Germany Semester

Economy

Germany is one of the most highly developed industrial nations in the world and, after the USA and Japan has the world’s third largest national economy. With a population of 82.5 million Germany is also the largest and most important market in the European Union (EU). In 2004, Germany’s gross domestic product (GDP) totaled EUR 2.16 trillion, which translates into per-capita GDP of EUR 26,856. This figure can be attributed primarily to foreign trade. With an export volume of EUR 734 billion or one third of GDP in 2004, Germany is the biggest exporter of goods worldwide, and as such is considered to be the “export world champion”. The engine room behind this foreign trade is first and foremost industry, which accounts for some 84 percent (2004) of total exports, making it more of a global player than almost any other country. The most important economic centers in the country are the Ruhr region (formerly characterized by heavy industry it is developing into a hub for high-tech and service providers), the Munich and Stuttgart conurbations (high-tech, automobiles), Frankfurt/Main (finance), Cologne, Hamburg (port, Airbus construction, media) and Leipzig.

Germany is one of the world's most advanced market economies. It is the world's third largest economy in USD exchange-rate terms,[1] the fifth largest by purchasing power parity (PPP),[2] and the largest economy in Europe.

Although recent performance has been dynamic, due to a strong world economy, the German economy is marked by domestic structural problems, and continued difficulties in fuelling formerly communist East Germany.

Competition and free enterprise are promoted as a matter of government policy. However, the state intervenes in the economy through the provision of subsidies to selected sectors and the partial ownership of enterprises in sectors of strategic importance[citation needed] .

The German economy is heavily export-oriented, with exports accounting for more than one-third of national output. As a result, exports traditionally have been a key element in German macroeconomic expansion. Germany is a strong advocate of closer European economic and political integration, and its economic and commercial policies are increasingly determined by agreements among European Union (EU) members and EU single market legislation. Germany uses the common European currency, the Euro, and its monetary policy is set by the European Central Bank in Frankfurt, Germany.

German development statistics:

· Income per capita is $34,400
· Life expectancy at birth has risen to 78.95 years
· Under-five mortality rate is 4.08 deaths per 1,000
· Literacy rate is over 99 percent

(Source: https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html)


CHALLENGES AHEAD

Currently the Germany economy is facing structural problems, in particular with regard to the welfare systems and the labor market. In late 2005 the unemployment rate was 9.4 percent in the West and 17 percent in the five new federal states in eastern Germany. In addition, the country is grappling with the enormous financial burden of reunification, which involves annual transfers of around EUR 80 billion (see information section on page 103). For this reason over the past few years the annual growth rate has only hovered around the one percent mark.

• Economic growth slowed to 2.5% in 2007.

The modernization and integration of the eastern German economy continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $80 billion. The former government of Chancellor Gerhard SCHROEDER launched a comprehensive set of reforms of labor market and welfare-related institutions. The current government of Chancellor Angela MERKEL has initiated other reform measures, such as a gradual increase in the mandatory retirement age from 65 to 67 and measures to increase female participation in the labor market.

Germany's aging population, combined with high chronic unemployment, has pushed social security outlays to a level exceeding contributions, but higher government revenues from the cyclical upturn in 2006-07 and a 3% rise in the value-added tax pushed Germany's budget deficit well below the EU's 3% debt limit.

Germany's Social Assistance Program: The Dilemma of Reform

Germany’s social assistance program is the subject of intense national debate.Its large and rapidly growing costs do not make fiscal consolidation easy and, more important, it aggravates Germany’s most pressing economic problem: structural unemployment.

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PROJECT ACHIEVEMENTS

For more information you can take a look at these web sites:

• Presidency of the European Union 2007
• German Embassy in Washington, D.C.
• North Atlantic Treaty Organization (NATO)
• Federal Statistical Office