This paper lays out the various reasons for the exceptional performance of the German labour market during and after the Great Recession of 2008/9. The reference point of our analysis is provided by an empirical model of both total hours worked and employment. We conduct dynamic simulations of the crisis period to assess how surprising the reaction of the labour market really was. We argue that the most important precondition for the minor reaction of employment during this crisis was the pronounced wage moderation observed in the years before, which constitutes a distinct difference to all other recessions in Germany. Beyond that, the flexibility of adjusting working time, which has increased considerably during the past ten years, facilitated a tendency to labour hoarding. In contrast, short-time work plays a minor role in explaining the difference from previous recessions, since this instrument has always been available to firms in Germany and its use has not been extraordinary compared with earlier recessions.

Various ways exist to make use of public debt financing despite the existence of the debt brake. These are outlined in the recent coalition agreement, which indicates that the new government will go in this direction. Particularly, the accounting of federal special funds will change and the role of public enterprises will increase. Budget surveillance at the European level, however, uses alternative accounting that remains unaffected. German budgets will likely run up against the current European rules in the medium run. Thus, the new budget plans also hint at the readiness to renegotiate fiscal rules for the European Union.

Die Zentralbanken in den Industrieländern betreiben seit längerer Zeit eine sehr lockere Geldpolitik mit niedrigen nominalen Zinsen. Bei gleichzeitig niedriger Infl ationsrate sind auch die Realzinsen sehr gering. Von niedrigen Zinsen wird erwartet, dass die Investitionsschwäche überwunden, defl ationäre Entwicklungen gestoppt und das Wirtschaftswachstum angekurbelt wird. Offenbar kann aber die Geldpolitik diese Ziele nicht allein erreichen, möglicherweise setzt sie sogar falsche Anreize. Andere regulierende Maßnahmen sind erforderlich, zudem können Investitionsprogramme unterstützend wirken. Due to the financial crises from 2008 to 2012, unconventional monetary policy caused an environment of record low interest rates around the world. Maintaining the low interest rate policy might be reasonable for the ECB in the short run in order to fight the fragmentation of the financial market and the risk of defl ation in the Eurozone. Some authors argue that permanently low interest rates lead to wrong incentives in the financial market for debtors and creditors alike. They fear potential risks for fiscal policy and financial stability in Germany and recommend macroprudential measures beyond the Basel III framework and a beginning exit of the ECB from its unconventional monetary policy. Others warn against overburdening monetary policy. They find rather that effective financial market regulation and proper fiscal rules and institutions are required to secure financial market stability and the sustainability of public debt and that a premature exit from accommodating monetary policies would do more harm than good. They argue that monetary policy alone will not solve Europe’s problems. The differing recommendations are mainly based on differing assessments of the European business cycle.