Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Abstract While a widespread consensus exists among macroeconomists that the German labour market reforms in [2003][2004][2005] have successfully contributed to the decline of the unemployment rate, critics claim that the reforms led to wage restraint and consequently consumption dampening accompanied by beggar-thy-neighbour effects, harming Germany's trade partners. We check up on the validity of these arguments by means of a two-country DSGE model featuring intra-industry trade and labour market frictions. Our results suggest that the disproportional growth of GDP (labour productivity) in comparison to consumption (wages) are only partially driven by the reforms. However, we do not find that the reforms contribute to Germany's trade surplus and cause negative spillovers to trading partners in terms of output and employment. The German Labour Market Reforms in a EuropeanJEL classification: E24, E61, E65, F42, J38, J63