Economics and business
Germany is the world’s fourth largest economy, after the United States, China and Japan, and has long been Europe’s leading industrialized country, with the exception of a period after the Second World War. The engine of the German economy has been the export of industrial goods for more than a hundred years. Between 2003 and 2009, Germany was the country in the world that had the largest exports but was passed in 2010 by China.
By the end of the Second World War, the entire German business community was basically in pieces and the country was divided into occupation zones. Through the Marshall Aid and a tremendous domestic investment in technical, economic and manpower, West Germany managed to recover relatively quickly. Already from the beginning of the 1950s, close economic cooperation with neighboring countries in the west developed, and with so-called social market management West Germany again became a leading industrial country.
East Germany, on the other hand, was integrated into communist Eastern Europe’s division of labor with a centrally planned, socialist economy. The country’s role would be to be primarily responsible for the production of transport equipment and parts of heavy engineering and chemical industries as well as energy production.
In two stages (1952 and 1960) agriculture was collectivized, and in industry and service so-called people-owned companies (VEB) were introduced alongside the state. In both agriculture and industry, large companies were invested in, and economies of scale and specialization became even more pronounced during the 1970s and 1980s.
After the reunification in 1990, the most important task in the German business world was to strike a balance between the old and the new Länder. Large cuts hit oversized industries and inefficient industries in the east, and large-scale agriculture was gradually transformed into private, smaller units. However, the very large differences between eastern and western Germany that existed in 1990 have only been partially reduced, despite the extremely large money transfers that have come from the western part of both the business modernization and efficiency and to improve the infrastructure and to the residents to improve their living conditions.
In 2009, unemployment was twice as high in the east as in the west and the wage situation was considerably lower in the east. In 2008, the five states in the east were the lowest per capita GDP in the country. The highest was Hamburg, Bremen, Hesse, Bavaria and Baden – Württemberg.
The extremely demanding work of merging the two regions meant that Germany’s economic growth was low from 1990 to the mid-00s. It was not until 2006/07 that annual GDP growth was as high as 3 percent. This was the result of an increase in exports of machinery and other capital goods to rapidly growing economies in other parts of the world. In 2009, 15 of the world’s hundred largest multinational companies had their headquarters in Germany, among them several car, energy and insurance groups. Frankfurt had become one of Europe’s foremost banking and financial centers and headquarters for, among other things. European Central Bank.
From the autumn of 2008, Germany was hit hard by the global economic crisis. The country is exceptionally dependent on exports and is thus directly affected when major customers face financial problems. In 2009, GDP fell by 5.6 percent. It hit particularly hard against the automotive industry, which suffered a production decline of 20-25 percent. The state intervened with infrastructure investments and strong support measures, which meant that companies did not have to lay off labor. When global demand rose again in 2010, primarily in Asia, German companies were able to rapidly increase their output, and in 2010 GDP again showed growth of 3.9 percent.
|Year||Change in GDP (%)||Government debt share of GDP (%)||Budget deficit or budget surplus share of GDP (%)||Inflation (%)||Unemployment of total workforce (%)|
Source: IMF, OECD and World Bank
Germany is among the world’s largest producers of hops, rye wheat, gooseberries, rye, asparagus, pork and turkey meat. The production of rapeseed, sugar beet, blueberry, barley, cow’s milk and potatoes is also extensive. Wine is grown along the Middle Rhine and its tributaries Mosel and Neckar.
The broad orientation of agriculture with both vegetables and animals can be explained by both natural and market conditions. The highest fertility is found in the area between Middle Elbe and Weser. Animal breeding occurs mainly in Lower Saxony and Schleswig-Holstein in the northwest, where climate and other natural conditions provide very good pastures, while cereal cultivation is most important in Mecklenburg-Western Pomerania in the northeast. Hops cultivation has a long tradition in central Bavaria.
About a fifth of the country’s land is agricultural land and more than 80 percent of the German food demand is covered by domestic production. Germany is the EU’s second most important agricultural country after France, but in 2017 the agricultural sector contributed only 1 percent of the country’s GDP, and employed less than 2 percent of the country’s employment. The annual increase in production was also low; during the period 2000–08 only 0.5 percent.
The size of the farms has for a long time differed greatly between different parts of the country. In northeastern Germany, extremely large goods dominated during the interwar period, and after a short time when the goods were divided, the very large farming units returned when the East German agriculture was gradually collectivized until 1960. After 1990 a privatization was carried out and thus a division of the largest units. However, the average area in almost all administrative circuits in eastern Germany is still considerably larger than in any circuit in western Germany, 202 ha in the east and 34 ha in the west (2005).
