On Wednesday around 30,000 workers in Germany’s vital manufacturing sector downed tools in a coordinated action that affected over 100 companies, including Daimler and Bosch. The strikes continued on Thursday with an estimated 115,000 workers staging a walk out in around 400 companies, including Porsche and Audi, as part of industrial action to secure a hefty 6.5 percent pay rise forGermany’s 3.6 million metalworkers.

Yet, while some workers in troubled countries may look with envy at their German comrades’ brazenness, in fact the action taking place from Berlin to Bavaria could end up being to the benefit of workers in Madrid, Athens or Lisbon.

After all, the stagnating wages of the past 10 years have served to tip the scales decidedly in German companies’ favor, allowing them to boost their competitiveness at a time when wages were soaring in many other euro zone countries.

That, along with actually producing high-quality goods that the rest of the world wants, has been partly to blame for some of the massive disparities within the euro zone, and to the indebtedness of countries that imported all those German goods.

“This has contributed to the imbalances in Europe, and means that Germany is also partly responsible for the current economic crisis in the euro zone,” argues Alexander Herzog-Stein, an economist with the Macroeconomic Policy Institute, a think-tank with links to Germany’s trade unions.

Now, organized labor in Germany could be riding to their fellow Europeans’ rescue, albeit largely out of self interest.

If wage hikes boost domestic consumption back home, it could go some way to correcting the imbalances that have been a hallmark of the monetary union, as German workers spend their wage increases on more products, including imports from other euro-zone states. As such, decent wages in Germany could even help generate much-needed growth elsewhere.

That could be an alternative to brutally slashing jobs and wages in troubled euro-zone countries.

What is certain is that unions here are adamant that wages have not risen fast enough, given Germany’s position as Europe’s industrial powerhouse.

Even in the engineering sector, vital to its export-led economy, wages have stagnated.

Leaders of the metalworkers union, IG Metall say the current employers’ offer of 3 percent is a “farce” and “provocation” and are hoping their action gets them their 6.5 percent. They are also demanding that employers hire apprentices at the end of their training, and that worker representatives have more say over the employment of temporary workers.

Joerg Hoffmann, regional union leader for the wealthy state of Baden-Württemberg, home to Porsche, said that a deal had to be reached by 15 May. “Otherwise we’ll show them the red card.”

The workers in the engineering sector are hoping to emulate other recent successes. Service union Ver.di secured a 6.3 percent pay increase for its 2 million members, following a series of strike actions. And just last weekend Deutsche Telekom agreed to pay its 17,000 employees an overall 6.5 percent increase over two years.

It’s a mark of the revival of confidence among the German trade unions. Now that unemployment has shrunk to its lowest rate in two decades, and with particular industries even complaining of skills shortages, this is a good time to flex their muscles.

It’s a welcome change from their relative weakness over the past decade. Their leverage had already been dented by the mass unemployment that came in the wake of reunification of East and West Germany and the subsequent collapse of East German industry. That was only compounded by the subsequent dot.com crash and the labor-market reforms that made it easier to hire temporary and part-time workers.

The upshot was that in real wage terms, German wages actually decreased over the past decade. Between 2000 and 2007, before the financial crisis even hit, nominal wages only grew by 1 percent, compared to 2.7 percent in the euro zone, and well below the rate of inflation.

At the same time productivity soared. Data released by Germany’s Federal Statistics Office on Monday showed that while average productivity in the European Union had risen by 3.4 percent between 2005 and 2010, in Germany it was 4 percent, compared to 3 percent in France and virtually zero in Italy.

And whereas overall unit labor costs had increased by 6.2 percent in that period, the rise was only 3.6 percent in Germany, and if had not been for the crisis years in 2008 and 2009 when workers were kept on even when orders were slack, those costs would have actually have decreased over the period.

During the crisis the government and companies introduced a short-work scheme that saved many jobs. However, it is also true that during that difficult period, the unions cooperated with employers to keep companies going. Many skilled workers accepted wage cuts or took unpaid leave to help companies get through the slump in demand.

