Germany's Economic Miracle in Pictures

In 2003 Germany was widely regarded as ?the sick man of Europe? ? uncompetitive after the traumas of re-unification, inflexible, uncreative and far too dependent on manufacturing for a modern, post industrial society. But the crisis has vindicated Germany?s economic model, while the boom in developing markets, far from wiping out Germany?s manufacturing sector, has by providing fast growing new export markets for German companies - writes Jeremy Warner in UK's Daily Telegraph blog.

Germany is experiencing a sharp V shaped recovery, more so than any other major advanced economy as industrial production, poleaxed by the banking crisis, bounces back. The German economy has already clawed back 70 per cent of the output lost in the crisis and is expected to be back to pre-crisis levels in the first half of next year.

Nor is this recovery entirely down to industrial production. Services have bounced back sharply too.

One reason for this is that since 2003, Germany has sharply increased its competitiveness against the Eurozone?s peripheral economies.

Germany has acted to reduce once internationally uncompetitive rates of corporation tax. For multinationals, the tax regime in Germany is now marginally more competitive than the UK.

More importantly, unit labour costs have been significantly reduced relative to the rest of the eurozone. Germans have become progressively worse off, relative to their european peers, over the last ten years. The pain of squeezed disposable incomes is now paying dividends in enhanced export competitiveness.

In marked contrast to other advanced economies, unemployment barely rose during the crisis and is now back below pre-crisis levels. This was only partly due to government policy to subsidise employment during the downturn. Employees also agreed part time working arrangements, which employers were happy to accept so as to preserve a skilled workforce for the upturn.

Levels of youth unemployment have remained amongst the lowest in Europe, thanks largely to Germany?s apprenticeship system. The pay is marginal, but the young worker ends up trained.

German companies are investing as heavily abroad as at home.

Particularly in China, where German investment is now almost as big as for the entire EU 15 put together.