Germany Is The World's Third Most Economically Advanced

Country After... Essay - 2,366 words

Germany is the world's third most economically advanced country after the US and Japan, though it took a lot of various recourses
to balance the economy of the East and the West after unification. Recently its inflation rate is one of the lowest in Europe and GDP
growth is stable. The main problem is high unemployment. German economy is heavily export-oriented, with exports of over one-
third of national output. Germany tries to encourage overseas investors. Corporate restructuring and growing capital markets are
transforming German economy to meet the challenges of European economic integration and globalization in general.

The raising maturity of German market is characterized by its increasing professionalism and enhancing internationalization, both in
terms of demand and supply. After the World War II, there was a long period of outstanding economic achievements, and this made
Germany the third largest economy in the world, after the US and Japan. Clear and fair fiscal policy, excellent cooperation between
social partners, outside support in the form of Marshall Aid played an important role for successful recovering of the country. The
main feature of the economic system was its course to a "social market economy": this required the system be ruled by market
forces, but the government still controlled distribution of the resources in favor of the weakest branches of the market and supported
the under-privileged. Social market concept advantaged to concordant labor relations. One more element of the German economic
model taking source from those times and still characteristically benefiting in modern economy was the focus on financing and
banking, which allowed the market players to concentrate on long-term goals and protected them from short-term frustrations with
basic economical indicators. But debates about the advantages of German economic model increased during the second half of the
1990s, in the situation of growing international rivalry and a breakaway from producing of traditional goods to high-value added
services with the result of unbalance at the labor market. Unemployment continued to set post-war monthly records through the end
of 1997 and averaged 4.3 million for the year.

Moreover, the integration of the country into European financial markets has started a diversion from the reliance on long-term
bank financing and growing attention to direct financing on capital markets. This has led to a stronger focus of companies on
shareholder value. In 1999 the government commenced the means directed onto lowering of the fiscal deficit. These efforts have
been complicated by increasing unemployment, imperfections in tax policy and the continuing reassign of about $100 billion a year to
eastern Germany to overtake the arrears caused by communist economical confusion. Therefore, the West played incomparably
more important role in economical achievements of the country, which are still being called as the 'Wirtschaftswunder' (economic
miracle). The Western economy is principally industrial, with large chemical and automobile manufacturing plants, mechanical,
electrical and electronic engineering, with rapidly improving advanced technology and service segments in computing, biotechnology,
information processing and media. For many years after the reunification the Eastern economy was far behind. Nevertheless, after a
large amount of pessimistic predicating and overcoming of initial difficulties, the Eastern economy has been successfully absorbed
into the Western. The reputation of Germany at international market has for long been associating with the feature of "stability".

This is one of important factors attracting potential customers and investors to the country. The variety of commercial opportunities
is provided by diversity of Germany's business and economic community: from large modern enterprises and corporations whose
names and trade marks are known throughout the world to small-sized companies whose business is directed towards profitable
operating at their highly-specific segments. During 1990s, Germany achieved annual average real growth of no more than about
1.5% and persistently high level of unemployment. After unification the best GDP real growth index was reached in 2000, when it
raised up to 3.0%, mostly because of enhancement of global demand; specialists expect that recently established business and
income tax reductions will keep the growth rising in further years. Economic revitalization in the East has been at the expense of
prosperous construction industries, with the growth progressively supported by the service segments and consumer manufacturing
industry. Only the western part of the country, which contributes about 90% of total GDP and has three times the per capita income
of eastern Germany, is currently the world second largest exporter, after the USA. German GDP is estimated to be about one third
of GDP of the whole Europe. Table 1.

Main Economical Indexes of German Market. Source: Germany Statistical Office. 1999 2000 2001 2002 GDP per head ($ at PPP)
24,660 25,898 26,680 27,060 GDP (% real growth pa) 2.05 2.96 0.57 0.18 Government consumption (% of GDP) 19.15 19.08 19.00
19.11 Budget balance (% of GDP) -1.50 1.12 -2.78 -3.60 Consumer prices (% change pa; av) 0.52 1.33 1.98 1.35 Public debt (% of
GDP) 61.18 60.50 60.21 61.30 Labor costs per hour (USD) 25.66 22.99 22.86 24.89 Recorded unemployment (%) 10.51 9.62 9.38
9.29 Current-account balance/GDP -0.90 -1.09 0.13 2.50 Foreign-exchange reserves (bn$) 61 56 51 51 As we can see from the data,
in recent years the average GDP growth slowed down a lot and has been surprisingly one of the lowest in Europe. The rate of
inflation rose to 2% in 2001 and decreased down to 1.3% in 2002, this rate is incomparably better than those of the most of EU
countries. But unemployment rate remains the main difficulty of German economy. Fortunately, it has a tendency to decrease in the
last two years from 9.6% in 2000 to abut 9.25 in 2003, despite of pessimistic forecasting. Even though economical indexes of the
East and the West parts of the country are sometimes rather diverse, nevertheless Germany has made great progress in raising the
standard of living in eastern Germany, having introduced a market economy and improved its infrastructure. Eastern economic
growth rates have been considerably lower than in the west in recent years, unemployment is almost two times as high, which caused
the outflow of qualified labor forces to the west, thats why efficiency and productivity of manufacturing is still far behind.

Eastern consumption levels are dependent on public financial transfers from west to east totaling annual about $65 billion, or more
than 4% of the GDP of western Germany. The government, in addition to social assistance expenditures, approved a policy of
increasing of funds to support the development of eastern economy Germany is among the world's largest and most technologically
advanced producers of iron, steel, coal and cement, chemicals, tools and machinery, vehicles, electronics, food and beverages;
shipbuilding; textiles. During the last years all the main sectors of industry have profited, especially the manufacturers of consumer
goods. For 2003 in whole, a little growth in value added over the previous periods was achieved in most of commercial segments
(manufacturing +0.2 %, services +0.5%). Both in the industrial sector and in the consumer service sector, value added was
increasing in the first half of 2003. Since the beginning of the year the external orders in producing have been growing noticeably,
both for domestic and international markets. The domestic market of the country is weak and can be characterized by anemic private
consumption, it is unclear will this market increase or decrease, resulting in a dependency of
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