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Countries : Europe : Germany Last Updated: 25 Mar. 2008 - 7:18:47 PM

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21 Jun. 2006 - 7:19:00 PM

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Germany is a country that everyone has an opinion about, and for many their view of Germany is still colored by the Nazi era. Whilst Germans would argue that their country has long put its past behind it echoes can still be heard from time to time, when right-wing thugs attack foreign workers, or in the continuation of disputes with its eastern neighbors concerning the expulsion of Germans from Poland and the Czech Republic in 1945. The Daily Telegraph reported 26 June 2002 that "Edmund Stoiber, the conservative candidate for German chancellor, caused a diplomatic row with Poland yesterday after suggesting that Warsaw should allow the return of Germans expelled from the country after the Second World War." Stoiber has also caused the Czech Republic concern by bringing up the issue of the Sudeten Germans who inhabited Czechoslovakia's border lands until 1947, Daily Telegraph 14 June 2002.

Population Changes

Germany is still the largest member of the European Union by population and GDP, but its population is falling and ageing (see graph of population changes 2000-2020) the predictions are a fall in total population to 80.3 million from a figure of 82 million in 2002, with a loss of 5.5 million in the age group 31-50 and an increase of nearly 4 million in the age group 50 to 65; an acing population will impact economic growth as the work force falls and consumer expenditure decreases, irrespective of other policies. Social changes, in particular the increase in single person households, are partly the cause of the decline in the birth-rate. In 1950, 7% of German households were single households whereas in 1999 the number increased to 36% and is expected to increase to 37% of the total by 2015; 46% of the German population is married and 13% divorced/widowed � the remaining 41% is single. The Rand Corporation in a paper published in 2000 noted that "By 2025, for example, the median age of the US population will rise from 34 to 43 years. In Germany, it will increase from 39 to 50 years. One-quarter of the German population will be over 65, and the number of new labor-force entrants will decline by one-third. This phenomenon raises crucial questions about how such societies will support increasing numbers of older people with fewer younger workers and where they will find new entrants into the labor force."


The Economist 2 January 2003 reported that "As yet, though, neither Mr Schr�der nor many Germans seem to have fully grasped the extent of the changes the country must make if the prosperity of the post-war years is to be preserved. .... data show[s] a further decline in German manufacturing, with output and order books contracting. Even export prospects appear to have weakened, partly in response to the rise in the value of the euro, which has made German products less competitive on world markets."

Unemployment is currently above 4 million [Jan. 2003].

The Economist also said, "many economists are in despair at Germany�s inability to formulate sensible, coherent economic policies. The absence of political leadership in the debate about reform has led to fears that Germany could become Europe�s Japan: in persistent and seemingly irreversible decline."

German economic performance is now a far cry from the wonders of the immediate post-war era. The Daily Telegraph reported 4 May 2002 that "Germany - the supposed powerhouse of Europe - has the lowest rate of economic growth of any European Union nation according to the European Commission. Four million people are unemployed. The public deficit is hovering perilously close to the limits set down in the Maastricht Treaty for members of the euro area." The same report added, "Most Germans, acutely aware of their country's past, do not care too much if their economy dips down the international league table. They are not bothered if they lag a little behind the British or American growth rates, so long as German society remains stable."

Many commentators have linked its ailing economy to the vast investment that it has made in the former East Germany and the over generous exchange rate agreed for the old East German mark against the DMark. Others has pointed to the fact that Germany still retains a higher proportion of its output in the form of manufacturing, at a time when the US and other advanced economies have moved more and more into the service sector. This has caused increasing problems as the cost difference between German costs, which carry a heavy burden of tax and related costs, and the emergent economies of Eastern Europe has continued to be large.

The Economist reported 22 August 2002 that "The costs and political consequences of the great flood, especially for Germany and its chancellor, Gerhard Schr�der, could be immense." The report concludes that "Much depends on whether Mr Schr�der has genuinely impressed Germans with his handling of the crisis or merely done what they expect of those in charge. For a few days, the dire state of the German economy, hitherto the dominant theme of the election, has scarcely been discussed. Mr Stoiber will be trying to ensure that the respite does not last."

