Germany - Future trends

Germany will continue to be one of the world's leading economies and the powerhouse of the European Union. Its economy will be influenced mostly by European integration, the adoption of the euro, the integration and upgrading of the East German economy, the restructuring of its economic sectors, and its aging population. The ability of the government to cope successfully with these issues may result in a solution to the problems of slow economic growth, high unemployment, high government debt, high tax rates, high unit labor costs, and growing social security and non-wage labor costs. Germany has a special interest in promoting EU enlargement by the accession of eastern European countries but it is also concerned with the possible influx of immigrants and high financial transfers to new EU countries. An important priority of the federal government is fostering the development of eastern Germany, a major burden on the federal budget throughout the 1990s. Germany's responsibility as an influential member of the international community will also grow in areas such as economic assistance for developing countries, environmental protection, and cooperation in combating corruption and transnational organized crime. Future economic stability will also depend on successful European monetary policy and the performance of the other countries within the euro zone and on global economic trends as the German economy becomes more and more international.

While traditional industries such as textiles and steel are declining, growth in the services sector, particularly in finance and high-tech sectors, will be indicative of the economy's development over the first part of the 21st century. Technological advances, notably in the information and communication sectors, will fuel dramatic productivity increases and the further globalization of businesses. The determination to be among the most advanced countries in the application of new technologies forces Germany to expand its already generous investments into that area. Expected new tax reductions will allow German corporations to invest in technologies with higher productivity and to increase exports. Gloomy forecasts of an aging and declining population will foster reforms in Germany's social security system.