Achtung…

A Brief History of Germany

1400 years in four slides

Retrieved from Wikipedia on 11-24-2006: http://en.wikipedia.org/wiki/History_of_Germany. Photos retrieved from Google images on 11-27-2006.

600-1700

• 600-800 A.D.600-800 A.D.– Centralized Germanic tribal controlCentralized Germanic tribal control– Spread of ChristianitySpread of Christianity– CharlemagneCharlemagne– 800: Holy Roman Empire800: Holy Roman Empire

• 800-1300 A.D.800-1300 A.D.– Expansion of the EmpireExpansion of the Empire– Vast colonization ensuesVast colonization ensues

• 1300-17001300-1700– The Black DeathThe Black Death– Papal authority challengedPapal authority challenged– Money-based economy--Mercantilism emergesMoney-based economy--Mercantilism emerges– 1500s: Luther, the Reformation, and Counter-Reformation1500s: Luther, the Reformation, and Counter-Reformation– 1600s: The Thirty-Years’ War1600s: The Thirty-Years’ War– The Holy Roman Empire stumblesThe Holy Roman Empire stumbles

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1700-1900

• 1700-19001700-1900– Revolution and war divide EuropeRevolution and war divide Europe– 1806: Holy Roman Empire dissolves1806: Holy Roman Empire dissolves– 1814: The German Confederation1814: The German Confederation– Political controlsPolitical controls– Customs unions begin to lower trade barriersCustoms unions begin to lower trade barriers– 1848: The national German constitution is written1848: The national German constitution is written– 1867: The German Confederation is dissolved1867: The German Confederation is dissolved– 1871: The German Empire is founded1871: The German Empire is founded– Discrimination and suppressionDiscrimination and suppression– Socialist Workers’ Party opposedSocialist Workers’ Party opposed– 1870s: Initial alliances between nations1870s: Initial alliances between nations

Retrieved on 11-27-2006 from http://en.wikipedia.org/wiki/Image:Flag_of_the_Holy_Roman_Empire_(1200-1350).svg

1900-1945• 1900-1940

– The alliances change– German expansionist threats– 1914: World War I begins– 1919: Treaty of Versailles– German Communist Party and German Workers’ Party gain traction– Early 1920s: Hyperinflation– 1925: Hindenburg elected President, Hitler emerges– 1929-1932: The Great Depression– 1933: Hitler is appointed as Chancellor– Totalitarian state is enacted

• 1940-1945– World War II sees the rise and fall of Hitler’s regime and the effects of

the Holocaust

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1945-Present

• 1945-Present1945-Present– Germany nearly collapsesGermany nearly collapses– East and West Germany are createdEast and West Germany are created– U.S. aids reconstructionU.S. aids reconstruction– East Germany joins Soviet UnionEast Germany joins Soviet Union– 1950s: Currency reform, NATO, EEC1950s: Currency reform, NATO, EEC– 1970s: East and West Germany join the U.N.1970s: East and West Germany join the U.N.– 1989: The Berlin wall falls, and Germany is reunited1989: The Berlin wall falls, and Germany is reunited– 1990s: Germany becomes a leader in the cause of 1990s: Germany becomes a leader in the cause of

the European Unionthe European Union

Germany’s Current

Situation

Retrieved on 11-27-2006 from http://www.calvin.edu/academic/german/images/scenic/cliff.jpg

The European Union

• Along with Belgium, France, Italy, Luxembourg and the Netherlands, Germany founded the European Union in 1957.

• As it stands today, if the countries of the European Union were combined, they would account for the largest GDP in the world.

• Germany is the most powerful country in the EU in terms of economic viability.

World Economic Standing

• Germany, alone, is the third largest country in terms of USD exchange rate, fifth largest in terms of purchasing power.

• Only the United States and Japan have more powerful economies than Germany.

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Domestic Markets and Policy

• Germany is a self-proclaimed social market society.– They enjoy the benefits of a free market and

competition, but it is regulated by government policy.– Various social services are provided as well as many

subsidies to selected sectors of the economy.

• Heavily oriented towards exporting– More than 1/3 of Germany’s GDP is from exports**– France and the US– Since 2003, Germany exports more than an other

country in the world.

• German policy makers encourage further economic integration.

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Primary Sectors• Energy:

– Fifth largest consumer of energy. However, they import more than 2/3 of the energy they use.**

• Industry:– Accounts for 25% of GDP– Employs 26.4% of the German workforce

• Services:– Tourism, Financial Services, and

Media/Advertising accounts for around 70% of Germany’s GDP.

– Instead of having a financial economy dominated by the stock market, Germany is a bank oriented system.

