The Eurasia Center/EBC
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Washington, DC 20016
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Email: President@eurasiacenter.org
The Federal Republic of Germany
Country Report
Germany: Political Structure
The political apparatus of Germany is a federal republic with three
branches for the executive, legislative, and judicial procedures1. The capital
is Berlin. The country is divided up into 16 administrative regions called
Bundeslaender. The executive branch consists of the President as the head
of state (currently Joachim Gauck), the Chancellor as the head of
government (currently Angela Merkel), and the Bundesminister or cabinet.
The majority of the power in the executive branch resides with the
Chancellor. Angela Merkel was re-elected as Chancellor on September 27
2009, leading a center-right coalition between her own party, the Christian
Democrats, and the pro-business Free Democrats. Despite previously being
hindered in enacting economic liberalization because of the Christian
Democrats’ former compromise agreement with the Social Democratic Party,
with the current support of a right wing majority, she has been working to
complete substantial reforms during her term2. In 2013, Germany’s Social
Democrats voted to accept a coalition agreement that party leaders had
drawn up with Angela Merkel’s Christian Democrats and its smaller, more
conservative sister party, the Christian Social Union. The result is known as
the Grand Coalition. The legislative branch is bicameral, made up of the
1
CIA World Factbook. https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html. June 10, 2013.
New York Times, “Angela Merkel”,
http://topics.nytimes.com/top/reference/timestopics/people/m/angela_merkel/index.html?scp=2&sq=germany%20el
ections&st=cse. Updated Oct. 28, 2009.
2
Bundestag and the Bundesrat3. The Bundestag creates and passes laws, the
Bundesrat represents the Bundeslaender. The 622 members of the
Bundestag are elected every four years through a system of proportional
representation. The next election will be in fall of 2013. The 69-member
Bundesrat does not hold elections; membership is based on political makeup
of the Bundeslaender. The judicial branch is hierarchal, with the highest
court being the Federal Constitutional Court. The Bundestag and Bundesrat
each elect half of the judges on the Court.
Germany: Economic Overview
Role within the European Union:
Germany was a founding state of the European Coal and Steel Community
(ECSC) and the European Economic Community (EEC), the predecessors to
the modern day EU. The ECSC and the EEC were founded with the primary
goal of economic integration in Europe, culminating in the Union’s
introduction of the euro as the primary currency on January 1, 1999—efforts
Germany had principally led.4 The global financial crisis which began in 2007
created contractions for the German economy. However, the strong German
economy soon climbed out of the crisis. Many other European states are still
struggling with the impact of the crisis, especially the Eurozone’s periphery
nations. Today, Germany remains the EU member state with the largest
population as well as the most powerful economy.
Economic Indicators:
▪ Germany’s current estimated GDP, adjusted for purchasing power parity
is $3.853 trillion, and the GDP per capita is $43,4434.
▪ Inflation is currently at 0.2%5
Economic Structure:
▪ 2015 GDP composition by sector: 0.8% agriculture, 30.1% industry, 69%
services.6The 2015 current account surplus is the highest in the world, at
3
CIA.
CIA.
5
CIA World Factbook
6
CIA World Factbook
4
▪
▪
▪
▪
over €254 billion as exports have continued to outweigh imports.7 This is
an impressive 7% of overall GDP8.
Major export commodities include: machinery, vehicles, chemicals,
metals and manufactures, foodstuffs, textiles.9
Germany boasts the largest economy by GDP in Europe. In terms of GDP
accounting for purchasing power parity, Germany wields the sixth largest
economy in the world (behind the EU as a whole, China, the United
States, India, and Japan).
As of 2014, Germany is trading with a diverse array of countries, with no
country receiving more than 10% of its exports. Its most notable trading
partners include France, the United States, the UK, the Netherlands,
Italy, Austria, Belgium, Switzerland, and Poland.10
Federal corporate tax rate is set at 15.8%, but this rises to a total of
36.3% when trade taxes are factored in11. Personal income tax is
progressive, with individuals being taxed between 18.9-45% depending
on their level of income.12
The 2007-2009 Eurozone Crisis
The recession in the Eurozone was triggered by a lending bubble in 2007.
States increased spending in an effort to stimulate their economies out of
recession. In the wake of the recession, Europe has been beset by a
sovereign debt crisis. Germany managed to maintain its economic
competitiveness, producing a capital account surplus at a time when the
Eurozone periphery countries (Greece, Ireland, Portugal, Spain, and Italy)
are running capital account deficits. This surplus has allowed Germany to
produce capital exports in the form of bank lending and foreign direct
investment (FDI). The majority of this has been flowing to other Eurozone
member nations, especially the periphery. Some economic analysts have
raised concerns that the periphery states are unable to compete with
Germany and that this inherent inequality is a primary barrier to successful
7
ibid
World DataBank- Germany.
http://databank.worldbank.org/data/views/reports/tableview.aspx?isshared=true&ispopular=country&pid=11. June
20, 2013.
9
CIA World Factbook
10
Germany Trading Partners.
https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/ForeignTrade/TradingPartners/Tables/Ord
erRankGermanyTradingPartners.pdf?__blob=publicationFile. June 20, 2013.
11
Heritage 2013 Index of Economic Freedom. http://www.heritage.org/index/country/germany. June 20, 2013.
12
“Individual Income Tax for Employees in Germany ”
http://www.expatica.com/de/finance_business/tax/Individual-income-tax-for-employees-in-Germany-_18488.html.