There is also a general difference in farm size between the large plains of the northern German lowlands and the hilly landscape of southern Germany. In southern and western Germany there have been many small family farms, but in recent decades these have not been able to provide sufficient income for the owners. Between 2003 and 2007, the number of farms decreased by less than 50 ha by 1/7, while the largest farms increased in number. However, the total agricultural area decreased only slightly. Nearly a quarter of farm households receive a significant portion of their income from activities other than agriculture.
Since 2000, demand for organically grown foods has increased more in Germany than in most other countries, and such cultivation has therefore increased significantly. In 2005, 5.6 percent of all agricultural activities were organic farming, more than half of them focused on animal production. However, the official target for organic production had been set much higher.
The EU’s common agricultural policy has an impact on German agricultural policy, and German politicians are largely behind the broadening of EU policy since 2007. It is now a rural development policy with regard to the environment, sustainable development and a differentiated business sector, and does not only refer to support related to economic production. There is now also more freedom for the farmers to produce what the market demands.
About 30 percent of Germany’s area is wooded. The highest proportion of forests is found in Rhineland-Palatinate, Hesse and Saarland in the west, in Baden-Württemberg and Bavaria in the south and in Brandenburg in the northeast. About 57 percent of the forest is coniferous and by far the most common is spruce. The most common deciduous tree is book. Germany is second only to Sweden and Finland the EU’s most prosperous country. Almost half of the forest area is privately owned, usually by farmers with small areas. More than 30 percent is state or federal owned and 20 percent is owned by municipalities.
During the 1970s and 1980s, the forests were severely damaged by air pollution and water pollution, especially in East Germany, and in 1991 more than 60 percent of the German forest was affected. Since then, emissions have primarily been reduced by sulfur dioxide, and the environmental impact is now less severe. Areas have been reforested and growth has increased, but in 2007, 1/4 of the forest was still estimated to be damaged.
In terms of volume, the German timber supply is larger than the Swedish one, as the forest grows on much more fertile land. Growth is faster than in Sweden, and sustainable forestry has a long tradition in Germany. The annual harvest fell significantly during the 00s and was usually slightly below the Swedish level, which was highest in the EU at that time. The wood is mainly raw material in sawmills and chipboard factories, while a smaller part is used for paper production. Germany is by far the largest producer of paper and paperboard in the EU, but in that manufacture is widely used pulp imported from Sweden.
The total catch of the German fishing fleet in 2009 was 250,000 tonnes, mainly herring, blue whiting and sharp herring. The most economically important catch consists of horsetail, cod and herring. In the same year, 40,000 tonnes of fish were grown, mainly rainbow and carp. The fisheries sector contributes 0.2 percent to GDP.
German fishing is carried out in the Baltic Sea (herring, cod, scraped and crustacean), in the North Sea (horsetail, blue mussel and grayling) and in the North Atlantic (herring, mackerel, blue whiting, barbed mackerel, Acadian kingfish, grayfish and cod). The most important fishing ports are Cuxhaven and Bremerhaven on the North Sea and Sassnitz on the Baltic Sea. More than half of the catch is landed abroad, mainly in the Netherlands, Denmark and Sweden.
Raw material resources and energy supply
Germany is largely lacking in mineral resources and relies on raw material imports and recycling to support its manufacturing industry. The last mines for the extraction of metal-containing ores were closed in 1992. However, the country is the world’s leading producer of lignite, which in 2009 accounted for almost 1/5 of world production. Germany was also one of the leading producers of kaolin, salt, lead, potassium carbonate (potash; see potassium: compounds), copper and steel.
The value of raw material production (mining and petroleum extraction) in 2009 corresponded to about 2 percent of GDP. The most economically valuable raw minerals were lignite, natural gas, natural gravel, crushing gravel, crude oil, potassium carbonate and rock salt. Raw material exports mainly consist of potassium carbonate (4/5 of the export is exported), but also of sulfur, gypsum, gravel, salt, limestone, dolomite and lignite. For its manufacturing industry, Germany is completely dependent on imports of, among others, metal-containing ores and metal concentrates, magnesite, graphite, phosphates,soapstone and talc.
