Elena is 56. But years of hard labour have added 10 years to her face, which looks unhealthy and puffy. When she cracks a smile, she shows a row of broken, discoloured teeth. We are sitting at a rundown cafe in one of the poorest districts of East Berlin. It is cloudy and chilly, with sporadic, uncertain showers of rain.

“I came here from a small village near Tirgu Mures in Romania 10 years ago, after my husband threw me out of the house. I thought I was coming to a better life. And in the beginning it was better. Steady pay, a decent employer. But then seven years ago the rules changed and life has become very hard since. Just look around you. We are all poor people. Only the poor live here,” she says.

Elena made her way to Berlin with the help of some friends and found a cleaning job and welfare benefits. Progressively, after her arrival, the German government began putting into effect the Hartz IV reforms (named after former Volkswagen director Peter Hartz who designed them) that cut down state subsidies, drastically reduced union-negotiated salary packages and deregulated the labour market. She went from earning a steady €1,200 per month to a state allowance of €382 per month coupled with a cleaning job that earns her €1.52 per hour. “The hours are not fixed. I usually manage to get four hours per day. Sometimes more, sometimes less. I can never earn more than €700 per month. No doctor, no dentist, no luxuries. I can just about survive,” she explains.

Today as a triumphant, export-driven Germany steams ahead, giving the lie to a general economic downturn in Europe and thumbs its nose at poorer debt-ridden southern European economies, an increasing number of intellectuals and scholars — Jurgen Habermas, Fritz Scharpf, Wolfgang Streeck or Klaus Dorre — and just plain simple people are asking themselves the human cost of this exercise. Yes, the wage bill has come down, competitivity and exports have increased, debt is under control. But more and more children are living in poverty and isolation.

The neighbourhood is drab, unpretentious. It appears like any other middle-class Berlin locality — until I really begin looking. There is no escaping the grime around children’s parkas, their pasty unhealthy look. No one leaves tips around here. There just isn’t enough money to go around. “According to statistics published recently, one out of four children in East Berlin live in poverty, their parents forced to hold down several mini jobs and rely on state subsidies, which are really meagre now,” says union leader Wolfgang Herbertz.

Professor Klaus Doerre of the Fredrich Schiller University in Jena told The Hindu: “What appears to be the German ‘employment miracle’ also has its ugly side, because integration into the labour market is accompanied by the growth of precarious work and employment. Part-time, temping, fixed-term employment, marginal employment has continued to grow. In 2008, of a total workforce of 34.7 million people, 7.7 million were in atypical jobs, with a further 2.1 million in self-employment. Since 2003, the number of atypical employment relationships has increased by 46.2 per cent with marginal employment rising by 71.5 per cent and of those in self-employment by 27.8 per cent. This is in contrast to the number of normal employment relationships, which has gone down by 3 per cent.”

Though intellectuals, scholars and NGOs are expressing concern at the erosion of the “classical” German model where everyone aspired to higher education and a middle-class life, Germany is heading into a general election with none of these issues being tackled. Chancellor Angela Merkel, who is riding a wave of popularity, hopes to win an unprecedented third term as Germany’s first woman Chancellor. Her party, the Conservative Christian Democratic alliance (CDU-CSU) won a resounding victory in local polls in Bavaria last week.

And yet, it is not a done deal yet. Her junior coalition partner, the liberal Free Democrats, has seen its support fall and the emergence of Alternative for Germany, a new ultra-liberal party, that could further weaken it. On the left of the political spectrum, the Social Democrats (SPD) and Greens are trying hard to improve their score but rule out any possible coalition with the hard-left former communist Die Linke party. So will Ms. Merkel and her allies get enough seats in Parliament under a very complicated voting system to form a government on their own? Or will she be forced to enter into a “Grand Coalition” with the SPD? It’s a formula that’s been tried before, in 2005.

“The only thing that is certain is that the situation is very fluid. Most likely, Ms Merkel will be next Chancellor. But we still do not know with whom she will govern. The very absence of debate in the campaign is worrying. The Greens and the Social Democrats (SPD) dare not criticise the Hartz IV reforms since they were the ones who instituted them under Gerhard Schroeder, the left-wing Chancellor. And Ms. Merkel refuses to raise any real issue including such crucial issues like Europe and Germany’s place in it.

It seems the whole world is watching Germany, worried about the future of Europe. Except perhaps Germany herself,” Ulrike Guerot of the European Council on Foreign Relations told The Hindu.

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