It was the Social Democrats (supported by the Greens) who introduced a reform package in 2005 which would mean additional financial hardships for many of the jobless, and particularly to the long-term unemployed.
The package was named Hartz IV after its mastermind - the then personnel director of Volkswagen Peter Hartz - and one of its provisions meant that those who had been out of work for a longer period would in future receive far less welfare money: roughly 350 euros ($500) per month, plus allowances for rent and children.
The supporters of the reform had two things in mind. First, they wanted to make sure that costs for the already overburdened social systems in the country did not spiral out of control.
Secondly, they hoped that paying the unemployed less would increase their willingness to look for a job. It's in this context that the government promised to increase the efficiency of job placement centers.
But the reform did not consider whether somebody had worked for many years and paid into unemployment funds before being on the dole. It also did not take into account the difficulties many older workers have in finding new employment, however much they try.
Few hearts for Hartz IV
Following the reforms, the country was rocked by street protests, in which even members of the Social Democrat party joined enthusiastically. Many left the party, and eventually joined the Left party, which benefited from the unpopularity of the Social Democrats over this issue, winning an unprecedented 12 percent in the last election.
"What we're seeing is the biggest attack on social benefits in the post-second-world-war history of Germany," said Keith Barlow, who joined the initial street protests against the reform package in the eastern city of Leipzig.
"The consequences will be awful, with millions of people threatened with a life in poverty," Barlow added.
In 2009, almost five million Germans were "living on Hartz IV." Some 800,000 of them appealed against their payments, many because they felt that the child allowances were too low, or because their Hartz IV payments had been reduced since they had money saved up for their retirement. About a quarter of the claimants were completely successful; more than 70,000 had their claims partly approved.
The Hartz IV reforms have never become the hit they were meant to be, says social scientist Herfried Muenkler.
"What's been quite obvious is that society has been drifting further apart since the reforms, with an economic underclass getting bigger and bigger", Muenkler claims.
Merkel's new team left to tamper with the reforms
Paradoxically, it's Germany's new coalition government of conservative and pro-business forces which has decided to deal with some of the most obvious Hartz IV hardships.
A first change already enacted means that welfare recipients can keep considerably more of their private savings and still get the Hartz benefits.
More changes are in the pipeline that will enable recipients to earn more money on the side without the earnings being deducted from the benefits, and to increase the allowances paid for children.
Editor: Michael Lawton