There's still time to reverse Germany's decline, but not much. The disastrous showing by Schr?der in local elections shows that many Germans are deeply unhappy with their state of affairs and want change. In reaction, Schr?der is now promising to attack Germany's problems--its inflexible labor laws, excessive taxes and regulations, and overgenerous social benefits. After a decade of inaction, false starts, and broken promises, it's hard not to be skeptical.
A bold move that radiates across Germany is required. One idea is to sharply cut all subsidies and tax breaks to fading Old Economy industries, such as shipping and coal. That would free tens of billions of euros for across-the-board tax cuts for individuals and corporations. Consumption would rise, and businesses would have profits to invest. In return, both labor and capital must give something up. The unions must let go of the K?ndigungsschutz, or job protection law, that makes firing so costly that companies don't hire. Corporations must fight for reform, instead of just investing abroad to avoid Germany's harsh business climate.
Such measures would have enormous symbolic value, sending powerful signals that Germany can reverse its slide.