Economic Trends

GDP growth rate from 2002 – 2005**

– 2002: +.2%

– 2003: -.3%

– 2004: +1.6%

– 2005: +.9%** Variability is in large part due to the effort to

fuel the formerly Communist East Germany**

• Balance of payments and currency

– Trade balance: positive $54.9 billion.– By recently changing from the

Deutschemark to the Euro, the Bundesbank gave up much of its power to the European Central Bank which now conducts monetary policy for the entire EU. **

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Tale of Two Cities

• Since the 1990’s, East and West Germany have been trying to successfully integrate. However, the predicament is much like it was before the union.

• Unemployment Rate: For West Germany it is approximately 12%. For East Germany it is closer to 20%.

• Gross Domestic Product: West Germany produces around 70% of the nation’s output, while East Germany produces only 30%.

** As a result of the disparity of wealth between West and East Germany, many East Germans migrate to the west looking for work.

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International Aspects

Brief Overview

1. International Organizations - Germany is a member of the EU, WTO, and the OECD.

2. U.S. Relations - The United States is Germany's second-largest trading partner, and U.S.-German trade continues to grow.

3. International Trade - Germany is the world’s leading merchandise exporter. They are also committed to reducing trade restrictions.

4. Foreign Investment - Germany follows a liberal policy toward foreign investment.

European Union

• In 2003, Germany conducted slightly more than half of its trade within the then 15-member EU.

• Germany’s currency is the euro. (The European Central Bank is located in Frankfurt, Germany.)

German-U.S. Relations

• Two-way trade in goods and services totaled $88 billion in 2000. (U.S. exports to Germany were $29.2 billion while U.S. imports from Germany were twice as high, $58.7 billion.)

• At $29.5 billion, the U.S. trade deficit with Germany is the United States' fourth-largest

International Trade Facts

• German companies derive one-third of their revenues from foreign trade to compensate for reduced domestic demand.

• In 2003, Germany imported $601.4 billion of merchandise, while imports of goods and services totaled $773.4 billion.

• Also in 2003, Germany exported $748.4 billion of merchandise, while exports of goods and services

totaled $873.3 billion.

Germany's main exports (Totaled $1.016 trillion in 2005) -

1. Machinery

2. Vehicles

3. Chemicals

4. Metals and Manufactures

5. Foodstuffs

6. Consumer electronics

7. Textiles

8. Beer

Germany's main imports are (Totaled $801 billion in 2005) -

1. Machinery

2. Vehicles

3. Chemicals

4. Foodstuffs

5. Textiles

6. Metals

Foreign Investment

• In 2003, net foreign direct investment was $11 billion.

• From 1995 to 1999, annual average flows of U.S. direct investment in Germany were $3.4 billion, while those of German investors in the United States reached $21 billion.

• Americans accounted for 18% of all foreign direct investment in Germany during 1998-99, the third-largest source after France and the UK.

Challenges and Obstacles

Unemployment

• Current unemployment is at about 8 percent.

• Inflexible labor market is the main cause.

• Increased cost of hiring makes reducing unemployment difficult

• Little to no incentive for unemployed Germans to find a job.

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National Trade Deficit

• GDP declined earlier this decade

• EU set a deficit limit at 3 percent which Germany is fast approaching

• Interest rates and money supply growth are determined by the European Central Bank rather than German banks.

An Aging Population

• Because of the increased number of retirees, German government must spend more on social welfare programs.

• This will result in higher taxes and fewer benefits for the retired.

Special Problems

• Decreasing Quality of Education– Free education– University administrations share decision-

making with businesses that are connected with the university. This results in inflexible decision-making.

Germany and the Future

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Domestic Future

• This year Germany's economy is expected to grow by less than 1%. Next year it might manage about 1.5%

• Needs to decrease high unemployment rate and increase the weak domestic demand

• As they tighten their belts, Germany's savings rate has reached a staggering 11%.

• Germany’s seasonally adjusted national unemployment rate increased to 12% (March 2005)

Ways to Improve the Domestic Future

• Reforms of product market regulation would boost consumer confidence– By making regulation of domestic goods and service markets more

competition-friendly

– Increasing real wages, employment and productivity growth

– Supporting small and medium-sized enterprises that are the backbone of Germany's economy

• Government sector involvement in business sector activities needs to be scaled down further– Privatization of public sector enterprises should be accelerated

– Telecom, energy and railway industries provides an opportunity to accelerate the pace at which genuine competition develops

Ways to Improve International

Competitiveness  

• The complex tax system; restrictive labor laws; rampant bureaucracy; and high social security and healthcare costs make an entrepreneur's life very difficult

• Lessen administrative burden on foreign market entrants

• Keep its export-oriented economy

• Do something with its stagnating wages

Questions?