Impact of the Euro on Jobs

The Eastern European economies, which are preparing for entry into the European Union, have also become far more competitive as they adopt western standards and skills. As a result German auto manufacturers have moved production into countries like The Czech Republic, and also into Spain. One effect of the adoption of the Euro by much of continental Europe has been to remove previous concerns about interest and exchange rate variations, thus encouraging the movement of manufacturing work from high cost economies like Germany into Eastern and Southern Europe. The International Herald Tribute reported 25 March 2002 that "The euro now lays bare comparative wage costs across Europe, which will inevitably lead to greater competition among workers, economists say. Already German manufacturing jobs have migrated to Portugal, where metal-industry workers work longer hours and are paid less than a third of what their rivals get in Germany, according to the West European Metal Trades Employers Organization."

The Daily Telegraph 10 October 2002 reported that, "The German economy went into red alert yesterday as investors again sold out of the stock market, sending the Dax to a fresh six-year low."

"'There is still no sign of the much hoped for upswing in the economy in the next year,'said Professor Wolfgang Franz of the ZEW, or Centre for European Economic Research. 'The risks for a renewed downturn have increased'".

Neil Collins also reported in The Daily Telegraph 10 October 2002 that the "Euro looks too heavy a burden for even the great German engine to bear". The report notes that "Last week the country's second-biggest bank, Dresdner, revealed plans to split itself into a "good bank" and a "bad bank", with all its non-performing loans dumped in the latter, to see what can be salvaged from the wreckage." and that, "Underlying all this is the political stalemate which makes the reform of its constipated labour market unlikely, and the possibility (to put it no higher) that Germany will breach the Stability and Growth Pact, which is designed to protect the euro."

The Daily Telegraph 12 October 2002 reported that, "The solid belief that the German economy could easily survive a crisis has gone, replaced by deep-seated uncertainty and fear. Germans had accepted that many certainties associated with the Mighty Mark were to depart along with the change to the euro. But the figleaf of confidence has slipped, revealing the huge burden of rebuilding the east, a failed construction industry and a labour market often described by commentators as 'constipated'".

"The many problematic strands of the economy came together in the recent closure of its Neuer Markt, a new technologies stock exchange described as Germany's answer to the Nasdaq."

See also a discussion of the Euro Stability Pact on the Portugal page.

High Tech

German technology companies have been successful in some industries, such as software, but they have yet to achieve sufficient sales to outweigh jobs losses in other sectors of the economy. There are surprising success stories and that the International Herald Tribute [IHT] reported 25 June 2002 that "Dresden's technology companies, the backbone of the local economy, added jobs by the hundreds and lured fresh investment throughout a downturn". The IHT also reported on the same day [25 June] that the Rhine-Neckar region, in the northwestern corner of Baden-W�rttemberg, "is home to European-league life science and IT clusters." and " ranks first in the world in the imaging industry, which creates the systems creating everything read in print." SAP (Walldorf) and Lion Bioscience AG (Heidelberg) are located in the region as is Mannheim-based Febit AG which was named Germany�s �start-up of the year� by WirtschaftsWoche, the business weekly in February 2002.


I know from experience that setting up a business in Germany is extremely bureaucratic, and that the process involves many documents witnessed by public notaries, a profession that thrives in Germany. Some of the more obvious follies have been removed, I understand that it is no longer the case that you have to spend hundreds of Euros/Dollars having someone check your phone line before you can install a fax machine. German is also a country that loves rules and regulations (the US can also be rather like this for a foreign visitor, especially when dealing with the police). When you jay-walk the German public will try to stop you. Rules govern many aspects of people's lives, in ways that foreigners rarely understand. Your neighbors are more than capable of reporting your failures to comply with regulations to the authorities. There is a bureaucratic attitude in many central European countries which is reflected in Kafka's novels, the individual has historically been a subject of the state, the rights of individuals to be governed by their own representatives is a relatively recent phenomena. It could be argued that the influence of Napoleon can still be found today in the countries governed by the French during the Napoleonic Wars. The European Union exhibits many of the characteristics of the central European bureaucratic tradition, where the exercise of power is not immediately accountable to democratic institutions, and it is this which is partly responsible for it being distrusted by many people in Britain and Scandinavia. Democracy in Europe by Larry Siedentop sets out the arguments for liberal democracy in Europe.

