For more thoughts on Germany, check out The Economist’s distinguished panel discussion. The contrasting answers are in themselves very amusing.

First, Princeton historian Harold James:

THE surprisingly strong and successful German recovery is almost entirely a consequence of export demand, in particular from vigorous growth of emerging markets. It is not a uniquely German phenomenon, in that the same pattern of a vigorous export recovery can be seen in other countries with a similar structure (notably Switzerland), but also some of the dynamic Central European economies (Slovakia or Poland) that see the German development as a model.

Then Beatrice Weder, an economist at Johannes-Gutenberg-University:

The more important part of the story is actually not about net exports. The news that did not make the news is that the growth contribution of domestic demand in Germany was larger that of net exports. Domestic demand contributed 1.3% and net exports only 0.8% in the second quarter (quarter-on-quarter) to growth. In the first quarter the relative contribution of domestic demand was even stronger (1.6% domestic versus -1.1% foreign). So the real question is why domestic demand is growing so un-Germanly.

My guess is that Weder has a keener understanding of this question than James. Weder credits Germany’s recovery to luck, the absence of private sector leveraging, and labor market deregulation.

In a similar vein, Alberto Alesina writes:

Germany’s recovery seems relatively solid. It is based on some labour market reforms in the last couple of years and a long period of wage moderation. It is also not based on the dubious and at most temporary effect of discretionary public spending increases. It is based on a private sector recovery and increases in productivity. What would sustain growth in Germany and in the rest of Europe is not more public spending but more pro-market structural reforms. If they take place, then growth will be sustainable, unless the US runs into a new recession.

Alesina also takes richly deserved potshots at fiscal irresponsibility in the U.S. My sense is that Alesina’s analysis is the one that U.S. conservatives would find most congenial, which is why it’s important to also give due regard to the analysis of pro-stimulus voices.

Carmen and Vincent Reinhart focus their remarks on private leveraging:

As we pointed out, Germany was a notable outlier in the now-notorious credit and debt boom of the decade prior to the onset of the subprime crisis. Credit relative to nominal GDP fell about 11 percentage points during 1997-2007; during the same period, credit/GDP rose 80 percentage points for most of the advanced economies. Germany’s gross external debt/GDP fell about 5 percentage points during 2003-2007, while that ratio climbed by about 50% for other advanced economies. Germany’s property market cannot even be loosely characterised as part of the global bubble. In fact, real house prices fell 11% from 1997 to 2007. Unlike Japan, which was the other notable outlier during the credit boom, it did not have the burden of a high public debt. As a consequence, despite rapid increases in government debt since the crisis, Germany does not have a private or public debt overhang of the historic proportions confronting most other advanced economies. It follows that a long and painful deleveraging is not on the horizon.

It should go without saying that the U.S. can’t just mimic German fiscal policy. For one thing, the Germans are building on a legacy of difficult reforms. Our labor market has never been as tightly regulated as Germany’s before Chancellor Schroeder’s controversial Agenda 2010 reform effort. Christian Reiermann of Spiegel Online wrote an article on the subject in January of 2008:

But what has contributed to Germany’s revitalization most of all was a treatment prescribed by former Chancellor Gerhard Schröder. “The Agenda 2010 reforms are part of the reason Germany is doing so well today,” says Rürup.
While the package of reforms, which Schröder’s coalition government of Social Democrats and Greens launched in 2003, certainly did not trigger the upswing, it did help to jumpstart the economy when the global economic boom finally reached Germany.
One of the triggers was the reform that combined unemployment assistance and welfare payments into a new entity known as Unemployment Benefits II. “The incentives to work have increased, especially for the qualified unemployed,” says Dennis Snower, president of the Kiel Institute for the World Economy (IFO).
As a result, the number of unemployed Germans declined much faster than during previous upswings.

“Doing so well” was relative, of course, as the article was written before the darkest moments of the downturn. We don’t have as much low-hanging fruit on the labor market front. But there is much that can be done to improve work incentives, especially since President Obama has presided over the creation of a panoply of new work disincentives.