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Why should the reforms be nullified by a change in saving rates?

Hartz IV reforms pushed unemployed people back to work by reducing long term unemployment benefits to 400 EUR + rent. This certainly reduced purchasing power first (by reducing available money) but also quickly freed up social spending as employment rates soared.

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That’s a classical and expected corollary to social dumping reforms intended to boost competitiveness. There is less money invested inside your own economy (that’s what the saving rate is) as you have intentionally made people poorer which leads to an influx of foreign capital propping up your currency and nullifying the advantage you were expecting on the international market.

As mentioned before Germany whose economy is extremely unbalanced and wouldn’t be viable if it used its own currency was shielded at the cost of killing the competitiveness of the poorest union members.

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