Background

Economic policy

In line with the federal system, structuring and coordinating economic and financial policy is the joint task of central government, the federal states and munici­palities. They cooperate in various committees. Furthermore, the Federal Government seeks the advice of independent economists. Every January the Federal Government presents to the Bundestag and the Bundesrat the Annual Economic Report, which among other things describes the government’s economic and financial goals for the year as well as the fundamentals of its planned economic and financial policy. One prerequisite for economic life in Germany being able to function is free compe­tition, which is protected by the law against restrictions on competition. It prohibits anti-competitive practice on the part of both companies and the state. Likewise, company mergers, state subsidies and market barriers are assessed to establish whether they impair competition.

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Global players

They are the flagships of the economy and global players with an international footing – the major German corporations. The top brands include Mercedes, BMW, SAP, Siemens, Volkswagen, Adidas, Puma and Porsche. Shares in the major German companies are listed in the German share index (DAX) at Frankfurt stock exchange. The largest German bank is Deutsche Bank, which has operations in more than 70 countries and has payroll of some 100,000 employees. It is headquartered in Frankfurt/Main, the leading banking center in continental Europe, where over 100 of the Top 500 banks are located. Volkswagen, whose headquarters are in Wolfsburg, is in terms of sales the largest German company. Volkswagen is one of several marques under which Volkswagen AG vehicles are built. Audi, Škoda Auto, Seat, Bentley, Bugatti, Lamborghini, Scania and Volkswagen Commercial Vehicles are also part of the Volkswagen Group. The luxury marque Porsche is due to be integrated in the Group in 2011. Siemens AG is the largest German employer in industry, with some 343,000 employees worldwide. Deutsche Telekom and Deutsche Post are the service providers with the highest sales, with Deutsche Bahn in third place. The tour company TUI and Deutsche Lufthansa are likewise topflight companies in the service sector.

SMEs

The German economy is characterized first and foremost by small and medium-sized enterprises as well as the self-employed and the independent professions. Some 99.6 percent of all companies are small and medium-sized enterprises. These are firms with annual sales of below EUR 50 million and a payroll of less than 500. Around 60 percent of all those in employment work in this type of company. Most SMEs are managed by the owners themselves, meaning that the majority shareholder and management of the company are frequently one and the same. Companies are often handed down from one generation to the next. The strengths of SMEs include the swift realization of marketable products, an international focus, a high degree of specialization and the ability to successfully claim niche positions in the market. Precisely these qualities make many German SMEs world market leaders in their field.

Social market economy

The Basic Law of the Federal Republic of Germany does not call for any particular economic order. Yet it is firmly anchored in the principle of the welfare state and therefore excludes a purely free market economy. Since the founding of the Federal Republic of Germany in 1949 the country’s economic policy has been hinged on the notion of the social market economy. This concept is an attempt to find a happy medium between a pure market economy and socialism. The social market economy was developed and implemented by Ludwig Erhard, the first Minister of Economics and later German Chancellor. The fundamental idea is based on the principle of freedom of a market economy, supplemented by socio-political methods for keeping a due balance in society. On the one hand, the system is designed to enable market forces in principle to develop freely. On the other, the state guarantees a welfare network that protects its citizens from risks.

Trade fairs

With 150 international sector trade fairs Germany is an important international market for goods. Of the leading trade fairs for individual sectors worldwide some two thirds are held in Germany. The major trade fairs include the annual Hannover Messe, which is regarded as a showpiece of industry, and the International Motor Show (IAA) in Frankfurt/Main, which takes place every two years. In the field of information technology the CeBIT in Hanover and the Internationale Funkausstellung, the consumer electronics and home appliances fair (IFA), in Berlin, are two of the leading fairs. The tourism sector also meets every year in Berlin at the International Travel Trade Show (ITB). At the International Green Week, a unique exhibition devoted to food and agriculture, the focus is on culinary delights. Every October the Frankfurt Book Fair is the biggest of its kind worldwide. In Cologne, photokina is all about images, imaging technology and image media. The Institute of the German Trade Fair Industry (AUMA) is the industry’s umbrella organization. Its main task is to strengthen German fairs at home and abroad. AUMA coordinates the trade fair activities abroad of German business, among other things the some 230 export platforms supported annually by the Federal Government. The trade fair organizers affiliated to AUMA stage over 200 fairs of their own a year in important foreign growth regions.

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