Economic dynamics in the activating welfare state

In his lecture before entrepreneurs in Hessen (Hessischer Unternehmertag), Hans-Werner Sinn, President of the Ifo Institute, analysed the current economic situation. The world is divided into two groups of countries: on the one hand, the newly industrialised countries, Germany, Sweden, Switzerland and some Eastern European countries, where the economy is growing again, and, on the other hand, countries that have taken on too much debt that now have to tighten their belts because credit is no longer flowing as freely as it once did. The redirection of capital flows will lead to a very positive economic development in Germany in the medium term, if this development is not stopped by an extension of the EU rescue packages. This turnaround, however, is not due to the self-correcting ability of the capital markets alone but also to the Agenda 2010 reforms that introduced a policy of subsidising people while they are working instead of giving them money on the condition that they not participate in the labour market.