Holzminden, a town of 20,000 souls on the border between Lower Saxony and North Rhine-Westphalia, lies roughly at the centre of northern Germany. Yet Angela Schürzeberg, head of strategic planning for the district, maintains: "We are the east of the west," as she sifts through a stack of depressing statistical reports.

In economic terms, her statement makes sense. Holzminden, whose slow decline has brought its standard of living close to that of depressed regions in the former Communist east, embodies a trend that is perplexing economists.