Warsaw School of EconomicsCorporate Strategy

Marcin Wojtysiak-Kotlarski, Ph.D.

Country Report

GERMANY

Sven Eppert

21 May 2003

Country ReportGermany21 May 2003

- 2 -Sven Eppert

1. Overview

2. Political environment

3. Economic environment

4. Social environment

5. Technological environment

6. Summary

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Country ReportGermany21 May 2003

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Germany in figures

Area: 356,970 km2

Population: 82.4m (i.e. 231/km2) Main Cities: Berlin (3.4m), Hamburg (1.7m), Munich (1.2m)

GDP: 1,984bn EUR (2002)

Inflation: 1.0% (April 2003)

Unemployment rate: 10.8% (April 2003)

Overv

iew

Country ReportGermany21 May 2003

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1. Overview

2. Political environment

3. Economic environment

4. Social environment

5. Technological environment

6. Summary

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Country ReportGermany21 May 2003

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Federal Republic of Germany (constituted of the united Germany on 3 October 1990)

3 levels of government: - Federal: bicameral with the Bundestag (Federal

Assembly) and the Bundesrat (Federal Council) both responsible for national laws, e.g. taxation

- States (Laender): own constitutions, governments and parliaments - running of own facilities, e.g. education and hospital

- Local: relatively large power (e.g. levy business tax)

System of government

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Country ReportGermany21 May 2003

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Main parties: SPD, CDU/CSU, Greens, FDP and PDS

Social democratic-Greens Party coalition since October 1998 led by chancellor Gerhard Schroeder (small majority since 2002)

Great influence of the opposition in the Bundesrat

47 2

248 251

55

SPD

Greens

CDU/CSU

FDP

PDS

Bundestag

Political parties

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Country ReportGermany21 May 2003

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Budget deficit (Maastricht treaty reference)- Tax outfall (126bn EUR till 2006)- Rising of taxes, e.g. tobacco tax by 1 EUR

Unemployment Social system costs (Health, pension and unemployment

insurance) "Agenda 2010" introduced by Schroeder in March 2003:

Broad reform package for the labour market, social system, economy, finance and education

Nevertheless likely that the current coalition remains in power till 2006

Outlook

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Country ReportGermany21 May 2003

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1. Overview

2. Political environment

3. Economic environment

4. Social environment

5. Technological environment

6. Summary

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Country ReportGermany21 May 2003

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GDP growth

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-1,5-1,0-0,50,00,51,01,52,02,53,03,54,04,5

1998 1999 2000 2001 2002

Year

Source: Federal Statistical Office Germany.

Quarterly % change on the previous year (at prices from 1995)

Country ReportGermany21 May 2003

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Consumer price index

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Source: Federal Statistical Office Germany.

Change in % (Index 100 = 2000, seasonally adjusted value)

Country ReportGermany21 May 2003

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Unemployment

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Unemployment rate (total): 10.8%, i.e. 4.5m (April 2003)

Old states: 8.6%, i.e. 2.8m (Trend: ) New states: 19.1%, i.e. 1.7m (Trend: )

Rising long-term unemployment (currently: 1.5m)Source: Federal Statistical Office Germany.

Unemployed(in 1,000)

Country ReportGermany21 May 2003

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Comparative economic indicators, 2001

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Sources: Economist Intelligence Unit, Country data.

Germany France UK US Japan

GDP (US$ bn) 1,847 1,31 1,424 10,208 4,148

GDP per head (US$) 22,505 22,055 23,832 36,222 32,776

Consumer price inflation (av; %)

2.5 1.6 1.2 2.8 -0.7

Exports of goods fob (US$ bn)

571 289 275 723 383

Imports of goods fob (US$ bn)

-488 -283 -323 -1,147 -313

Trade surplus (US$ bn) 83 6 -48 -424 70

Country ReportGermany21 May 2003

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EUR/USD

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Source: Finanztreff.de.

Country ReportGermany21 May 2003

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Companies with sales less than 50m EUR and employees less than 500

Share of the Mitttelstand among the - Companies (2000): 99.7% - Turnover (2000): 43.2% - Employment (2000): 69.7% - Gross value added (1999): 48.8%

Great importance for the German economy

"Mittelstand"

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Source: IFM, Bonn.

Country ReportGermany21 May 2003

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Trends

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2nd largest export country in the world

But Remaining strong EUR reduces growth Tax burden still high, e.g. non-wage labour costs of

about 50%, and constrict investments Large influence of labor unions Tumbling world economy 0.2% decrease of GDP of in Q1/2003 enforces

speculation of a recession

Country ReportGermany21 May 2003

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1. Overview

2. Political environment

3. Economic environment

4. Social environment

5. Technological environment

6. Summary

Ag

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Country ReportGermany21 May 2003

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Population: 82.2m- Shrinking to 78m (2030) and 70m (2050)

Ageing population Falling fertility Growth: 0.26% (2002 est.)

Immigration policies(currently 8.9% foreigners)

Demographic structure

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Source: Federal Statistical Office Germany.

Country ReportGermany21 May 2003

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Social system costs

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Source: FAZ.net.

Country ReportGermany21 May 2003

- 19 -Sven Eppert

1. Overview

2. Political environment

3. Economic environment

4. Social environment

5. Technological environment

6. Summary

Ag

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Country ReportGermany21 May 2003

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World's most technologically advanced telecommunications systems

Internet user: 32.1m (2002) eCommerce growth held back by privacy issues and

concerns about credit-card security- EIU e-readiness ranking (2003): 13th (out of 60)

R&D is well developed, but has a lack of competitiveness in high-tech

eCommerce and Technology

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Country ReportGermany21 May 2003

- 21 -Sven Eppert

1. Overview

2. Political environment

3. Economic environment

4. Social environment

5. Technological environment

6. Summary

Ag

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Country ReportGermany21 May 2003

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"Agenda 2010" is unlikely to pass without major changes under the pressure groups

Recessionary tendencies in 2003 IMD World Competitiveness Ranking (2003): 5th

(previous year ranked 4th)

Immediate sharp reforms and another attitude to our problems are needed

Does Germany remain the sick man in Europe?

Su

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