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The European Community was not conceived merely as an economic union, in which, once barriers to trade had been reduced through the play of market forces and the mobility of the factors of production, living standards in the poorer countries would converge with those of the wealthier countries. Economists categorise such catch-up processes as ‘beta-convergence’. The European Union (EU) also talks of a European social model, by which is meant not only that social standards should converge towards a minimum level, but also that they should be further developed in order to establish fair working and living conditions and equality of opportunities. The aim is to reduce social inequality within member states and the EU as a whole, a process termed ‘sigma-convergence’. Both convergence criteria belong together, because increasing social inequality hampers growth (Ostry and Berg 2014), and thus also beta-convergence, if too little is invested in the life opportunities and therefore also the human capital of disadvantaged groups, thereby causing consumer demand to stagnate. Germany is one of the wealthiest EU member states; it might be surmised, therefore, that the question there would be less about catch-up processes than about maintaining prosperity. However, following German reunification and the integration of the poorer part of the country after the fall of the Iron Curtain, the organisation of such catch-up processes has determined German economic policy to date. The various solidarity pacts intended to provide aid for eastern Germany are the functional equivalent of the EU’s cohesion fund. Also, social inequality within Germany has increased considerably in the past two decades. This is linked not to reunification but to the deliberate policy goal of weakening the once inclusive wage system and to a redistribution from the bottom to the top, primarily through tax policy (Bach et al. 2016). Growing inequality in the EU member state with the largest population has acted as a brake on sigma-convergence in the EU as a whole. There is also the question of whether Germany, with its growing current account surpluses within the straitjacket of European austerity policy, is hindering other countries’ catch-up processes (beta-convergence). Consequently, the convergence debate cannot be conducted on a country by country basis, because in a common economic area – and even more so in a monetary union – a policy adopted by one country (particularly the largest country) can have both positive and negative effects on the convergence processes in other countries. After the experiences of recent years, we surely have to bid farewell to the naive hope of the EU’s early years that all member states would grow and prosper together.

Does the German social model support the convergence of living conditions in the EU?