Extraction of fossil fuels is extensive, but only 1/4 of the country’s energy needs are covered by domestic assets. Of the entire energy supply in 2009, just over 1/3 came from oil, a proportion that decreased during the 1990s. Just over 20% of the energy demand was covered by natural gas and just over 10% each of lignite and coal. Nuclear energy contributed just over 10 percent and renewable energy sources by less than 10 percent to the energy supply. However, the share of renewable energy is increasing at a rapid rate and during the first half of 2011 contributed to over 20 percent of total consumption.
Oil is extracted at sea in the Mittelplate field off Elbe’s estuary and in several small fields onshore. close to the Dutch border. However, almost all of the oil needs are covered by imports and Germany is the world’s third largest oil importer. About 1/3 of the oil imports come from the Russian Federation via crude oil pipelines to eastern Germany and to Bavaria. Oil also comes from Norwegian and English fields in the North Sea, via crude oil pipelines to western and southern Germany from the import ports in Rotterdam, Marseille and Trieste, and via a pipeline for refined products from Rotterdam. Significant oil reserves are known from the area northeast of Elbe, but extraction is technically very complicated and therefore currently too expensive.
Two natural gas fields are located on the Lüneburgerheden in the northwest, but the need is largely covered by imports via oil pipelines from mainly the Russian Federation and the Netherlands. In recent years, German energy policy has led to increased use of natural gas, partly through the investment in the Nord Stream natural gas pipeline, which came into use in 2011.
Almost 1/4 of the total energy supply in 2009 came from coal and lignite, Germany’s most important energy source by far. Coal mining declined sharply during the 1990s, as more and more mines became unprofitable, despite the fact that the business was supported by government subsidies. Coal is now mainly mined in the northern part of the Ruhr area, and about half of the coal used in Germany is imported. The recovery of lignite, on the other hand, has increased during the past ten-year period. In 2010, it was about ten times larger than coal mining. The center for lignite mining is located in Saxony, near the Polish border. Almost all of the lignite production is used for electricity generation.
Most nuclear power plants in Germany were built in the 1970s. The five plants in East Germany were closed in 1990, after the reunification, when they had poor reactor safety. Germany has long had Europe’s strongest anti-nuclear movement and the official attitude towards nuclear energy has also been negative for a long time. In 2002, the red-green government decided to discontinue nuclear energy gradually as the facilities became too old. Operating disruptions were common and in 2009 it was estimated that the last nuclear power plant would be closed in 2025. Nuclear energy then accounted for just over 1/4 of electricity production, renewable energy for just over 1/6 and fossil fuels for the remainder. The idea was to primarily replace nuclear energy with natural gas but also with renewable energy. In the autumn of 2010, 17 nuclear reactors were still operating in different parts of the country, except in the former East Germany and the Ruhr area. In addition, a number were in liquidation. The bourgeois government coalition then enforced a respite for nuclear decommissioning, with a new end date of 2040.
Following the Fukushima accident in Japan in March 2011, public opinion swung and in May the same year, the Liberal Conservative coalition decided to close all nuclear power plants by 2022. Already in August 2011, eight works were permanently closed which were currently undergoing service. Nuclear energy will be replaced by renewable energy with the help of state control and subsidies, but at the same time it is planned for increased coal production to fully compensate for the nuclear energy loss.
Germany invested early on renewable energy for electricity generation, which was subsidized as early as the 1990s. In 2011, just over 65 percent of renewable energy is produced from biofuels (biogas, biomass, biowaste), just over 15 percent of wind energy and the remaining part of water, solar and geothermal energy. At the end of the 1990s, Germany was the country in the world that had the most installed wind energy and extracted the most energy from solar cells.
Hydroelectric power stations are mainly located in the Upper Rhine and in the Danube and its tributaries in southern Bavaria. The goal is that the energy demand in 2020 to 35 percent be covered by renewable energy.
The German industry is based in the former forest and iron ore-rich area south and southeast of the Ruhr area. From the 1840s, an almost explosive industrialization took place there, and it was further promoted at a later stage when using the large coal deposits that were north of it. After the ore deposits began, ore was imported via the Rhine River, which also became the main transport route for steel and heavy engineering products, which were increasingly exported. The Ruhr area became one of Europe’s most important industrial areas. For similar reasons, a secondary industrial center was developed in southern Saxony, near the border with the present Czech Republic.
