INDUSTRY IN GERMANY Country Issues Country issues related to Germany are
addressed in four contexts. The areas of consideration are (1) cultural, social,
and demographic trends and concerns, (2) political/governmental concerns, (3)
exchange rate issues, and (4) macroeconomic issues. Cultural, Social, and
Demographic Trends and Concerns Germany is the slightly larger then the combined
size of Ohio, Pennsylvania, and New York. (137,691 square miles.) Germany is a
nation of 81.5 million people (Hunter, 1997). The rate of population growth in
Germany approximates one-percent per year. The head of the government is
Chancellor Gerhard Schroder (elected on October 27,1998). The official language
is German. The principal religions are Protestant (Evangelical Lutheran) and
Roman Catholic-Christianity. German workers are among the best educated, best
trained, and most productive to be found anywhere in the world. Germany's modest
population growth tends to produce market stability, as opposed to market
growth. Thus, automobile manufacturers in Germany tend to look to exports for
sales growth. Germany's chief commercial exports include machinery, automobiles
(Volkswagen, Mercedes-Benz, Audi), chemicals, iron, and steel.
Political/Government Concerns Germany is a parliamentary democracy. A
proportional representation system assures that smaller parties are represented
in the Bundestag.
The governing conservative coalition, the Christian Democratic
Union (all states other than Bavaria) and the Christian Social Union (in Bavaria
where the Christian Democratic Union does not stand), has held power since 1982
(Hunter, 1997). The reunification of East Germany and West Germany into a single
state has produced economic, political, and social problems. While not all of
these problems have been completely solved, they do not represent a source of
instability in the country. Exchange Rate Issues The currency in Germany is
called Deutsche Mark. The economy in Germany is the strongest in Western Europe
and is an important member of the European Union. The principals of the social
market economy guide its economic activity. Germany has pursued a monetary
policy of that emphasized the control of inflation, relatively high interest
rates, and a strong mark, often to the complete dismay of the country's European
Community partners. Monetary policy emphasizes interest rates and money supply
management. Germany is a key player in the drive toward European Monetary Union.
The mark remains strong at DM1.84/US$1 and DM3.07/61 (Financial
Indicators,1998). Germany will qualify for monetary union and the single
European currency as of 1 January 1999 (Maastricht Follies,1998). Taxation in
Germany The federal government and its States (lands) try to coordinate their
policies through such advisory bodies as the economic council and the finance
planning council. But the central government cannot order the States (lands) to
follow its policy, largely because it has no monopoly on taxing power. In, all
the central government receives around 55 percent of all taxes but makes then 45
percent of all expenses. On the other hand the States, spend more then they
receive and the federal government makes up the difference. Macroeconomic Issues
Per capita gross national product is US $28,760, gross domestic product is US
$2.1 trillion (Hunter, 1997). Germany's GDP growth in 1997 was 2.4 percent
Economic Indicators, 1998). Foreign Trade remains the essential pillar of
Germany's prosperity. It is one of the world's leading export accounts for over
half of it manufacturing jobs. Germany is very sensitive to world economic
climates because, its GDP is made 38 percent of exports. Germany's international
trade balance is traditionally in the black (Hunter, 1997). Exports typically
exceed imports by approximately five-percent. Germany's international trade
balance is compared with that of Japan and the United States in Table 1. Table 1
International Trade Balance Comparison: Germany, Japan, and the United States
[billions of US$]
________________________________________________________________ Country
January-March 1998 April 1997-March 1998 Germany + 4.62 + 70.5 Japan +8.79 +
103.8 United States -18.80 - 199.4 [Source: Financial Indicators, 1998]
________________________________________________________________
