Subject Economic Growth Topic International Finance, Productivity, and Growth Key Words Economic Growth, Unemployment, Collective Bargaining News Story Europeans are concerned that they will not be able to escape the worst effects of the U.S. slowdown, and Germany is one of the major reasons for that concern. While growth in France is about 3 percent, and Spain, Portugal, the Netherlands and Finland have even higher growth rates, German economic growth is forecast to be only 2 percent this year. Germany has lagged behind the rest of Europe for several years. Economists believe that Germany's growth has been hampered by its inability to create jobs, which is, in part, the result of over-regulated labor markets.
German laws provide workers extensive protection against layoffs.
Collective bargaining usually takes place at the industry level, giving an individual firm little freedom to negotiate terms tailored to its needs. New legislation has given workers some input on many management issues, adding additional frustration. While other European countries have highly regulated labor markets, they have adapted to the changing economy by introducing additional flexibility. Germany has not. As a result, unemployment has fallen by a third in France, from 12 percent to 8.8 percent, and in the Netherlands unemployment is 2.4 percent.