Germany in an Interconnected World Economy

The German economy has continually displayed a capacity to regenerate itself. Its emergence from the Great Recession-and especially its ability to generate jobs-has been widely, and rightly, lauded. With its success, Germany has been called on to assist the global recovery. But some aspects of Germany's Economy-its current account surplus, wage moderation, and pace of fiscal consolidation-have been regarded with concern. Rather than short-term responses to these concerns, the German challenge is to strengthen its areas of weakness. A greater emphasis is needed on innovation that extends Germany beyond its traditional manufacturing strengths. A new model of social safety nets, drawing possibly on the Nordic experience, could also help increase labor force participation to counter the growing number of retiring workers. Such actions would also be good for Europe and the global economy.