For decades, environmentalism has been close to a national obsession in Germany. The Green Party was invented here as a counterculture movement in the 1980s; today Green ministers help run the country. All across the land, households dutifully separate their garbage into five different containers for recycling. Thousands of newly built windmills provide a phenomenal 5 percent of Germany's electrical power, and there are plans to double that share by 2010. Hundreds of laws regulate the environmental impact of industry. One of them will phase out all nuclear power over the next 30 years.

But these days, with a stubbornly high unemployment rate (11 percent), and after a decade of economic stagnation, the German consensus on environmentalism is beginning to fray. In fact, many citizens now wonder if environmentalism is a luxury the country can still afford. According to a recent Allensbach Institute poll, public concern for the environment now ranks far behind worries about jobs, pensions, education and health. In Berlin, political battles are raging over the economic cost of Green policies; taxpayer advocates, citizens' movements and leading media all complain about money-guzzling wind power and recycling schemes. Last week, during deliberations over a new law establishing carbon-dioxide-emissions trading, the Environment and Economics ministers were at loggerheads over the scale of planned pollution cutbacks, which the latter said could cost thousands of jobs. In the end, Chancellor Gerhard Schroeder intervened in favor of industry; the new law will not restrict CO2 emissions as much as environmental advocates had hoped.

German Greens have long argued that their policies would not only clean up the country at little cost, but also help create millions of new jobs in environmentally friendly new industries, from solar-panel manufacturing to recycling plants and organic farming. No one disputes that Germany has made significant environmental improvements. The country's once filthy rivers and smoggy skies are now relatively clean, and its environment-technology companies enjoy rising sales. But instead of an economic miracle, the Green revolution has created a very German kind of mess. Pro-growth advocates argue that excessive regulation, taxpayer-financed subsidies and the environmental movement's general dogmatism are a costly drag on the economy. Meanwhile, the country's environmental-technology exporters have lost their market leads to Danish, American and Japanese firms. The problem? They're too fixated on subsidy-driven local markets to compete effectively abroad, says Gerhard Voss, head of the environmental-policy department at the German Economics Institute in Cologne.

Germany's recycling program is cited as a prime example of a good intention gone wrong. According to a 1991 law, at least 65 percent of all containers and packaging has to be recycled. To that end, citizens painstakingly sort their garbage before tossing it into at least five color-coded containers: green for glass, blue for paper, yellow for plastics, brown for organic waste and gray for what's left over. A complex scheme sets rules for deposits. Plastic bottles can be returned anywhere, aluminum cans only where they're bought. Water and beer require deposits, wine and milk do not.

This complex and bureaucratic system is expensive, inefficient--and, say critics, mostly irrelevant to protecting the environment. Recycling is handled by Duales System Deutschland, a monopoly whose 2 billion euro in annual fees are ultimately paid by consumers in the form of higher product prices. Britain, for example, also recycles half its packaging. But by letting some 300 recyclers compete with each other, the system costs only 150 million euro a year. (Germany recycles more waste than Britain, but not enough to justify a thirteenfold price increase.) What's more, modern recycling plants can sort garbage far more efficiently than the German system's scheme of household separation. Environmental experts decry the entire concept. "Packaging is one of the least toxic types of waste," says Matthias Schatz, an environment economist at Berlin's Technical University. Unlike automotive or electronic waste, much of it can be burned easily, cheaply and cleanly for energy, as practiced in Sweden and Switzerland. Germany's recycling obsession, Schatz says, "contravenes every single aspect of regulatory and economic efficiency."

The latest backlash is against wind power. Thanks to 1 billion euro in tax subsidies and a law forcing power companies to buy all wind power at two and a half times the market rate, Germany's got a booming windmill-building industry. Sixteen thousand windmills, each up to 180 meters high, already blanket the German landscape, and more are on the drawing board. But in a recent study leaked to the German media, the government's own Council of Scientific Advisers recommended ending the program, concluding that emissions trading would be a less costly way to reduce pollution.

Germany is under pressure both internally and externally to adopt more market-oriented policies. Both the Organization for Economic Cooperation and Development and the EU have made that point to government officials. Several of Germany's poor eastern states are clamoring to set up special pro-growth zones with fewer environmental regulations. "The environment is less and less a part of the Zeitgeist," says Thomas Petersen of the Allensbach Institute. Saxony-Anhalt and Mecklenburg, two major farming states, are pushing the government for more leeway in experimenting with genetically modified organisms, or GMOs. That GMO crops might actually be good for the environment because they require fewer pesticides is an idea German environmentalists still seem unwilling to consider.

No one believes that environmental overregulation is the root cause of Germany's economic woes. And experts say that some of the new environmental industries may yet turn out to be growth sectors. Other countries, however, have shown that a clean environment can be produced at lower cost to both taxpayers and the economy. As with other issues of reform, Germany is beginning to debate the costs and benefits more rigorously. With so much at stake these days for Europe's biggest economy, that can only be a good thing.