Now it’s payback time. Workers know that Germany’s export sector has been booming and that many of Germany’s industrial giants are raking in the profits. Just last week Volkswagen, Europe’s biggest carmaker, announced a 10 percent increase on its first quarter operating profit to 3.2 billion euros ($4.2 billion) after seeing a record operating profit of 11.3 billion euros in 2011.

“Naturally the workers also read the newspapers, and they read how well the German economy is doing and how it is being praised,” says Herzog-Stein. “And they are asking for their share.”

On Tuesday, the unions were out in force to celebrate May Day, the traditional day of organized labor, and to reiterate their position. “After years of pay cuts in real terms, after years of efforts to help the country through the crisis and helping save many companies and jobs, it’s our turn now,” Michael Sommer, head of the DGB trade union federation said in a speech.

That sentiment was echoed in the banners held up by many union members who took part in the traditional May Day marches. One in Berlin declared, “It’s time to cough up the money.”

Unions are also demanding a general minimum wage of around 8.50 euros ($11) an hour, something that the center-right coalition has so far resisted. However, as Chancellor Angela Merkel moves to the center, hoping to poach voters from the center-left SPD and Greens, she has indicated in recent weeks that she would now back such a move.

There are some economists who worry that the trend toward higher wages, coupled with the ECB’s low interest rates, could lead to Germany’s greatest fear: inflation. However, others argue that in fact a wage hike is long overdue and should not push prices up. “Wages are rising, but this follows a prolonged period of restraint,” Andreas Rees, chief economist at Unicredit in Munich, told Reuters.

And while it could help the rest of Europe if German consumption picked up even further, it could be of benefit to the German economy. For one, it might help offset any slump in demand in recession-hit Europe. After all, even though German exporters have been able to rely on continued demand outside of the continent, particularly from China, the euro zone still accounts for 40 percent of its market.

“If there is not also a boost in domestic demand then Germany will not remain untouched by the euro crisis,” Herzog-Stein argues. “That is why, out of self interest, we need a stronger and more dynamic domestic market.”

The latest figures are certainly worrying.

The euro-zone economy contracted by 0.3 percent in the fourth quarter of 2011, the EU’s statistics office Eurostat confirmed on Tuesday, and unemployment reached an average of 10.7 percent in January, the highest since the euro was introduced in 1999.

That figure masks the huge discrepancies within the bloc. For example, while Spain’s unemployment is now at 22.9 percent, Austria’s is only 4 percent.

Most attention recently has focused on the drama in Greece, which has required a second bailout in two years to keep from defaulting on its debts.

The embattled country has been prescribed severe austerity in recent years to tackle its alarming public debt mountain, yet the medicine seems to be killing the patient. The Greek economy shrank by 6.8 percent in 2011. The bulk of the new 130 billion euro ($172 billion) bailout will go to lenders rather than being used for any measures to boost growth.

The Greeks are not alone. Ireland and Portugal, the other two recipients of bailouts from the troika of the European Central Bank, the European Union and the International Monetary Fund, have also had to sign up to reforms and punishing public-spending cuts as a condition for the funding.

Portugal in particular is struggling to find growth prospects. Last week, Finance Minister Vitor Gaspar announced that the economy is now expected to contract by 3.3 percent this year, instead of the previous forecast of 3 percent. Unemployment has soared to over 14 percent and the government is even encouraging people to emigrate. Last week President Anibal Cavaco Silva called on the government not to impose yet more austerity on the country’s “new poor.”

And even the austerity drive may not be achieving the government’s aims. Borrowing costs are still prohibitive at 13.07 percent, and Standard & Poor’s recently reduced the country’s rating to junk. “Portugal is doing the best it can to spread the message that we are not Greece, that we are implementing reforms,” said Luis Faria, director of the Lisbon-based Contraditorio think-tank. “But the market is still waiting for credible signals.”

Although Lisbon has managed to cut the deficit from 9.1 percent in 2010 to 5.6 percent last year, that is largely on the back of one-off measures such as transferring banks’ pension funds to the state, says Faria.

He argues that Lisbon will not be able to return to the bond markets any time soon. “It seems obvious now that either another bailout will be negotiated or orderly default will be the solution.”

