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As
the world’s third strongest national economy, Germany
holds a leading position in terms of its total economic output.
With the highest gross domestic product and the largest number
of inhabitants in the European Union, it is the most important
market in Europe. In global trading of goods and services,
the Federal Republic of Germany is in second place after the
USA.
Germany stands out as a centre for business through innovative
and internationally active companies, qualified and motivated
employees, an internationally recognised education system,
an excellently developed infrastructure, as well as top achievements
in research and development. Due to its central geographical
location, Germany is at the same time an interface to the
new markets of Southern and Eastern Europe, as well as beyond
the boundaries of the new EU.
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Social market economy
Economic order in Germany is organised according to the
principle of the "social market economy". Although
German Basic Law does not prescribe any particular economic
order, the embodiment of the principle of the welfare state
rules out a completely "free market economy". The
concept of the social market economy, which can be traced
back to the Federal Republic of Germany’s first Economics
Minister and, later, Chancellor, Ludwig Erhard, is secured
by flanking market forces with social policy measures.
The model of the social market economy is designed to allow
market forces free reign within certain limits and to prevent
unsocial outgrowths of market development. The supply of goods
is increased and diversified, the providers are motivated
to be innovative, income and profits are distributed based
on individual performance. At the same time, the social market
economy prevents excessive pooling of market strength, ensures
participation by employees in basic economic decisions and
therefore their participation in social achievements.
The task of the state and politics is to create the framework
for functioning competition and to moderate the various interests.
At the same time, the state must promote the willingness and
ability of people to act on their own responsibility.
World leader in exports
Economic life in Germany is more international in nature
than in most other major industrial nations. One in three
euros in Germany is generated through exports; nearly one
in four jobs depends on exports. In 2003 Germany’s foreign
trade surplus totalled 129 billion euros. Germany is the world
leader in exporting goods – even ahead of the USA.
Germany’s great competitive strength internationally
is illustrated most clearly in its high level of and rapidly
growing merchandise exports. The rise in direct investments
in Germany by international companies also underlines the
good position of the German economy.
Germany’s most important trade partners are western
industrial nations. Its closest trade relations are with members
of the European Union, with which Germany generates more than
half of its turnover from foreign trade. Nearly 72 per cent
of German exports remain within Europe; 71 per cent of German
imports also come from Europe.
In 2003, Germany’s most important trade partner was
once again France. With regard to imports, France was followed
by the Netherlands and the USA. The main buyers of German
goods and services are, after France, the USA and Great Britain.
The states of Central and Eastern Europe – especially
Poland, the Czech Republic and Hungary – are also becoming
increasingly important to German foreign trade.
Top position internationally
Germany is one of the world’s leading industrial nations.
In the last few years, Germany’s industry has considerably
boosted its competitive strength and further extended its
leading position in the international markets.
German industry is maintaining its strong position in Europe
too. Between 1995 and 2001 Germany’s share of total
EU production in the automobile industry rose from 48.2 per
cent to 52.6 per cent, in machine construction from 42.3 per
cent to 44.4 per cent, and in the production of office machines
and data processing equipment from 24.9 per cent to 29.7 per
cent.
Between 1991 and 2002 Germany’s gross domestic product
(the value of all produced goods and services) rose from 1,710
billion euros to 1,984 billion euros. The weakness of the
global economy led to a slow-down in growth in 2002. Despite
this, in terms of its total economic output, Germany is in
third place in the world.
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