Invest in Germany

Inside the dome of the Reichstag building, Berlin

Germany, a nation of 80 million people, is the world’s 5th-largest economy at US$2.3 trillion in purchasing power parity (PPP) terms.

Germany’s postwar reconstruction/revival charted a course congruent with that of France. Under the aegis of Konrad Adenauer, West Germany (East Germany was under communist control) first adopted highly capitalistic economic policy relative to France, although the government also encouraged the growth of unions to give West Germany some semblance of social harmony. After Adenauer’s term ended, Germany’s economic policy quickly shifted left in alignment with other continental Western economies. By 1989, Germany had one of the most inflexible labor markets on the entire Continent, and punitive taxation to boot.

Reunified, but Ailing

Thus, when Helmut Kohl shepherded a reunification between formerly communist East Germany and West Germany, the West German political and economic frameworks were far too rigid to assimilate the much poorer East German economy. East Germans quickly became disenchanted with unfulfilled West German promises. While western Germany has remained highly prosperous, western Germany's highly regulated business climate and labor markets have choked growth in former East Germany.

During the 1990’s and early 2000’s, German underperformance led to its winning the dubious title of “the sick man of Europe” by the Economist. After tentative labor market reforms, Germany has shown surprisingly vigorous growth in 2006-07, and stunning performance by the German export sector has been a key driver in both German economic performance and the recent appreciation of the euro’s value.

An Uncertain Turnaround

German industry has long cultivated a sterling engineering culture, the quality of whose products is unsurpassed. Germany has also exhibited strength in high-end manufacturing exports, and so is not so susceptible to export competition (in contrast to China, Japan, South Korea and other medium- and lower-end manufacturers). However, the massive appreciation of the euro’s value cannot be good for German exports.