because the new immigrants are considered not as productive workers but only as welfare recipients.

The only remaining strategy for survival, except the total political inactivity and waiting until the world demand finally draws up the economy*, was to find internal ways of restructuring the economy and that was exactly what the Chancellor Schroeder had in mind. Lower taxes for the individuals and companies and lower social protection for workers and unemployed. These plans are attacked by both left wing of the ruling Social Democrats and by the traditional right parties. For former the reforms are too radical and unsocial by nature, for the later the budget deficit that will result from the tax reform is intolerable.

The conservatives that control the upper house of parliament already blocked the economic plan of the Chancellor, but the German consensual political system would push it ahead anyway with some minor or more substantial changes. The partial demolition of the welfare state is needed for the preservation of the welfare system in whole. Most people in Germany understand this, but many still prefer delaying taking this pill.

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* - Gerhard Schroeder was reelected a year ago as Chancellor after making some anti-American speeches. It's irony that if his economic plans are not accepted, the only chance for him to be reelected again will stand on the economic growth based on strong international (i.e. American) demand.

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