Paper presented at the Academy of Sciences of Northrhine-Westphalia on 13 November 2002. This paper is based on Hans-Werner Sinn, Die rote Laterne, Die Gründe für die Wachstumsschwäche und die notwendigen Reformen, ifo Schnelldienst 55, 2002, No. 23, 17 December 2002, special issue. Some of the material is also contained in condensed form in European Economic Advisory Group at CESifo, Report on the European Economy 2003, Ifo Institute for Economic Research: Munich 2003, chapter 1, appendices 4 and 5.