The global financial and economic crisis has hit Germany especially hard, leading to the most severe economic decline in the history of the Federal Republic—one more drastic than its counterpart in any other large European country or the United States. The impact of the crisis on Germany’s manufacturing sector has been especially dramatic as a result of the country’s strong focus on exports (exhibit).

Some argue that Germany must reduce its emphasis on them and concentrate more on domestic demand. But the country’s answer to the crisis cannot be a departure from a successful export orientation and an above-average level of industrialization. Given these strengths, radically redefining the current economic model is not the solution. Instead, Germany will need to develop and refine its economic model further...