By the time Germany passed its Agenda 2010 reform package in 2003, the country had been suffering from double-digit unemployment and mostly anemic growth for a decade. The reforms included draconian cuts in pensions and unemployment benefits, increased labor flexibility and wage cuts.
Harm Bandholz's Munich-based colleague Andreas Rees is UniCredit's chief German economist and says that the country's road to recovery from being the "sick man of Europe" has been anything but easy.
"The road to higher GDP growth was long and hard," he said. "It involved cutting wage costs for about 10 years and consumer expenditures have simply been a disaster."
"We've been through massive uncertainty and for many Germans it was a really painful period."
The reforms also resulted in the formation of the new Left socialist party, altering Germany's political landscape.
But thanks to the country's more flexible work force and "also partly good luck" in the form of demand from China for quality manufactured products, Rees said the "reforms have clearly paid off."
Driven by its manufacturing sector, the German economy is expected to grow by anywhere up to 3.7 percent in 2010, while unemployment fell to an 18-year low of 7.5 percent in October. Rees said he is upbeat about future consumer spending. But even seven years after reforms began, Rees said they are not over.