Meanwhile, Ireland may be the poster boy for European austerity, even managing to see a slight growth of 0.9 percent last year after three years of contraction.

Yet it too is suffering from the negative consequences of austerity. Businesses are struggling and the unemployment figure has soared to over 14 percent, and would probably be higher if it were not for emigration. And while exports have driven the recovery, the rest of the economy is extremely sluggish.

“The prospects are quite poor for Ireland,” said Tom O’Donnell of the TASC think-tank, based in Dublin. “I don’t think it’s accurate to say that we are a successful example of austerity. Austerity has been very damaging, in terms of growth and demand.”

Particularly galling for the Irish is that the punishing cuts and tax hikes are required in large part to pay off the colossal debts of reckless banks who bet on the country’s massive property bubble. The Irish government is currently committed to paying 3 billion euros a year for the next 15 years to the unsecured bondholders of the worst offender, Anglo Irish Bank — a massive burden on such a small country.

With the economy only expected to grow by 0.5 percent this year, the prospects of returning to the bond markets in 2013 are fragile, something acknowledged by the IMF only last week.

O’Donnell says that many economists believe that Ireland will probably require a second bailout, which would be under the auspices of the European Safety Mechanism, the new rescue fund. That may well be a consideration for Irish voters who face a referendum on the fiscal pact, as its ratification is a precondition for the rescue fund’s support.

Around 150 shops were looted and over 40 buildings, including the Attikon, a 19th-century theater-turned cinema, were torched. Unrest also flared in the second largest city of Thessaloniki, and on the islands of Corfu and Crete.

The violence may have been perpetrated by a minority, but there is little doubt that the onslaught of yet more cuts to wages, spending and public jobs is massively unpopular in Greece.

And the crisis is far from over. The Greek government will be under pressure to deliver on the promises it has made to the international troika of lenders — the European Central Bank, European Union and International Monetary Fund — if it is to secure the 130 billion euro ($172 billion) bailout it needs to evade default.

The next hurdle for Greece is the meeting of euro zone finance ministers on Wednesday. The government, headed by Prime Minister Lucas Papademos, will have to convince the Eurogroup that Athens can come up with yet another 325 million euros in budget savings after political leaders refused to cut pensions. The troika is also demanding written commitments from politicians to implement the deal after April elections.

Athens is also expected to inform the euro zone ministers of a planned debt swap deal with private lenders, which should slash 100 billion euros from Greece’s massive debt burden.

Europe’s Economic Affairs Commissioner Olli Rehn welcomed the parliamentary vote as a “crucial step” on Monday, adding that he was confident that the Greeks would identify the concrete measures for the further 325 million in cuts before Wednesday’s meeting.

German Economics Minister Philipp Roesler cautiously welcomed the Greek parliament’s move but made it clear that German approval of the bailout was not inevitable. “Now we need to wait and see what comes after the legislation,” Roesler told public broadcaster ARD.

“We have taken one step in the right direction but we are still far from the goal,” he said.

Berlin is waiting until the troika release a report on Greece’s debt sustainability before the Bundestag votes on whether to back the bailout on February 27.

Many countries in the euro zone, particularly Germany, are wary of ploughing more money into Greece based on the latest pledges, considering the commitments it made in May 2010 for the first bailout of 110 billion have not been kept.

Greece has struggled to stick to the troika’s targets to cut the deficit while it continues to grapple with the affects of five years of recession.

Now it is being forced to implement even fiercer cuts, which critics say will just push Greece further into a downward spiral. On Sunday the Greek parliament backed the package, including a 22 percent reduction in the minimum wage and 150,000 job cuts in the public sector by 2015.

Despite the refusal of 43 members of the coalition parties to back the deal, the legislation still passed comfortably with 199 votes in favor and 74 against. The two biggest parties – the socialist PASOK, and conservative New Democracy – backed the deal, while the right-wing populist LAOS party refused to do so, and withdrew its support for the technocratic government.

“The full, timely and effective implementation of the program won’t be easy,” Papademos told parliament on Sunday. “We are fully aware that the economic program means short-term sacrifices for the Greek people.”

