European Economy. Economic Papers. Germany's growth performance in the 1990's

Employment
1971-2000
0.3
0.5
0.6
0.4
0.6
0.5
1.7
0.7
1991-2000
0.2
0.5
0.1
0.2
0.5
0.4
1.2
0.3
1991-1995
-0.3
-0.2
-0.7
-0.9
-0.3
-0.6
0.9
0.8
1996-2000
0.7
1.2
1.0
1.3
1.3
1.3
1.6
-0.1
(1)
Data up to 1991 West Germany.
(2)
Euro-area excluding Germany, Greece, Ireland, Portugal and Spain
(3)
EU excluding Germany, Greece, Ireland, Portugal and Spain
Source : Commission services
In recent years, the apparent lack of dynamism of the German economy has become more
accentuated. Indeed, in the second half of the 1990s annual average output growth of
Germany was almost 1 percentage point below that of the EMU/EU partner countries and
around 2¼ percentage points below that of the US. Likewise, during this period the annual
average increase in employment in Germany fell short by more than ½ percentage point of
that of the EMU/EU comparison group and by almost 1 percentage point of that in the US.
Partly, the meagre economic performance can be blamed on the fact that in the aftermath of
re-unification German real GDP growth rose significantly above its longer-term trend.
Specifically, real GDP growth between 1990 and 1992 averaged almost 4½ %, i.e. more than
2 percentage points above Germany’s longer-term average. The ensuing period of weakness
could thus be viewed as an adjustment process towards the longer-term growth potential of
the German economy. However, this argument stops short of explaining why Germany’s
potential growth has been so low and, more importantly, why the period of adjustment has
lasted for so long.
1.2.2 Population growth
A slowly growing population has clearly contributed to weak overall economic growth in
Germany. Over the last three decades the differential in annual average population growth
between Germany and the US amounted to no less than -¾ percentage points and there is also
a negative albeit much smaller differential vis-à-vis France (Table 1.3). However, other
3
For the years up to and including 1991, growth rates underlying Table 1.2 and all following tables in this
sub-section are based on West-German data only, while growth rates for the years from 1992 onwards are
based on data for unified Germany.

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countries like Italy and the UK exhibit even slower population growth than Germany and the
overall difference with the EMU/EU average is negligible.