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This article is an attempt to clarify the effects of the German labour market reforms, commonly known as the Hartz reforms. Competing arguments were used to identify the welfare implications for German society and the German economy in order to explore whether or not such labour market reforms might provide another German answer, following fiscal discipline, to the EU’s post-euro-crisis management. This paper confirms that the Hartz reforms effectively reduced German unemployment, but they did not fundamentally solve the problem. Moreover, such effects appeared to propagate an increase in size of the low-paid sector, declining wages and increasing income inequality. The reforms were not welfare-enhancing for individuals because of increased poverty levels in employment and unemployment, which further implied a counter-productive risk for the German economy because of the contraction of domestic consumption, and potential social instability for German society because of rising inequality and deteriorating living standards. Therefore, Hartz-style reforms are neither a desirable model for other EU countries, nor the answer to Europe’s post-euro-crisis management in a time of fiscal austerity and negative interest rates. The real danger to European integration, as argued in this article, is not the challenge from high unemployment, but from Germany’s complacency of a one-size-fits-all thinking and, being the EU’s leading country, its double standards towards and ignorance of the differential nature and contexts of the European unemployment issue compared with the German one. This article warns that the mishandling of labour market reforms could result in the collapse of the already fragile public confidence in European integration.

In its 2015 official report on growth and employment, the European Commission indicates that the EU economy would be characterized by slow growth and high but stable unemployment. The Commission therefore suggests that reforms supporting well-functioning labour markets must take and continue in order to effectively reduce unemployment. Labour market reforms, following austerity and fiscal discipline, seemingly become another recipe for recovering the eurozone economy in the EU’s post-euro crisis management. With both monetary and fiscal policies reaching their limits and unemployment still at high levels in some EU members, labour market reforms are expected to be the major, if not the last, resort that policy-makers can turn to. As the European Central Bank (ECB) indicates in its report (2012: 10), a comprehensive strategy of labour market reforms is key to solid economic recovery.