And it's far more complex than that. Germany faces severe demographic trends that have caused a labor shortage, and also has an economy that's highly dependent on manufacturing exports. Having an open door policy at that point makes an awful lot of sense.
The US is headed towards a similar situation, but will have a better labor pool in Mexico, and–Internet wisdom notwithstanding–the US is much better at integrating immigrant labor than Europe is.
If you are a French national and want to come work in Italy: no problem, you are treated exactly like an Italian (except for maybe a couple of national security jobs). If you are Romanian you still have to get a work permit.
This led to a lot of polemic and propaganda here in Germany, especially from the right-wing.
After a country joins the EU, its citizens gain full freedom of movement after 7 years maximum. Countries can impose a 2-year transitional period, followed by a 3-year extension, and another 2-year extension, with escalating requirements for what claims need to be made to justify an extension.
For example here in Denmark there was only a 2-year transitional period, so Romanians and Bulgarians are free to work here without a permit since 1/1/2009. But a few EU countries, such as Germany and the UK, exercised an extraordinary right to delay implementation for a full 7 years, by asserting "serious labor-market disruption". Italy was in between, applying the 2+3 but not the full 2+3+2 transitional period, so Romanians/Bulgarians may work there without a permit since 1/1/2012. Since 1/1/2014 all transitional periods for Romania and Bulgaria have expired (a transitional period for Croatia is still in effect in some countries).
However I was imprecise on the terminology: Romania and Bulgaria are actually not in Schengen yet, so EU states may impose border checks. What they are part of is the free-movement-of-labor zone, which is not quite identical to Schengen.