However, what actually forced the German government to undertake a set of major reforms was a couple of intensifying domestic problems which depressed growth and increasingly constrained policy makers’ scope of action.
In the economic downturn following the burst of the “New Economy” bubble in the early 2000s, persistently high unemployment peaking at more than 5 million people in 2005 as well as overburdened social security systems led to high fiscal deficits and a protracted period of only meagre GDP growth. Thus, adjustments in the areas of economic and social policy had become inevitable.