Amity Shlaes

Germany, the grandmother of social welfare states, is being forced to take a hard look at its long tradition of generous social benefits for workers (and now for eastern Germans as well). Lengthy paid vacations, guaranteed jobs, cash-heavy unemployment benefits, and labyrinths of regulations are conspiring to set up daunting hurdles to a competitive economy. Starting a new business is laborious; hiring workers is expensive compared with elsewhere; and the country's once-renowned education system is stagnant. Even worse, when German baby boomers are ready to claim their hallowed pensions, the money may not be there. Germans will have to pen a new social contract for the 21st century.