Resistance to Change

The International Herald Tribune reported 10 September 2002 that "the performance rankings suggest that Germany's most specific problems - one of the European Union's lowest rates of economic growth, high debt and deficit, and a bottom rung in the EU for unemployment - are ultimately difficult to solve because they have their roots in a society that is uncomfortable with and resistant to change." "In the 2002 World Competitiveness ratings, compiled by the Lausanne-based Institute for International Management Development, Germany ranked 47th out of 49 major countries when it came to flexibility and adaptability. It placed 15th in overall competitiveness, but in terms of the business community's trust in any German government's capacity to adapt to economic developments, it was 46th." "Without growth (Germany's expansion is estimated by the Bundesbank at 0.5 percent for 2002) and new jobs, the country cannot sustain its already deeply indebted health, pension and social services system. Because of Germany's low birth rate, one projection for the year 2040 puts an implosion of the system in sight with more than half the population at over age 55."


Modern Germany is of course a Federal State, and delegates real power to its local institutions, but the traditions of power in any country are deeply rooted in its culture. Germany consists of 16 Bundesl�nder (federal states), each of which has its own sovereign powers and Constitution, although the latter must be consistent with the principles set out in the Basic Law (1949). The division of Germany into four zones of occupation in 1945 was reversed in two stages, firstly the American, British and French zones were merged to form the new country of West Germany (The Federal Republic of Germany) in 1949, and finally the old Russian zone, which became East Germany (the German Democratic Republic), rejoined the rest of Germany in 1990. The Allies undertook a massive program of reeducation of ex-Nazis after World War II and German institutions were completely remodelled by the Allies. The British, who elected a Labour Government in 1945, had a lasting influence on matters like the role of labor unions.

Germany surrendered unconditionally in 1945 and the remodelling of Germany by the Western Allies was designed to introduce democratic accountability into the German political system and to make it impossible for another Nazi regime to ever come to power. The Allies were so concerned about the potential danger of Germany that for a time the reduction of Germany to a rural State with no industry was considered during the Second World War. The rise of the Iron Curtain and the start of the Cold War did much to ensure the reintegration of West Germany into international institutions, including its membership of NATO. The generosity of the US Government in creating the Marshall Plan did much to enable the reconstruction of West Germany after the War. Germany is extremely interesting to the student of modern history, not only because of the lessons of the Nazi era, but because Germany is a society which was "remodelled" in an enormous social experiment. The interaction of the "New Germany" with German culture is therefore fascinating. It is also clear that the experiment has worked.

Germany was a founder member of the EEC, now the European Union and has been a strong supporter of the growth of European institutions, Germany has also been the greatest contributor to the EU budget, although there is now a reluctance to increase its financial burdens. Germany has traditonally favored a Federal system for Europe, a Super-State, which mirrors the German constitution. The German public has also historically been very pro-Europe. Germany has now adopted the Euro currency, giving up its strong DMark. In 2002 problems with the European Stability Pact between Euro members and price rises associated with the introduction of Euro notes and coins have given rise to some concerns in Germany. The east-ward expansion of the European Union, with the addition of low-wage economies like Poland have also caused concerns within the country. The European Union is critical for Germany in a way that it is not for countries like the UK, France and Spain, who are still focused on their own countries' role in the World, in many ways Germany has tried instead to work through the EU. In the same way German citizens have been more ready than people from some other EU countries to identify themselves with "Europe" and European ideals; this differs greatly from the British view of the EU, for example, the British still talk of "going to Europe", as if it were three thousand miles away. The German Foreign Office Web Site, states that, "Following centuries of bloody conflicts between neighbours, overcoming nationalism by integrating states and interests has given Europe an unprecedented period of peace, prosperity and stability. That is why the completion of European integration remains the main focus of German foreign policy."

Germany is now facing a period of change in its relationship with the World (the deployment of troops in Afghanistan and Kosovo on active service marks a major change in Germany's role in the world) and a realignment of political forces within Europe; for a country that is so attached to stability this is potentially troublesome. The expansion of the EU may make that organization even more difficult to control and the threat of a bureaucratic Europe will alienate electors in the EU. The Euro currency remains an experiment which may still fail, there is no strong authority at the center with the power to regulate all the economies of the Euro-Zone, problems in Portugal may be the forerunner of larger issues. The Arab (or Chinese) curse, "May you live in interesting times", may be Germany's future.


