Germany's affluent and technologically powerful economy- the fifth largest national economy in the world - has become one of the slowest growing economies in the entire euro zone, and a quick turnaround is not in the offing in the foreseeable future. Growth in 2001-03 fell short of 1%. The modernization and integration of the eastern German economy continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $70 billion. Germany's ageing population, combined with high unemployment, has pushed social security outlays to a level exceeding contributions from workers. Structural rigidities in the labor market - including strict regulations on laying off workers and the setting of wages on a national basis - have made unemployment a chronic problem. Corporate restructuring and growing capital markets are setting the foundations that could allow Germany to meet the long-term challenges of European economic integration and globalization, particularly if labor market rigidities are further addressed. The government is also starting long-needed structural reforms designed to revitalize the country's economy. In the short run, however, the fall in government revenues and the rise in expenditures have raised the deficit above the EU's 3% debt limit.