Germany is still a strong economy in various respects, as reflected in its vigorous export performance and high innovative capacity. However, the economy has fallen back. For a period of more than ten years real GDP growth has fallen short of that in other European countries and North America. This is reflected in potential GDP having decelerated to a growth rate of just 1.5 per cent annually while structural unemployment has trended upwards. In addition actual GDP has tended to substantially undershoot potential. While convergence of GDP per capita with the US peaked already ...