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The Economy
in the international arena German companies
have an excellent reputation. They
represent “made in Germany”, known as a
seal of quality the world over. They represent
innovation, quality and cutting-edge
technology. yet the world’s fourth largest
economy does not consist solely of global
players, but also of many world market
leaders who are actually small and mediumsized
enterprises, the powerhouse of the
German economy. They all benefit from the
sound economic conditions, not to mention
the excellent qualifications of the workforce.
foreign investors also value this.
stronG economic Hub in tHe
Global marKet
Germany is one of the most highly developed
and efficient industrial nations and, after
the USA, Japan, and China, has the world’s
fourth largest national economy. With a population
of 82 million Germany is furthermore
the largest and most important market in the
European Union (EU). The Germany economy
focuses on industrially produced goods and
services. In particular German mechanical engineering
products, vehicles, and chemicals
are highly valued internationally. Around one
euro in four is earned from exports and more
than every fifth job depends directly or indirectly
on foreign trade. Having been “export
world champion” six times in a row between
2003 and 2008, in 2009, with exports worth
US$ 1,121 billion, around one third of the
gross national income, Germany was the second
biggest exporter of goods worldwide after
China (US$ 1,202 billion). Germany’s share
of total world trade is around nine percent.
Given its high focus on exports there is
scarcely any other country than Germany so
intertwined with the world economy and interested
in open markets. The most important
trading partners are France, the Netherlands,
the USA and Great Britain. In 2009,
goods and services worth EUR 82 billion
were exported to France, EUR 54 billion to
the Netherlands and the USA, and EUR 53
billion to Great Britain. In addition to trade
with the original European Union member
states, since the European Union’s expansion
eastwards (in 2004 and 2007) there has been
an increase in trade with the central and east
European EU Member States. A good ten
percent of all exports go to these countries.
Overall the share of total German exports to
the countries in the European Union is 63
percent.
The importance of trade and economic relations
with emerging nations in Asia is growing
continually. Asia is now the second most
important market for goods from Germany.
In 2009 14 percent of German exports went
to this region. China is the most important
partner. Since 1999 Germany has also been
China’s biggest European investor. Some
2,500 German companies have investments
in the country.
successful social marKet
economy model
Germany is a social market economy, in
other words: The state guarantees the free
play of entrepreneurial forces, while at the
same time endeavoring to maintain the social
balance. Also on account of this concept,
made popular in the post-War era by the
Minister of Economics at the time, Ludwig
Erhard, even in economically difficult times
Germany enjoys a high degree of social harmony,
something reflected in the fact that
labor disputes are so rare here. The social
partnership of trade unions and employer associations
is enshrined in the institutionalized
settlement of conflicts as outlined in the collective
labor law. The Basic Law guarantees
employers and trade unions independence in
negotiating wages, and they accordingly have
the right themselves to select the working
conditions.
Like all industrialized nations, since 2008
Germany has been affected by the global
banking, economic and financial market crisis,
which was triggered by speculation on
the real estate market in the United States
and hit Germany in the middle of a strong
growth phase. As an efficient response to the
systemic crisis in the finance sector and to
stabilize the situation on the financial markets,
in the winter of 2008-2009 the Federal
Government, like other countries (the United
States, France, Great Britain), put together
two rescue packages for the banks worth billions
and for business introduced two extensive
economy stimulus packages.
The state programs for repairing roads,
schools, and other public buildings proved to
be a success, as did the internationally highly
regarded efforts to maintain employment levels
despite severe capacity under-utilization
(short-time working) and the environment
incentive for older vehicles (until September
2009). The Growth Acceleration Act passed
in late 2009 brought further tax cuts and
stimuli for domestic demand.
restructurinG of international
financial arcHitecture
In view of the financial market crisis Germany
is strongly pursuing a reform of the
international financial structure at several
levels (European Union, G20, IMF). It envisages
extending the scope of financial market
regulation to all players, products and markets
as well as ensuring that the regulatory
measures are implemented in full and in a
consistent manner. In the banking sector Germany
is hoping for stricter equity capital and
liquidity regulations, internationally valid accounting
rules and a financial supervisory authority
that it more stringent in its controls.
At the same time the remuneration systems
in place in banks and insurance companies are
to be regulated more strictly; inappropriately
high bonuses for managers should be able to
be forbidden. With its economic policy the
Federal Government hopes to overcome the
decline in growth as quickly as possible and
ensure Germany emerges strengthened from
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