http://www.cia.gov/cia/publications/factbook/geos/gm...

Germany's affluent and technologically powerful economy- the fifth largest national economy in the world - has become one of the slowest growing economies in the entire euro zone, and a quick turnaround is not in the offing in the foreseeable future. Growth in 2001 - 2003 fell short of 1%. The modernization and integration of the eastern German economy continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $70 billion. Germany's ageing population, combined with high unemployment, has pushed social security outlays to a level exceeding contributions from workers. Structural rigidities in the labor market - including strict regulations on laying off workers and the setting of wages on a national basis - have made unemployment a chronic problem. Corporate restructuring and growing capital markets are setting the foundations that could allow Germany to meet the long-term challenges of European economic integration and globalization, particularly if labor market rigidities are further addressed. The government is also starting long-needed structural reforms designed to revitalize the country's economy. In the short run, however, the fall in government revenues and the rise in expenditures have raised the deficit above the EU's 3% debt limit.

http://www.house.gov/jec/growth/govtsize/govtsize.ht...

There has been some controversy over the slowdown in European rates of economic growth since 1970. One view is that the slowdown is to be expected, that European growth rates from 1945 to 1970 were unusually high, and that the more recent experience is a return to normalcy. An alternative view is that the expansion of the European welfare state after 1970 has stifled the spirit of enterprise and has had negative growth consequences. The findings above clearly are consistent with this alternative perspective.

http://www.fcpp.org/publication_detail.php?PubID=786

The Wirtschaftswunder of the first period was due in part to reconstruction following the devastation of the economy during the Second World War. But the basic reconstruction had been completed largely by 1960, and the high growth rates in the following decade took place while the country still operated as a market economy, free from the burdens of the welfare state and pervasive regulations.