Germany Economy

By: EW World Economy Team   Date: 10 June 2013

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EW World Economy Team

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Germany is the 4th largest economy in the world going by GDP (current prices, US dollars) and the 5th largest according to GDP (PPP). In 2012, Germany’s GDP (current prices) was $3.4 trillion and its GDP (PPP) was $3.197 trillion.

Despite being a latecomer to Europe’s Industrial Revolution during the 19th century, the German economy quickly caught up to the likes of Great Britain and France; and by 1910 was one of the world’s leaders in industrial development alongside the U.K. and the U.S..

The strength of its industries also allowed the nation to recover quickly from World War II, known as “Wirtschaftswunder”, or economic miracle in German, from 1948 to the 1960s.

An enduring element of the economic miracle has been its “social market economy” system or “soziale Marktwirtschaft”, which was introduced by former Minister of Economics Ludwig Erhard. soziale Marktwirstschaft rested on three main principles: Individual freedom rested on the liberal ideal of individuality, Solidarity meaning that an individual is part of a larger society consisting of mutual dependencies, Subsidiary being a role of the state to shape the relation between individuality and solidarity. It should give the highest priority to individual rights and ensure that what can be done on the part of the individual should be done by it and not by the state.

Today, Germany is Europe's most industrialised nation, boasting major players in industries like automobile manufacturing, machinery, precision equipments, heavy automotive, technology and softwares.

Industries is also the backbone of its exports, which made up about 52 percent of its GDP in 2012. Significantly, EU integration has greatly intensified intra-European trade, with about 69 percent of German exports shipped to European countries and 58.2 percent delivered to member states of the EU.

This has led to some criticism over its current account blanace, as Germany is generating a huge surplus at the expense of other EU states. In 2012, the European Commission issued a warning to Germany after its current account surplus reached 7.013 percent of its GDP.

Nonetheless as the largest and most important economy in Europe, Germany holds the key to solving the eurozone’s debt crisis. If the eurozone can recover quicker from its current crisis, it is entirely foreseeable that the German economy, in view of its sound underlying health, would be able to utilise the additional growth opportunities that arise.

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