By the end of the Second World War, German industry was largely destroyed and the links between companies in eastern and western Germany were completely broken. In West Germany, the rebuilding of the industry went fast, and that also meant a modernization of the industry’s direction and infrastructure. The Ruhr area, including the port cities of the Rhine, retained its focus on the iron and steel industry, heavy engineering industry and the chemical industry, but increased global competition resulted in a serious structural crisis from the 1970s onwards. Old industrial areas must be restored and new industrial and service industries eventually emerged. The growth problems in the Ruhr area led to the fact that it became the major cities of southern Germany that attracted modern industry. Especially Stuttgart, Munich and Frankfurt have become the center of Germany’s high-tech industry and also the seat of most German car companies. Well-known old industrial companies grew into multinational groups.
In East Germany, a socialist industry was built according to the Eastern European model. The largest investments were made in heavy industry, and the companies’ operations were guided by central planning. Almost invariably they were state or people-owned and usually very large. The transition to a market economy after the reunification in 1990 led to very large changes. The companies were privatized, unprofitable and heavily environmentally polluting factories were closed, operations were streamlined and unemployment rose sharply.
Germany has a diverse industry and is one of the world leaders in a number of industries. Manufacturing is high-tech and the value added in industry is higher than in other countries. The transport industry is of major importance in the export industry, and in 2009, Germany ranked third in the world (after China and Japan). In 2009, the industry employed close to 725,000 people. Its center is located in southern Germany (Daimler and Porsche in Stuttgart, BMW and the trucking company MAN in Munich, Audi in Ingolstadt), but large production is also at Frankfurt (Opel in Rüsselsheim) and in northern Germany (including Volkswagen in Wolfsburg).
The second most important industry is manufacturing machinery, factory equipment and tools. The vast majority of these companies are small or medium-sized, and the industry has the largest proportion of industrial employees, close to 940,000 (2009). Many small companies are subcontractors to large engineering and automotive companies and thus strongly dependent on how demand for these develops. At the same time, this industry in Germany is considered to be very innovative. Already during the interwar period, the German electrotechnical industry was a leader in Europe and it has been further developed with electronics. The largest electrical engineering companies have an enormous breadth in their operations, for example Siemens in Berlin, which produces both power plants as well as home electronics and computers. German kitchen appliances, washing machines and TV sets from for example AEG in Berlin and shavers and other consumer electronics from Braun in Kronberg near Frankfurt have a large market abroad as well. For engineering companies, research and development plays a very important role. For example, the results of an innovative business climate and staff with high technical education are reflected in the German aerospace industry. It is found in many industrial areas and has the main focus in Hamburg and Berlin, which is the center of technical research. In the German defense industry, the aviation industry is most prominent.
The chemical industry plays a very important role in Germany. It manufactures inputs for other industries, such as synthetic fibers, plastics and varnishes (BASF in Ludwigshafen), and consumer goods such as pharmaceuticals (Bayer in Leverkusen), cosmetics and detergents. German chemical industry is the largest in Europe and a large part of production is exported. German steel and metal products are also the largest in Europe. Almost all raw materials are imported and the industry still has its main focus in the Rhine-Ruhr area. The largest company is ThyssenKrupp, already Germany’s most famous steel company during the interwar period.
The food industry is widely spread across the country. It employs 535,000 people (2009), the vast majority in SMEs. But there are also very large and highly automated companies, such as breweries (Löwenbräu in Munich, Schultheiss in Berlin) and dairies that have a large market in neighboring countries.
New industries with high growth power have been developed since the beginning of the 00s with links to the environment, health and renewable energy. German medical technology production is the second largest in the world and it is based on the optical and pharmaceutical industry which has a long tradition in the country. Manufacturing of technically advanced textiles, solar cells and wind turbines is another new direction.
In 2003, Germany passed the United States as the world’s leading exporting country. In the mid-1990s, close to half of the German foreign trade was conducted with countries within the EU. Trade with the new EU countries in Central and Eastern Europe had then increased significantly, mainly with regard to exports of machinery and factory facilities needed there, as business was modernized and developed more and more. For the same reason, trade with China, India and Brazil grew. Trade with the Russian Federation also became more important, as Germany needed to import more oil and natural gas. German foreign trade increased in 2007–08 by 14 percent per year and the surplus in foreign trade was large. More than 70 percent of exports then consisted of motor vehicles, advanced machinery and factory equipment and semi-finished products, and exports of chemical products were also significant. Imports also consisted mainly of machinery, transport equipment and semi-finished products, including steel and metals. In addition, input products were added to the chemical industry and not least fossil fuels.
