The Hartz IV reform tackles Germany's chronic unemployment problem, cutting the link between the benefits paid to the long-term unemployed and their earnings in their last job.

ECONOMIST: Ersatz Europeans

He appointed a reform commission, headed by Peter Hartz, the head of personnel at Volkswagen.

FORBES: Why Obama Cannot Match Germany's Jobs Miracle

He has already begun to water down the Hartz commission's labour-market proposals, his government's supposed flagship reform, in response to pressure from the unions.

ECONOMIST: German politics

The proposals for labour-market reform put forward in the summer at the government's suggestion by Peter Hartz, a senior Volkswagen man, are a test of the new government's determination to enact painful structural reforms.

ECONOMIST: Germany's trade unions