June 20, 2013.
8
Eurozone economic reforms. The global financial crisis created a contraction
in GDP of 5.1% in 2009, though GDP growth accelerated in 2010 and 2011.
Due to economic worries and decreased demand from the indebted
periphery, GDP growth rate in Germany fell to 0.7% in 2012. The Eurozone
is still managing the effects of the crisis, particularly with regards to the
Greek debt crisis. Germany has been responsible for funding a significant
portion of each of the bailout packages Greece has received and continues to
receive in an attempt to prevent its economy from defaulting on its debt.
Attractions:
▪ Foreign Investment: The German government welcomes foreign
▪
▪
investors as an opportunity to create new jobs in the country. Foreign
investors receive the same treatment as domestic investors and have no
additional restrictions or barriers in conducting business in Germany.
There are no restrictions on capital transactions, currency transfers, real
estate purchases, repatriation of profits or access to foreign exchange.13
Advanced Technology & Industry: Germany is currently one of the
world’s largest and most technologically advanced producers of metals
and valuable resources, such as iron, steel, coal, cement, chemicals, and
textiles. The industrial production currently stands at 1.8% in 2013,
beginning to gain some ground due to increased demand in the
construction market.14
Close Ties to the United States: Since the end of World War II and the
rebuilding of Germany through the Marshall Plan, the United States and
Germany have been close allies. German- US trade has been consistently
strong with the bilateral trade reaching $157.5 billion in 201015, making
Germany the 5th largest trading partner for the US.16
Troubled Spots:
▪ Unemployment and the Continued Recovery from the Cold War:
Though Germany has one of the world’s largest economies, the process of
integrating the former eastern German economy with the west continues
to be long, expensive, and hinders economic growth; social programs
have been particularly costly and required fiscal transfers from West to
13
The Heritage Foundation. “Index of Economic Freedom 2006- Germany.”
http://www.heritage.org/index/Country/Germany, January 2010.
14
http://www.rttnews.com/2132365/construction-drives-german-industrial-output-growth.aspx. June 20, 2013
15
US/ Germany Foreign Trade. http://www.census.gov/foreign-trade/balance/c4280.html. June 20, 2013
16
US/German Foreign Trade. http://www.census.gov/foreign-trade/statistics/highlights/toppartners.html. June 20,
2013.
East, for a total of €1.7 trillion in 201217. Despite efforts to modernize,
eastern Germany is still less developed and suffers from high
unemployment compared to the rest of Germany- currently over 10%
while unemployment in western Germany is closer to 6%18. Austerity
measures launched under Chancellor Gerhard Schroeder prepared
Germany for the harsh 2007-2009 financial crisis, allowing the country to
contain its unemployment to a manageable level.
Demographic Changes.
Germany is facing the effects of an aging population. According to the
Federal Statistics Office of Germany’s 2050 projections (which are based
upon Germany’s low fertility rates, net migration and an increase in life
expectancy), the working population will drop from 42-44 million in 2030
to between 35-39 million in 2050. Furthermore, the working age
population will become, on average, older and the population aged 80
and over will grow from 4 million to 10 million19.
Migrant Crisis
In recent months, Europe has been flooded by an influx of migrants
fleeing conflict in the Middle East, particularly in Syria and Iraq. These
migrants have sought asylum in many European countries, receiving the
most overwhelmingly positive response from Germany, which expects to
take in 800,000 refugees by the end of 2015. While many German
citizens have been welcoming the migrants with open arms, there are
concerns about how Germany will cope with such a large influx,
particularly in light of xenophobic sentiments coming from the far right.
Environmental Concerns
The environment in Germany has been severely degraded by the country’s
heavy industrialization. This is especially true for the area of former East
Germany, which in 1985 was ranked as having the worst air, water, and
ground pollution in Europe. Between 1949 and the 1980s, the Rhine River
became 20 times more polluted than it was at the start of that time period.
The government has been taking actions to curb pollution. The Federal
Emission Protection Act of 1974 protects the air, the Effluency Levies Act
enacted in 1978 covers discharges into water, and the Waste Disposal Act of
1972 deals with ground pollution20. In addition, the government began
17
http://www.economist.com/node/21551512
http://www.dw.de/combating-rising-racism-in-eastern-germany/a-16740324. June 20, 2013.
19
Federal Statistics Office of Germany. “Germany’s Population by 2050”.
http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Publikationen/SpecializedPublications
/Population/GermanyPopulation2050,property=file.pdf.
20
http://www.nationsencyclopedia.com/Europe/Germany-ENVIRONMENT.html
18
shutting down its 23 nuclear reactors and replacing them with renewable
energy21. This move was a response to the March 11, 2011 Fukushima
Daiichi nuclear catastrophe.
2009 CO2 Emissions, kilotons
2010 Other Greenhouse Gases, HFC,
PFC, SF6 (kt CO2 Equivalent)
734,599 kt
26,843 kt
Population Pyramid over Time22
Acknowledgements:
Research and Data Development Provided by Hannah Friedman, Benjamin Harned, Jessica
Jerrell and Elke Larsen, Research Assistants, Under the supervision and coordination of Dr.
Gerard Janco, President, The Eurasia Center/EBC.
21
http://www.bbc.co.uk/news/world-europe-13592208
Berlin Institute for Population and Development. “ Population Aging”. http://www.berlin-institut.org/onlinehandbookdemography/population-ageing.html. July 2009.
22