With a 14.5 billion euro bond repayment due on March 20 the pressure has been on to get a deal in place to avoid a Greek bankruptcy.

However, the austerity measures that are a pre-condition of the bailout money, leave little prospect of Greece returning to a path of growth any time soon.

“Yesterday’s vote in the parliament may have saved the country temporarily from default, but the Greek economy is going bankrupt and the country’s political system is failing,” the head of the Greek Commerce Confederation, Vassilis Korkidis, said in a statement.

Fear is mounting that Europe’s debt crisis could rage out of control, ultimately causing the breakup of the currency union or worse.

The most surefire solution would be for the ECB to declare that it would act as a lender of last resort. That option would require a change in the bank’s charter, but it wouldn’t even demand taxpayer money, given that the central bank can simply print it.

In a dramatic speech, Polish Foreign Minister Radosław Sikorski virtually implored Chancellor Angela Merkel to act. “I fear German power less than I am beginning to fear German inactivity,” he said in Berlin on Monday. “You have become Europe’s indispensable nation. You must not fail to lead.”

A New York Times editorial characterized Germany’s stubborness more succinctly, calling it “absurd.”

Despite this rising chorus of pleas, Germany still says “nein” to using the ECB. (The country is also rejecting another powerful option, of issuing euro bonds that would pool the zone’s credit rating, reducing costs for the highly-indebted nations that are straining the continent, but increasing the cost for more fiscally-disciplined countries.)

So is Germany’s refusal really absurd, as The Times suggests? What exactly are its leaders thinking?

Analysts say that firing up the ECB’s printing presses to solve the crisis is something that goes deeply against the grain here. Instead Germany has been pushing austerity on indebted countries and calling for closer coordination of the euro zone’s spending and budget policies and tough sanctions on those who break the rules.

Some experts say Chancellor Angela Merkel is simply playing hardball, holding out on the issues of the ECB and eurobonds in exchange for concessions.

“Mrs. Merkel’s position has been to use the pressure that is exerted by the markets to help push countries that have budget or generally public finance problems towards a much stronger reform drive,” said Timo Klein, senior economist with IHS Global Insight. He adds that she is using that same pressure to try to make changes in the EU treaties to allow for greater budget supervision. “Obviously this is a high risk strategy,” he adds.

But Berlin also disagrees with its foreign detractors regarding the wisdom of using the ECB as a lender of last resort. “If this were to be seen as a standard procedure in future — that the ECB would be obliged to buy up large quantities of government bonds — then that is nothing else than monetizing that debt, and then before long you will have noticeable increases in inflation,” Klein said. (Printing currency essentially means that more money is chasing the same goods, which drives up prices.)

Inflation is profoundly worrying to Germans, due to the traumatic experience of hyperinflation in the early 1920s, when the personal assets of the majority of the population were wiped out. “That fear is so deeply ingrained, almost 90 years on, this is still very much present on people’s minds,” Klein said.

“Germans are probably more inflation averse then people in other countries,” said Sebastian Dullien, professor of international economics at Berlin’s HTW University. But he adds that they have become more concerned with inflation recently than they were between World War II and reunification, even though inflation was actually higher then. One possible explanation, he says, is that wages have stagnated in Germany, meaning that even slight inflation eats into people’s spending power more.

Moreover, where other see a necessary bailout, Germans see a handout to countries that are living beyond their means. They regard this as letting them off the hook for their profligate ways. Berlin is convinced that only by imposing stringent sanctions on these debt sinners will they enact reforms. It also sees this as the best way to win back market confidence.

This is a view many German economists share. “In Germany there is this feeling that if you just cut spending strongly enough then confidence will return and you will have more investment,” Dullien said. He points out, however, that market panics show that financial markets are not always efficient and don’t always process information adequately.

Nevertheless the thinking in Germany is that inflationary policies are wrong-headed in that they might cover up the cracks but don’t address the real issues.

“The use of the ECB will not solve this problem in the long term,” said Matthias Kullas, of the Center for European Policy, a conservative think tank based in Freiburg. “It can only buy time. The basic problem is that the euro zone is a suboptimal currency union, in which the states’ competiveness differs so widely.” That breeds imbalances that inevitably lead some countries to become indebted.

