Germany's (and western Europe's in general) biggest problem is not lousy compensation and sky-high taxes (although these are a huge problem as well).
The biggest thing that prevents Europe from innovating is culture.
Risk-taking, innovation, doing crazy "unthinkable" things is something that has simply deserted the European DNA a long time ago (probably over a century by now).
Almost all the important technical inventions of the 19th century happened in Europe. Almost all the important technical inventions of the 20th century happened outside Europe.
If you've ever worked in Germany in a tech company you will very likely know what I am talking about here: when you throw a new and crazy idea on the table, the immediate reaction of the crowd is to carefully explain to you the myriad of ways in which your idea is just "not possible" and "will fail".
Getting a brainstorm-type session going with a group German engineers is darn near impossible.
And much less so with management.