The German economy - the fifth largest economy in the world in PPP terms and Europe's largest - is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force. Like its western European neighbors, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and declining net immigration are increasing pressure on the country's social welfare system and necessitate structural reforms. The modernization and integration of the eastern German economy - where unemployment can exceed 20% in some municipalities - continues to be a costly long-term process, with annual transfers from west to east amounting in 2008 alone to roughly $12 billion. Reforms launched by the government of Chancellor Gerhard SCHROEDER (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong growth in 2006 and 2007 and falling unemployment. These advances, as well as a government subsidized, reduced working hour scheme, help explain the relatively modest increase in unemployment during the 2008-09 recession - the deepest since World War II - and its decrease to 7.4%in 2010. GDP contracted 4.7% in 2009 but grew by 3.6% in 2010. In its annual projection for 2011, the Federal Government expects the upswing to continue, with GDP forecast to grow this year at a real rate of 2.3%. The recovery was attributable primarily to rebounding manufacturing orders and exports - increasingly outside the Euro Zone. Domestic demand, however, is becoming more significant driver of Germany's economic expansion. Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced in Chancellor Angela MERKEL's second term increased Germany's budget deficit to 3.5% in 2010. The Bundesbank expects the deficit to drop to about 2.5% in 2011, below the EU's 3% limit. A constitutional amendment approved in 2009 likewise limits the federal government to structural deficits of no more than 0.35% of GDP per annum as of 2016.
GDP (purchasing power parity): $2.94 trillion (2010 est.) country comparison to the world: 6 $2.841 trillion (2009 est.) $2.98 trillion (2008 est.) note: data are in 2010 US dollars
GDP (official exchange rate): $3.316 trillion (2010 est.)
GDP - real growth rate: 3.5% (2010 est.) country comparison to the world: 111 -4.7% (2009 est.) 0.7% (2008 est.)
GDP - per capita (PPP): $35,700 (2010 est.) country comparison to the world: 33 $34,500 (2009 est.) $36,200 (2008 est.) note: data are in 2010 US dollars
GDP - composition by sector: agriculture: 0.8% industry: 27.9% services: 71.3% (2010 est.)
Germany has a non-discriminatory, well developed financial services infrastructure. Germany’s universal banking system allows the country’s more than 39,000 bank offices not only to take deposits and make loans to customers but also to trade in securities. The traditional German system of cross-shareholding among banks and industry, as well as a high rate of bank borrowing relative to equity financing, allowed German banks to exert substantial influence on industry in the past.
Private banks control roughly 30% of the market, while publicly owned savings banks partially linked to state and local governments account for 50% of banking transactions, and cooperative banks make up the balance. All three types of banks offer a full range of services to their customers. A state-owned bank, KfW, provides special credit services, including the financing of homeowner mortgages, guarantees to small and medium-sized businesses, financing for projects in disadvantaged regions in Germany and export financing for projects in developing countries.
Regional state-owned banks ("Landesbanken") were among the hardest hit by the economic crisis and their future is uncertain. The financial crisis also triggered a major consolidation of the German banking sector with Commerzbank buying up Dresdner Bank, Deutsche Bank taking over Postbank and UniCredit Bank buying up Hypovereinsbank. This has effectively reduced the number of top German banks to just two (Deutsche Bank and Commerzbank).
The Frankfurt Stock Exchange is one of the world‘s largest trading centers for securities. The most stock trading is conducted via the Frankfurt Stock Exchange and Xetra (as of March 2008, they accounted for 98% of trading in German shares and 84 percent in foreign shares). Deutsche Börse AG operates the Frankfurt Stock Exchange, an entity under public law. The Frankfurt Stock Exchange facilitates advanced electronic trading, settlement and information systems. Today, the Frankfurt Stock Exchange is an international trading centre. This is also reflected in the structure of its participants. Some 160 of around 330 market participants come from abroad. There are six other regional stock exchanges based in: Stuttgart, Munich, Hamburg, Düsseldorf, Hannover, and Berlin. In addition, the derivatives exchange Eurex is based in Frankfurt, the European Energy Exchange in Leipzig, and the Risk Management Exchange in Hanover.
As Europe's largest economy and second most populous nation (after Russia), Germany is a key member of the continent's economic, political, and defense organizations. European power struggles immersed Germany in two devastating World Wars in the first half of the 20th century and left the country occupied by the victorious Allied powers of the US, UK, France, and the Soviet Union in 1945. With the advent of the Cold War, two German states were formed in 1949: the western Federal Republic of Germany (FRG) and the eastern German Democratic Republic (GDR). The democratic FRG embedded itself in key Western economic and security organizations, the EC, which became the EU, and NATO, while the Communist GDR was on the front line of the Soviet-led Warsaw Pact. The decline of the USSR and the end of the Cold War allowed for German unification in 1990. Since then, Germany has expended considerable funds to bring Eastern productivity and wages up to Western standards. In January 1999, Germany and 10 other EU countries introduced a common European exchange currency, the euro. In January 2011, Germany assumed a nonpermanent seat on the UN Security Council for the 2011-12 term.
Government type: federal republicCapital: name: Berlin time difference: UTC+1
Independence: 18 January 1871 (German Empire unification); divided into four zones of occupation (UK, US, USSR, and later, France) in 1945 following World War II; Federal Republic of Germany (FRG or West Germany) proclaimed 23 May 1949 and included the former UK, US, and French zones; German Democratic Republic (GDR or East Germany) proclaimed 7 October 1949 and included the former USSR zone; unification of West Germany and East Germany took place 3 October 1990; all four powers formally relinquished rights 15 March 1991
National holiday: Unity Day, 3 October (1990)
Constitution: 23 May 1949, known as Basic Law; became constitution of the united Germany 3 October 1990
Legal system: civil law system with indigenous concepts; judicial review of legislative acts in the Federal Constitutional Court; has not accepted compulsory ICJ jurisdiction
Suffrage: 18 years of age; universal
Chief of state: President Joachim GAUCK (since 23 March 2012) head of government: Chancellor Angela MERKEL (since 22 November 2005) cabinet: Cabinet or Bundesminister (Federal Ministers) appointed by the president on the recommendation of the chancellor
elections: president elected for a five-year term (eligible for a second term) by a Federal Convention, including all members of the Federal Diet (Bundestag) and an equal number of delegates elected by the state parliaments; election last held on 19 February 2012 (next to be held by June 2017); chancellor elected by an absolute majority of the Federal Diet for a four-year term; Federal Diet vote for Chancellor last held after 27 September 2009 (next to be held 18 March 2012) election results: Joachim GAUCK elected president; received 991 votes of the Federal Convention against 126 for Beate KLARSFELD and 3 for Olaf ROSE; Angela MERKEL reelected chancellor; vote by Federal Diet 323 to 285 with four abstentions