The German government, Kullas argues, wants to make sure that Europe gains the power to supervise budgets before it resorts to the ECB or eurobonds. “If the ECB is used before that is agreed, then many states would quickly give up their efforts to reform.”

The government also knows that it will have to wrest concessions at the forthcoming December 9 summit in order to placate voters back home. The bailouts have been deeply unpopular among Germans, who see their taxes flowing to others less disciplined than themselves. Indeed, at times Merkel has seemed paralyzed by the prospect that the electorate will punish her for throwing German taxpayers money at the problem.

“Merkel [has] always acted tactically in this crisis,” said Dullien. “She always tried to do what was most popular but she didn’t have a strategy and didn’t know where she actually wanted to end up.”

It is certainly true that Merkel has not effectively explained to her citizens what is at stake. “The story might have been different,” Dullien argued, “if she had stepped up and said: ‘The euro is vital to German national economic interest. It’s not out of altruism that we are doing it. It’s just because we are [heavily] export-dependent — this is what we need to do.’”

In fact German businesses are becoming increasingly uneasy at the way the crisis is dragging on. “It is important that the euro crisis be solved as quickly as possible,” says Anton Börner, president of BGA, Germany’s leading exporters association. “Not just for Germany but for the whole world. This uncertainty is very difficult to cope with and cannot be allowed to continue. Uncertainty is always bad for business.”

Nevertheless, while from the outside Merkel seems to be dragging her feet in the crisis, for many in Germany she has already gone too far. “She is clearly caught in a dilemma between domestic political demands and foreign calls on her,” Klein added. “That is a very difficult position, and she’s trying to muddle her way through.”

Analysts are convinced that in the end Merkel and the other leaders will come to some kind of compromise agreement. “I think the fear of a euro zone break up is simply too great,” Kullas says. “No one will want to be responsible for that.”

And so began the first day of the Pirate Party’s newly changed status as legislators, after an unexpected election result that has shaken up the staid world of German politics.

The band of internet-freedom activists shocked themselves and pretty much everyone else when they won close to 9 percent in the Berlin state election on Sept. 18, allowing them to send 15 very unconventional new politicians to the regional parliament.

And a recent opinion poll gave the Pirates 7 percent nationally, enough to make it into the federal parliament.

A week after their Berlin triumph, however, it was clear the astonishment had not worn off. They hadn’t prepared to win or to take office.

Awkwardness has ensued, even on the part of the fledgling parliamentarians.

“My wife was not amused,” said new Pirate lawmaker Pavel Mayer.

The long-haired 46-year-old started a software business earlier this year, ploughing his savings and pension into the company. Now he, along with three of his employees in the tiny company, will have to take time off work to serve in parliament.

Mayer says he will hire new staff but hopes to juggle both jobs for the moment. Having already worked crazy hours during the campaign, he said he’s used to it: “When the things you do are fun, then you don’t mind spending many hours on it.”

The new party was founded in 2006, an offshoot of the Swedish party of the same name. Its original platform involved focusing on data protection, file-sharing and censorship. It has expanded that to include a range of social issues and demands for increased transparency and citizen participation. The party’s average member is 29 years old.

The Pirates are determined to set an example in the Berlin parliament. In general, the impression they’ve made since their surprise Berlin triumph is one of exuberant chaos. At their very first meeting as a parliamentary group, the 14 men and one woman were already openly bickering over whether or not future meetings should be streamed to the public or held behind closed doors. Many argued that meeting in private would betray their pledge to radical transparency during the campaign.

It took them another week of arguments and deliberations to elect a parliamentary floor leader. In the end, the post went to Andreas Baum, the fresh-faced electrical engineer who headed their highly successful and irreverent election campaign. His laid-back attitude went down well with younger voters, unperturbed when he stumbled over thorny issues like how much debt Berlin currently has. When asked on a TV show, he guessed “many millions of euros.” The true amount is €63 billion.

Many supporters are hoping that the young, tech-savvy crew will bring a breath of fresh air to stuffy German politics. Others wonder if they will change the system — or if the system will change or even eradicate them.

