GERMANY: Useful Info

Germany is the European Union’s largest consumer market, and also one of the most affluent. It has one of the highest per capita incomes, and its citizens have excellent purchasing powers and disposable incomes. It is also the world’s third largest economy, and contributes to a third of the entire European Union GDP.

Germany follows a "social market" economy which combines free-market principles with a few government regulations and social welfare programs and protections. Some have blamed it for the economic problems in the recent years, citing inflexibility, over-regulation in labour markets, and high social insurance costs as obstacles for growth. Unemployment has been a major issue, largely due to weak economic performance and stagnant creation of jobs. Economic forecasts are not encouraging, with experts predicting that growth will slow to 1% by the end of 2005. There also a large disparity between the performance of Germany’s eastern and western states; many of the easterners are migrating where more opportunities wait. Aside from this, government is also struggling to control outbursts of racial violence from far-right wing groups.

Quick Facts

Population: 82.5 million (UN, 2005)
Capital: Berlin
Area: 357,027 sq km (137,849 sq miles)
Major language: German
Monetary unit: 1 Euro = 100 cents
Main exports: Motor vehicles, electrical machinery, metals
GNI per capita: US $30,120 (World Bank, 2005)

Economic Background

Germany is the UK's largest European export market, reaching £23 billion in 2004. Almost 1,000 British companies—including most of its multinationals— have offices in the country. There is reason for others to follow suit, especially with recent movements by the government—called “Agenda 2010”— to make the country more investor-friendly. Two of the problems it hopes to solve is the baffling maze of regulations and bureaucratic procedures, some of which seem to protect local suppliers and the high cost of production and operations. Germany also has a higher marginal tax rates and complicated tax laws, which “Agenda 2010” will adjust through deductions, allowances and write-offs

While doing business in Germany may be expensive, others may argue that it is cost-effective. The country has very high levels of productivity, a highly skilled labour force, excellent engineering, first-class infrastructure, and a strategic location in the heart of the European Union.

For those considering exporting to Germany, companies must take care to research on which standards apply to their product and acquire the appropriate certifications. It is, in fact, prudent to keep informed of Germany’s standards if doing business in the continent, since these often serve as the basis for those adopted by the entire European Union.

Consumer interests and tastes differ across the German states, and the most successful businesses are those that invest in market research. Price is not much of a determining factor, since the consumers have a high purchasing power and are willing to pay for quality. Trends indicate a demand for innovative gadgets that have good features and a modern aesthetic. Agricultural exports are also well received.

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