- COUNTRYAAH: Find major trading partners of Germany, including major exports and major imports with latest trade value and market share as well as growth rate.
The global economic crisis hit hard on the German economy in 2009. Drastically, foreign demand for high-tech, expensive German products, mainly investment goods and cars, fell. The need to import inputs to the German manufacturing industry was thereby greatly reduced. That year, German foreign trade fell by 20-25 percent, exports of cars significantly more. The most important trading partner in 2009 was France (9.2 percent of the total value of foreign trade), followed by the Netherlands (7.6 percent), China and the United States (6.3 percent each), and Italy and the United Kingdom.
Already in the latter part of 2010, foreign trade again showed an almost “normal” scope, mainly due to high demand in China and other Asian countries. China’s share of foreign trade thus increased, while US and EU countries’ shares decreased. At the end of 2010, China passed Germany as the world’s largest commodity exporting country, with the two countries accounting for 9 percent of global trade. When it came to exporting services, Germany was a long time in second place, after the United States. For Sweden, Germany is the most important trading partner.
Tourism and gastronomy
More than 18 million foreign tourists visited Germany in 2010. More than twice the number of Germans who visited other countries as tourists, which is why tourism generated a net outflow of money from Germany. More than 14 percent of the visitors came from the Netherlands, 8 percent from each US and the UK and 7 percent from Switzerland. More than 850,000 tourists came from Sweden, which in 2008 ended up in tenth place on the visitor list.
Attractive destinations are available all year round. The small medieval cities and the modern big cities attract culture and trade, and the nature of Bavaria and the Black Forest, Thuringian Forest and Erzgebirge also attracts tourists in all seasons, as do the resorts in many parts of the country. In the summer, millions of visitors, both Germans and foreigners, come to the seaside resorts along the North Sea and Baltic Sea coasts, and especially in the autumn many visit the wine districts along the Rhine. Special destinations for short tourist visits are the major trade fairs and music festival games in different parts of Germany.
- According to AllCityPopulation, the capital city of Germany is Berlin with a population of 3,460,000 (2011). Other major cities include Hamburg with a population of 1,790,000, Munich with a population of 1,350,000, Cologne with a population of 1,010,000, Frankfurt with a population of 670,000, Stuttgart with a population of 606,000 (2011).
The German table has a well-known reputation as rustic, solid, heavy and plentiful. This is also largely a fitting characteristic, but many of the subtle features are missed in this generalization. Germany, which so far into modern history was a great amount of petty wealth and the Principality, had many hoofs to saturate, and many cooks were also imported from e.g. France.
The rich farming is not just sour cabbage (Sauerkraut) and rye bread but plenty of tender spring vegetables. In the north, with Polish, Scandinavian and Dutch influences, you eat many powerful soups and preferably smoked (Kieler Sprotte) or pickled fish; Aal soup, sweet and sour eel soup with ham and vegetables is also served here.
In the middle of Germany, rye bread and meats dominate, while in Baden and the Rhineland you eat less heavy dishes (halber Hahn: raw roll with cheese and spinach; Himmel und Erde mit Brutwurst: mashed potatoes and apple pudding). Bavaria is known for its heavy meat dishes (Kalbshaxe: veal) and good pastries. In the eastern part of the country there are many Polish features; Here dishes such as Königsberger Klopse: meatballs in caper sauce, and Königsberger Fleck: indoor food soup.
However, everywhere there is a weakness for sweet and sour combinations, which are achieved through e.g. fruit and sour cream in the sauces. Meatballs in the form of sausages and hams (Katenschinken, Westfalischer Schinken, Presssack, Metwurst, Leberwurst, Weisswurst) are another common feature and constitute many everyday dinners in the form of cold cuts. The dumpling (or northern clove) is dumplings (often of potatoes) that disperse soups and meat dishes throughout the country. Plenty of game and fish from both sea and freshwater guarantees a varied menu with elements of deer, trout, carp and salmon trout among the usual. The pastries are often Austrian-Hungarian extravagant even far north, but ginger and cinnamon-spiced cookies (Lebkuchen), float-boiled donuts andStollen (powerful, fruit-filled sugar cookies) is also included in the range. The dairy industry contributes with a wide selection of cheeses, often in fresh form (Quark). Pickled cherries as well as pies with apples and plums are common dessert options.
See also German food and German wines.