Even so, their lack of political nous is actually part of their appeal — if not their very purpose.

“That is exactly what they say they want,” said Christoph Bieber, professor of political science at the University of Duisburg. “Not to decide things hierarchically; to listen to every voice; and to really react to what is said and to include that in their work. It will be interesting to see how they deal with the new situation.”

The party has dubbed their approach “liquid democracy,” whereby citizens can directly influence the politics from the bottom up. Using a computer program called “Liquid Feedback,” party members can submit motions online. Proposals are then voted on. If enough members back them, then the executive committee has to adopt it. The party’s election manifesto in Berlin was created using the program.

Although the party is hoping to change things, the danger is that they will lose their edge as they get sucked into professional politics, says Gero Neugebauer, a political scientist at Berlin’s Free University. “The pirates can compensate for this by really building on this liquid democracy and implementing it internally,” he said. “This way of communicating, not from the top down but horizontally, could be a good way of combating this danger.”

In the huge lobby of Berlin’s grand parliament building, Susanne Graf, at 19 now the youngest member of parliament, said the party will have to in some way adapt to the system, adhering to the rules and acting properly. “We aren’t going to go running through the corridors screaming,” she said. “But if we insist that we have our issues, that they are important to us, then we can change the way we behave to a certain extent.”

In addition to her new ID for the parliament, Graf has just picked up her brand-new student card. She is slated to study mathematical economics beginning this month, but will have to arrange with her lecturers how to combine her work as a politician with her studies.

“I know it’s going to be tough,” she said.

As Graf and Mayer learn the ropes, the other political parties are scrambling to analyse how much of a threat this unknown entity poses. The Greens are particularly alarmed. The environmentalists, who 30 years ago were the new non-conformist rebels on the block, are increasingly regarded as part of the establishment. The Greens lost the most voters to the Pirates, with 17,000 switching to the new party in Berlin.

Gesine Agena, Green Party youth wing spokesperson, said the party is looking at where it went wrong and how it can win back the voters.

“I don’t think it was just about the internet. I would say it is about the fact that they had lots of catchy themes, and a campaign that spoke to young people.” Campaign pledges – legalizing cannabis, improving Berlin’s education system, making public transport free and establishing a basic minimum wage — had a lot of appeal. They made the Pirates seem “cool, young and fresh,” she said.

Agena worries that the Pirates could continue to take votes away from the Greens and the center-left Social Democrats in the 2013 federal election, affecting the formation of the next government. “You have to take them seriously as a party. You can’t just expect them to go away.”

Mayer says the party’s appeal is that completely normal people appeared to be standing for election. “Not political professionals, who have learned to be smooth and say nothing when speaking to the media,” he said. “I believe people don’t want that any more. There is a huge desire to see real people in politics.”

Not everyone agrees. Those “real people” looked very much like a gang of mostly white males when they appeared in front of the media after the Berlin vote. A major criticism of the party has been the lack of women or minorities as candidates.

Graf says she thinks it’s a pity that she is the only woman who ran (another female candidate dropped out). “There are a lot of really competent women in the party but they didn’t want to go forward, and if they don’t want to you can’t force them,” she said.

The party has also received flak for having a flimsy platform, more interested in the form than the content of democracy. For example, there’s little clarity as to how exactly they would pay for their many attractive-sounding pledges.

Graf said that for a party that is just five years old, its program is actually very comprehensive. “Naturally there are areas where we are lacking, for example, economic policy, but we always said that we would only speak about things that we know something about.”

Mayer points out that the party has had to come up with their program without any paid staff. And he argued that whatever its deficits, the party is full of exceptionally bright young people who learn more quickly and more efficiently than those in other parties.

“We don’t have a lot of money, but we use a lot of modern tools, and we are used to exchanging opinions quickly on the internet and organizing.”

With their new high profile, there is now enormous pressure on the rookie troupe to do well in Berlin.

“The pressure is not just from within Germany,” Graf said. “It’s from across the world. We have Pirate parties in 44 countries, including the US.”

“If we blow it, then we can’t just say it was the Berliners who messed up,” she added. “That’s why we really have to make a huge effort.”