The Guardian 19 September 2002 reported that "Justice Minister Herta Daeubler-Gmelin told a small group of labor union members on Wednesday that Bush was going after Iraq to divert attention from domestic problems. ``That's a popular method. Even Hitler did that,'' the German newspaper, Schwaebisches Tagblatt, quoted her as saying. The minister called the report misleading but did not deny the remarks."

The New York Times 21 September 2002 reported that, "Justice Minister Herta Daeubler-Gmelin still faces calls to quit and charges from Bush's national security adviser Condoleezza Rice that U.S.-German relations have been "poisoned.'' The row over relations with Washington sidelined other election issues such as high unemployment and the state of what is Europe's largest economy."

German Life

Germany is, in the main, a rich and attractive country. There is a wealth of interesting small towns, which are clean and well-looked after; but there are often seedy areas. Public transport works well, is reliable and frequent, the highway system is excellent, but the lack of a speed limit on autobahns can cause panic in foreign drivers, who do not expect to be nearly rammed by a Mercedes traveling at 150 mph. Food is excellent, but often not good for your diet-plan; the beers and wine are first class. Shops keep restricted hours by law, though there has been some relaxation. Most stores do not open late, and weekend opening is limited.

Western Germans still tend to look down on East Germans. There are also many Turks living in Germany and most do not have German citizenship, they are "guest workers" bought in from the 1950s to work in industry.

Business dealings

In business matters the Germans are very polite, but formalities are very important, as is status, they may expect deference as a result of their status. Be careful to use surnames, and show them respect, don't be too friendly, in contrast to the States. Their cards will list all their qualifications. German organizations are also normally strictly hierarchical, keep this in mind and don't tread on any toes. Humor is not the ice-breaker that it is in the UK and US, you will hear their stories after business over a beer. Germans are very proud of their country, unlike some nations (e.g. the Brits) they do not go in for critical comments about the way things are run. It's a good idea to remark on the quality of German products and the other things you like about the country, in the words of John Cleese, "don't mention the war." Don't be casual in your dealings, be serious and well-prepared, be thorough and explain everything in detail, make sure that you are well-prepared before your trip. Apologise if you make a mistake.

Although Berlin is the only really large city in Germany most Germans live in towns, often in apartments rather than in houses, and many still rent their homes, rather than buy. Cars are therefore important status symbols.

If invited to a German home remember to take flowers, this will be expected. Most Germans understand some English and most business people speak excellent English, however politeness means that you should at least attempt some German. Germans hate being kept waiting, they have strict views of time-keeping and this can be a problem for them when dealing with other cultures, particularly in the Middle East. Germans are normally excellent people to do business with, they value clarity and are happy to define exactly what is to be delivered, and they will normally take time to examine matters in sufficient detail. German businessmen can also be too blunt for their own good, diplomacy is not always their strongest card; this can result in problems for those from different cultures, who may see this as rudeness, but avoid being equally blunt if at all possible.

The Environment

Finally don't ignore the Green element in German life. Recycling is an important issue for Germans, there are separate waste bins for different types of trash, the Green Party is a real political force, the Germans are really concerned about the environment. The paradox is that this is a country with no speed limits on autobahns and where much of the carefully graded trash is still not recycled. The concerns are rooted in traditional German concerns for the countryside and love of the mountains and nature, it is also an area which is not linked to other political issues. Protests over issues like nuclear power have seen violent protests in Germany. If your company has any environmental concerns, or may be be seen as a polluter, exercise great care, Shell Oil has had real problems over the issue of disposal of North Sea oil platforms, for example and German Greenpeace is currently attacking Esso (ExxonMobil). ExxonMobil, is suing Greenpeace over this issue. There is currently no information on ExxonMobil's Web Site concerning this action.

GM crops are also a big issue, as they are across Northern Europe. Lycos reported 11 June 2002 that "The German Government has unveiled plans for massive development of offshore wind power to help the country reconcile its climate protection goals with its nuclear phaseout policy."

© Copyright 2006 by Negotiation.Biz

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